October 25, 2015
In his review of former Fed Chair Ben Bernanke’s new book, Michael Kinsley tells us:
“Bernanke makes a compelling case that in 2007 and 2008, the world economy came very close to collapse, and only novel efforts by the Fed (cooperating with other United States and foreign government agencies) saved us from an economic catastrophe greater than the Great Depression.”
The Great Depression lasted for more than a decade because the government did not spend enough money to get the economy back to a normal level of output. It eventually did get the economy back to full employment due to the spending associated with World War II. If the government had undertaken similar spending in 1931, for example to build up the infrastructure and to expand the provision of education and health care, the depression would have ended a decade sooner.
Unless there is some reason the United States government could not have spent money in 2009 if the banks had collapsed in 2008, then we did not have to worry about a Second Great Depression. No one has yet indicated what that reason could be. Even Republicans have consistently supported stimulus during downturns. (George W. Bush signed the first stimulus package in February of 2008 when the unemployment rate was 4.7 percent.) So the story of being saved from the Second Great Depression is entirely a myth that can be used to justify the bailout of the Wall Street banks.
Comments