- Ben Bernanke
Despite telling US President George W Bush that America faces an economic meltdown greater than the Great Depression, Federal Reserve chairman Ben Bernanke said Monday that today’s “social safety net” ensures that today’s problems are “no comparison” to the 1930′s catastrophe.
“As a scholar of the Great Depression – and I’ve written books about the Depression and been very interested in this since I was in graduate school, there’s no comparison,” Bernanke said in an Austin, Texas Q&A session.
Bernanke said the situation at that time – 25 percent unemployment, a 90 percent drop in stock market value, a third of all banks failing and GDP falling by a third – represented “very difficult circumstances,” because “we didn’t have the social safety net that we have today. So let’s put that out of our minds; there’s no — there’s comparison in terms of severity.”
However, outgoing US president George W. Bush recounts his “uh-oh” moment in a newly released interview when both Bernanke and Treasury Secretary Henry Paulson warned him that without strong government action, America could face a depression worse than the Great Depression. Bush says the stark assessment of Bernanke and Paulson prompted his administration to ask Congress for the $700 billion financial-market rescue package in September.
“The one thing that I don’t want to have happen is people say this thing was in a financial meltdown and we didn’t do anything. And so we’re moving — hard,” Bush said. “What scared me is not doing anything, which would have caused there to be a huge financial meltdown and the conceivable scenario that we’d have been in a depression greater than the Great Depression”.
Bernanke backed up Bush Monday when he said, “We have learned from that experience that monetary policy has got to be proactive and supportive of the economy in a situation of difficult financial conditions. The big mistake that policymakers made in the early ’30s was they essentially allowed the financial system to collapse and they didn’t do anything about it. The Federal Reserve did no action as the banks failed by the hundreds and the thousands.”
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If ever one needs another example that our government is out of touch with the average American, here comes Bernanke to wipe away all doubt. Sheesh!