“I spent my career as an academic studying great depressions. I can tell you from history that if we don’t act in a big way, you can expect another great depression, and this time it’s going to be far, far worse.” Those are the words of then Federal Reserve Chairman Ben Bernanke. He directed them in 2008 to Speaker of the House Nancy Pelosi. The often wrong, never in doubt Bernanke quite literally believed that a failure to bail out institutions like Citibank (as of 2008 it had already been saved four times previously) would cause the mother of all economic collapses; one that would take many, many years to recover from.
It’s hard to know where to begin. To paraphrase Henry Hazlitt about economists who believe in the impossibility that is a “savings glut” (Bernanke naturally does), it’s hard to imagine even the ignorant could believe something so ridiculous. But Bernanke did, and still obviously does. He felt that absent the propping up of financial institutions that actual market actors no longer felt worth saving, the U.S. economy would implode; recovery a very distant object. To say that Bernanke got things backwards insults understatement. You build an economy by bailing out what’s holding it down? The very notion…The sad and comical reality is that Bernanke to this day believes himself the hero of 2008. Delusion is powerful.
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