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« Hacking in the Public Interest: 5 Ways to Protect Yourself Early | Main | Consumer Attitudes: The Future of Saving and Spending »

November 23, 2009

Comments

Laurence Hunt

Bill,

I read Mr. Dudley's article. While I find his analysis knowledgeable and coherent, I feel that he overlooks the role of the Fed itself in creating the conditions for the growth of "the shadow banking system." In short, low interest rates not only made available massive funds to fuel speculation, but also make good returns difficult to obtain apart from speculative and leveraged investments.

In short, the Fed lit the fire, and then added fuel to it. Let's not forget the loosening of capital ratios that ramped up speculation by the (former) investment banks. This in my mind is an evidence of both complicity and failure on the part of regulators. While the Fed was promoting speculation, the SEC and rating agencies overlooked evidence of rampant egregious practices. The SEC focused on short-sellers for goodness sake - I guess because they had not drunk enough from the punch bowl (or was it the Kool-Ade bowl?).

I have been a gold investor for the past 6-1/2 years for the above reasons.

I'm interested in your thoughts on this interpretation of events.

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