Yes. To some degree a major rescue does create 'moral hazard'. But the Fed will obviosuly do this only in a rare emergency case and make it clear that it will be an exception - as has happened in the past with some increase perhaps in speculation but not a debilitating increase...
-----Original Message----- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Michael Perelman Sent: May 15, 2005 8:42 PM To: [email protected] Subject: Re: [PEN-L] more hedge fund angst Minsky says that when the Fed rescues a speculative venture, it opens the door for even more speculative ventures. The resulting asset inflation can contribute to inflations. On Sun, May 15, 2005 at 08:39:33PM -0400, sam gindin wrote: > Not necessarily. The Fed can maintain its general policy and intervene > selectively to deal with a specific emergence (as long of course as > its specific, not generalized). It did this re the Long term Hedge > Funds and other potential major bank closures in the 80s and 90s > > -----Original Message----- > From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Jim > Devine > Sent: May 15, 2005 3:03 PM > To: [email protected] > Subject: Re: [PEN-L] more hedge fund angst > > if there's a financial problem due to big Hedge Fund melt-down(s), the > Fed may find itself between a rock and a hard place (to use the late > Hyman Minsky's phrase). Saving the Hedge Fund and stopping the spread > effects of a default goes against the Fed's current anti-inflation goals. > JD -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
