In times of financial crisis, people want nuts and bolts advice on how to survive, or even better, how to profit from the calamity. “Tell us how to get out of this, not how we got in it,” is the prevailing attitude -- which is ironic, since most investors are calling for more cheap credit, the policy that brought us to disaster’s door in the first place.
The Fed and the government -- the public sector -- will “do what it takes to maintain the stability of our financial system,” according to Treasury Secretary Henry Paulson, and that is precisely why we can expect more of the same -- bailouts, inflation, jittery investors, false euphoria, the continued destruction of the dollar -- not just now but for as long as the government controls the money supply. History tells us so, and theory backs it up.
In his book, Essays on the Great Depression, published in 2000, Ben Bernanke says,
To understand the Great Depression is the Holy Grail of macroeconomics.
The experience of the 1930s continues to influence macroeconomists’ beliefs, policy recommendations, and research agendas. [p. 5]
He says we don’t yet “have our hands on the Grail by any means,” but we’re getting there. According to Bernanke, we’ve made “substantial progress” in the last 15 years.
Bernanke will never find the Holy Grail. To paraphrase an old song, he’s looking for it in all the wrong places. This would hardly be worth mentioning if it weren’t for the job he holds. As such, he’s dragging us and every other prisoner of central banking along on his misguided search.
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