What financial crisis has the feds ever seen before it happened? 1929? 1998? 2007? Will they see the next crash coming brought on by high interest/inflation rates due to massive borrowing and printing monetary policies by Bernanke?
Federal Reserve officials in 2007 badly underestimated the scope of the approaching financial crisis and how it would tip the U.S. economy into the deepest recession since the Great Depression, transcripts of the Fed’s policy meetings that year show.
The meetings occurred as the country was on the brink of its worst financial crisis since the 1930s. As the year went on, Fed officials shifted their focus away from the risk of inflation as they slowly began to recognize the severity of the crisis.
At the Fed’s Oct. 30, 2007 policy meeting, Janet Yellen, then president of the Federal Reserve Bank of San Francisco, noted that the economy faced increased risks. But she didn’t foresee anything dire.
“I think the most likely outcome is that the economy will move forward toward a soft landing,” Yellen said then.
Yellen was hardly alone in feeling hopeful about the economy in October. At the same meeting, Chairman Ben Bernanke noted that housing was “very weak” and manufacturing was slowing but sounded an optimistic note.
“Except for those sectors, there is a good bit of momentum in the economy,” Bernanke said.
Earlier that October, the Dow Jones industrial average closed at an all-time high of 14,164 - nearly 4 percent above where the Dow stands now.