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: History has an uncanny knack of repeating itself. These often catch people off-guard. Few realise this better than Ben Bernanke.
At a conference organised by the University of Chicago to honour Milton Friedman on his 90th birthday, Bernanke waxed eloquent on Friedman’s prognosis of the ‘Great Depression’. Alluding to Friedman and Schwartz’s A Monetary History of the United States (1963) that provides one of the most authoritative analyses of the Great Depression, Bernanke agreed with the authors on the Fed’s role in precipitating the crisis. “What I take from their work is the idea that monetary forces, particularly if unleashed in a destabilising direction, can be extremely powerful.” The best thing that central bankers can do for the world is to avoid such crises by providing the economy with, in Milton Friedman’s words, a ‘stable monetary background’ — for example as reflected in low and stable inflation. “I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”
This was on November 8, 2002. Ben Bernanke was a Governor the Federal Reserve Board. Today, he heads the Fed. He is the cynosure of all eyes as the US grapples with a financial crisis that threatens to be worse than the Great Depression. Bernanke is in the spotlight not only for what the Fed does to mitigate the crisis. He is also facing the heat over Fed’s policies that might have contributed to the build-up of the catastrophe.
Anniversaries are usually pleasant occasions. But the 69th anniversary of the Great Depression is arousing disturbing feelings. Almost seven decades ago, on October 29, 1929, the US stock market had crashed. That ‘Black Tuesday’ signalled the onset of the most acute global economic downturn of modern times. Popular explanations of the crisis (and there are several) hold irresponsible policies of the US Fed responsible for the debacle. Similar criticisms are being levelled at the Fed now too.
Is it as bad now?
Is the current crisis going to be as bad as the Great Depression? That depends on how bad the Depression actually was. Economics texts capture only the pathological flavour of the calamity. They miss the human trauma and tribulation. Literature and celluloid depict the darkness more vividly. Be it John Steinbeck’s gut-wrenching The Grapes of Wrath or Charlie Chaplin’s tragically comic Modern Times, the harsh impact of...
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