Economists across the political spectrum believe that the Federal Reserve Board and other central banks failed miserably in the Great Depression, failing to respond quickly to the financial collapse in the U.S. and elsewhere. In addition, they extended the downturn by refusing to pursue aggressive monetary policy that would have countered the deflationary trends in the world economy.

While the media are not actively discussing the history of the Great Depression, the deference in current reporting to central banks certainly implies that they would not have reported any criticisms of the central banks' behavior in the Great Depression. For example, the Washington Post today reported on concerns expressed by the IMF and others over a wave of refinancing that will be necessary in the next few years. Central banks, like the Fed and the European Central Bank (ECB), could provide the money needed to support this refinancing.

While this would involve pumping trillions of dollars into the world economy, there is little basis for concern about inflation given the enormous excess capacity in nearly every sector and every country. Tens of trillions of private sector wealth has disappeared with the collapse of the housing bubble in the United States and elsewhere, so even very aggressive monetary policies would only replace a fraction of the paper wealth that existed a few years ago.

In a similar vein, NPR ran a piece on the economic crisis in Spain and never once mentioned the possibility that overly-restrictive policy by the ECB was a factor in the country's double-digit unemployment rate. Whatever other problems Spain has, it certainly would be in better shape if the euro region had a 3-4 percent inflation rate rather than the near zero rate that has resulted from current ECB policy.

Central banks often make mistakes. They made horrendous mistakes in the 30s that led to enormous suffering. This downturn was the result of their failure to recognize housing bubbles and to take steps to counter them. If an economic reporter is unable to recognize the fallibility of central banks then they should be in a different line of work.