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I Think One Of The Lessons Of The Depression - And This Is Something That Franklin Roosevelt Demonstrated - Was That When Orthodoxy Fails, Then You Need To Try New Things. And He Was Very Willing To Try Unorthodox Approaches When The Orthodox Approach Had Shown That It Was Not Adequate.

-Ben Bernanke

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I Think One Of

Ben Bernanke

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I Think One Of The Lessons Of The Depression - And This Is Something That Franklin Roosevelt Demonstrated - Was That When Orthodoxy Fails, Then You Need To Try New Things. And He Was Very Willing To Try Unorthodox Approaches When The Orthodox Approach Had Shown That It Was Not Adequate.

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The Economic Repercussions Of A Stock Market Crash Depend Less On The Severity Of The Crash Itself Than On The Response Of Economic Policymakers, Particularly Central Bankers.

I Served Seven Years As The Chair Of The Princeton Economics Department Where I Had Responsibility For Major Policy Decisions, Such As Whether To Serve Bagels Or Doughnuts At The Department Coffee Hour.

Economics Is A Very Difficult Subject. I've Compared It To Trying To Learn How To Repair A Car When The Engine Is Running.

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The Best Approach Here, If At All Possible, Is To Use Supervisory And Regulatory Methods To Restrain Undue Risk-taking And To Make Sure The System Is Resilient In Case An Asset-price Bubble Bursts In The Future.

How Much Would You Pay To Avoid A Second Depression?

Great Depression

I And Others Were Mistaken Early On In Saying That The Subprime Crisis Would Be Contained. The Causal Relationship Between The Housing Problem And The Broad Financial System Was Very Complex And Difficult To Predict.

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The Economist John Maynard Keynes Said That In The Long Run, We Are All Dead. If He Were Around Today He Might Say That, In The Long Run, We Are All On Social Security And Medicare.

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I Assure This Committee That, If I Am Confirmed, I Will Be Strictly Independent Of All Political Influences... Essential To That Institution's Ability To Function Effectively And Achieve Its Mandated Objectives.

Like Gold, U.s. Dollars Have Value Only To The Extent That They Are Strictly Limited In Supply. But The U.s. Government Has A Technology, Called A Printing Press (or, Today, Its Electronic Equivalent), That Allows It To Produce As Many U.s. Dollars As It Wishes At Essentially No Cost. By Increasing The Number Of U.s. Dollars In Circulation, Or Even By Credibly Threatening To Do So, The U.s. Government Can Also Reduce The Value Of A Dollar In Terms Of Goods And Services, Which Is Equivalent To Raising The Prices In Dollars Of Those Goods And Services.

Importantly, In The 1930s, In The Great Depression, The Federal Reserve, Despite Its Mandate, Was Quite Passive And, As A Result, Financial Crisis Became Very Severe, Lasted Essentially From 1929 To 1933.

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The Risk That The Economy Has Entered A Substantial Downturn Appears To Have Diminished Over The Past Month Or So.

The U.s. Government Has A Technology, Called A Printing Press (or, Today, Its Electronic Equivalent), That Allows It To Produce As Many U.s. Dollars As It Wishes At Essentially No Cost.

It Must Be Awfully Frustrating To Get A Small Raise At Work And Then Have It All Eaten By A Higher Cost Of Commuting.

To Avoid Large And Unsustainable Budget Deficits, The Nation Will Ultimately Have To Choose Among Higher Taxes, Modifications To Entitlement Programs Such As Social Security And Medicare, Less Spending On Everything Else From Education To Defense, Or Some Combination Of The Above.

The Crisis And Recession Have Led To Very Low Interest Rates, It Is True, But These Events Have Also Destroyed Jobs, Hamstrung Economic Growth And Led To Sharp Declines In The Values Of Many Homes And Businesses.

It's The Price Of Success: People Start To Think You're Omnipotent.

Price Of Success

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Inflation Is Certainly Low And Stable And, Measured In Unemployment And Labour-market Slack, The Economy Has Made A Lot Of Progress. The Pace Of Growth Is Disappointingly Slow, Mostly Because Productivity Growth Has Been Very Slow, Which Is Not Really Something Amenable To Monetary Policy. It Comes From Changes In Technology, Changes In Worker Skills And A Variety Of Other Things, But Not Monetary Policy, In Particular.

In Fact, The World Needs More Nerds.

The Crisis In Europe Has Affected The Us Economy By Acting As A Drag On Our Exports, Weighing On Business And Consumer Confidence And Pressuring Us Financial Markets And Institutions.

The Lesson Of History Is That You Do Not Get A Sustained Economic Recovery As Long As The Financial System Is In Crisis.

It Takes About Two And A Half Percent Growth Just To Keep Unemployment Stable.

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Education - Lifelong Education For Everyone - From Toddlers To Workers Well Advanced In Their Careers - Is Indeed An Excellent Investment For Individuals And Society As A Whole.

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With Respect To Their Safety, Derivatives, For The Most Part, Are Traded Among Very Sophisticated Financial Institutions And Individuals Who Have Considerable Incentive To Understand Them And To Use Them Properly.

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I Think One Of The Lessons Of The Depression - And This Is Something That Franklin Roosevelt Demonstrated - Was That When Orthodoxy Fails, Then You Need To Try New Things. And He Was Very Willing To Try Unorthodox Approaches When The Orthodox Approach Had Shown That It Was Not Adequate.

Over The Years, The U.s. Economy Has Shown A Remarkable Ability To Absorb Shocks Of All Kinds, To Recover, And To Continue To Grow.

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Among The Largest Banks, The Capital Ratios Remain Good And I Don’t Expect Any Serious Problems . . . . Among The Large, Internationally Active Banks That Make Up A Very Substantial Part Of Our Banking System.

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Over The Years, The U.s. Economy Has Shown A Remarkable Ability To Absorb Shocks Of All Kinds, To Recover, And To Continue To Grow. Flexible And Efficient Markets For Labor And Capital, An Entrepreneurial Tradition, And A General Willingness To Tolerate And Even Embrace Technological And Economic Change All Contribute To This Resiliency.

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The Central Bank Needs To Be Able To Make Policy Without Short Term Political Concerns.

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