In a rare display of candor, "[a] senior Federal Reserve policymaker ... warned that US central bank moves this year to extend credit to Wall Street investment banks carried a significant danger of 'moral hazard' and could encourage risky behaviour in the future."
The article continued:
Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, said in a speech at the European Economics and Financial Centre in London: “The danger is that the effect of recent credit extension on the incentives of financial markets participants might induce greater risk-taking, which in turn could give rise to more frequent crises, in which case it might be difficult to resist further expanding the scope of central bank lending.”
To most people, unfamiliar as they are with the teachings of the Austrian School of economics and its brilliant theory of the business cycle, Mr. Lacker's warning is surely a different take on the wisdom of the various actions being taken by the Fed to address the current credit crisis.
But the statement is a refreshing and welcome admission from a Fed official that the Fed may not have all of the answers, and may in fact do more harm than good.
As a layperson with no formal training in economics, I will not even attempt to expound on the esoteric issues related to monetary policy.
But as an admirer of the Austrian School, I urge anyone interested in this issue to follow my link to the Ludwig von Mises Institute to learn more than they ever could imagine on this and many other issues related to economic freedom, sound money, property rights, and the effects of government intervention.
An informed citizenry is the best way to effect the real change needed to pull America back from its current path and toward the freedom all her people deserve.