Monetarists from across the world can mostly agree on one thing. The US Federal Reserve caused the Great Recession.
Fed chair Ben Bernanke kept policy far too tight after the US economy buckled in early to mid 2008. He allowed a collapse in the money supply to run unchecked, causing avoidable disasters at Fannie, Freddie, Lehman, and AIG later that year.
Call it the "Bernanke Depression" if you want, a term gaining traction in elite circles. The indictment is a little unfair. The European Central Bank was worse. It raised rates into a deflationary oil shock in August 2008, and worsened a run on the dollar that constrained Fed actions.
There was little that Bernanke could do about the deeper causes of the crisis, whether the `Savings Glut' of Asia and North Europe, the `China Effect', the $10 trillion reserve accumulation by the world's rising powers.
Yet three heavyweight books now lay the blame squarely on the Fed: the 'Great Recession' by Robert Hetzel, a top insider at the Richmond Fed; 'Money in a Free Society' by Tim Congdon from International Monetary Research; and 'Boom and Bust Banking: The Causes and Cures of the Great Recession' by David Beckworth from Western Kentucky University.
They do not agree on everything. Hetzel denies that there was a serious debt bubble before the crisis. Beckworth and Congdon think there was, and I am with them. Total debt levels in the OECD club of rich states rose from 167pc of GDP to 330pc in thirty years. This was the blow-off phase of a Kondratieff debt cycle. The system was primed for a crisis.
Fed chair Ben Bernanke kept policy far too tight after the US economy buckled in early to mid 2008. He allowed a collapse in the money supply to run unchecked, causing avoidable disasters at Fannie, Freddie, Lehman, and AIG later that year.
Call it the "Bernanke Depression" if you want, a term gaining traction in elite circles. The indictment is a little unfair. The European Central Bank was worse. It raised rates into a deflationary oil shock in August 2008, and worsened a run on the dollar that constrained Fed actions.
There was little that Bernanke could do about the deeper causes of the crisis, whether the `Savings Glut' of Asia and North Europe, the `China Effect', the $10 trillion reserve accumulation by the world's rising powers.
Yet three heavyweight books now lay the blame squarely on the Fed: the 'Great Recession' by Robert Hetzel, a top insider at the Richmond Fed; 'Money in a Free Society' by Tim Congdon from International Monetary Research; and 'Boom and Bust Banking: The Causes and Cures of the Great Recession' by David Beckworth from Western Kentucky University.
They do not agree on everything. Hetzel denies that there was a serious debt bubble before the crisis. Beckworth and Congdon think there was, and I am with them. Total debt levels in the OECD club of rich states rose from 167pc of GDP to 330pc in thirty years. This was the blow-off phase of a Kondratieff debt cycle. The system was primed for a crisis.
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