Monday, December 5, 2011

Did Bernanke learn from the Great Depression?

From class we learned that the US government was unable to ease the economic situation during the Great Depression because of its attachment to the gold standard. Thus, interest rates increased to keep pace with France and stop an outflow of gold. However, this was tight fiscal policy, which certainly prolonged and worsened the recession. Economists agree that decreasing the interest rate was the proper course of action. Thus, during the recession of 2008, with Ben Bernanke as the chairmen of the FED, he swiftly lowered interest rates in an emergency coordinated bid to ease the economic effects of the financial crisis. Additionally, he attempted to revive the paralyzed credit market with massive monetary pumping. Bernanke was very much a student of the Great Depression and seems to have applied this knowledge to the current crisis. However, it is unclear if his polices have worked as the 21st century is not a direct corollary to the 20th and presents other unique problems.

http://www.brookesnews.com/080310bernankedepression.html

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