June 08, 2010
That could have been the headline of an NYT article that reported on Federal Reserve Board Chairman Ben Bernanke’s warning that the government had to reduce its budget deficit. The article quotes Mr. Bernanke as saying:
“We can see what problems can arise in a country if investors lose confidence in the fiscal position of that country, so it is very important that we address this problem.”
This might have been a good place to point out that Mr. Bernanke could not see the $8 trillion housing bubble whose collapse gave us the worst economic crisis since the Great Depression. It could have also pointed out that it is not clear what he meant, since Greece his presumed point of reference, has very little in common with the United States. Greece is a small economy that is far more dependent on international trade than the United States. It also does not have its own currency.
For these reasons, economists who can see an $8 trillion housing bubble do not think that the experience of Greece tells us: “what problems can arise in a country if investors lose confidence in the fiscal position of that country.” The NYT erred badly in not noting Mr. Bernanke’s poor track record in discussing his latest pontifications on economic policy.
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