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Central Banking in a Systemic Crisis: The Federal Reserve's 'Credit Easing.'

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  • Robert Guttmann

    (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)

Abstract

In response to the worst crisis since the Great Depression the Federal Reserve undertook a series of different policy measures. These could be divided into two response categories. The first consisted of extensions of traditional monetary-policy tools, which have had to be adjusted and/or ramped up to scale in the face of an unprecedented financial crisis. The second involved entirely new channels of liquidity provision designed to revive or replace financial markets that no longer work properly following their breakdown in the crisis. It is only by looking at those different response strategies that we can full appreciate how the US central bank managed to prevent the world economy from sliding into a dangerous debt-deflation spiral. At the same time monetary policy alone is insufficient to assure an adequate recovery.

Suggested Citation

  • Robert Guttmann, 2012. "Central Banking in a Systemic Crisis: The Federal Reserve's 'Credit Easing.'," Post-Print hal-01345531, HAL.
    • Handle: RePEc:hal:journl:hal-01345531
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    References listed on IDEAS

    as
    1. Robert Guttmann & Dominique Plihon, 2010. "Consumer debt and financial fragility," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(3), pages 269-283.
    2. Engelbert Stockhammer, 2004. "Financialisation and the slowdown of accumulation," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 28(5), pages 719-741, September.
    3. Robert Guttmann, 2011. "Basel II: A New Regulatory Framework for Global Banking," Chapters, in: Claude Gnos & Louis-Philippe Rochon (ed.), Credit, Money and Macroeconomic Policy, chapter 8, Edward Elgar Publishing.
    4. Claude Gnos & Louis-Philippe Rochon, 2011. "Credit, Money and Macroeconomic Policy. A Post Keynesian Approach," Post-Print halshs-01231787, HAL.
    5. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
    6. Alan Greenspan & James E. Kennedy, 2005. "Estimates of home mortgage originations, repayments, and debt on one-to-four-family residences," Finance and Economics Discussion Series 2005-41, Board of Governors of the Federal Reserve System (U.S.).
    7. Claude Gnos & Louis-Philippe Rochon (ed.), 2011. "Credit, Money and Macroeconomic Policy," Books, Edward Elgar Publishing, number 13254.
    8. Robert Guttmann, 2009. "Asset Bubbles, Debt Deflation, and Global Imbalances," International Journal of Political Economy, Taylor & Francis Journals, vol. 38(2), pages 46-69.
    9. Guttmann, Robert, 2008. "A Primer on Finance-Led Capitalism and Its Crisis," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 3.
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