Vital Crisis Advice – Don’t Fight the Fed!
Since the Great Depression, history has been supporting the Fed in making the economy stable during a monetary crises such as the 1987 stock market crash, the 1997 Asian currency crisis, or the 9/11 terrorist attacks. In December 1930 the Fed was given a hard lesson as it failed to bail out the official-sounding Bank of the United States. Its failure to act properly precipitated the Great Depression. Ever since that time, the Fed has stepped in quickly and acted as the true last resort lender.
Working out the current real estate credit crunch may take longer, but I’m a quite confident that the Fed will be able to stabilize the economy and the financial markets once more. Nevertheless, it is still possible that history might repeat itself. Considering the fact that the Fed is a source of significant instability (easy money – tight money cycle), it is beneficial to hedge one’s bets.