If It Weren't for War, Bernanke Would Have No Argument

Posted: Mar 22, 2012 12:01 AM

Oh, to be back as a freshman at George Washington University. 

What I wouldn’t have given to be once again sitting in the economics classroom as Professor Ben Bernanke took to the podium with the intention of lecturing and reshaping young minds regarding the history and mission of the central bank. 

I would have been awed by the Chairman’s (I mean Professor’s) attack on the gold standard and duly impressed with his grasp of events and reasons for the Great Depression of the 1930s. 

After all, he is the self-proclaimed expert on that era. 

In addition, I would have been watching very closely for the signs that inspired David Blanchflower, a Dartmouth economist, to refer to Bernanke as another Winston Churchill, one of my historical mentors. 

When it was time to ask questions, my hand would have risen several times. 

If a bank is in trouble, I would have asked why can’t depositors get their cash without a central bank?  What happened to both the FDIC and the U.S. Treasury? 

Keeping my hand raised, I would have stated it was a waste of time mining gold in order to transport it to the basement of the New York Fed. 

I thought the gold standard was just that, a standard by which currencies are measured and not a measure of who has the most gold. 

But maybe that confirms what someone said years ago, that there just isn’t anyone who really understands how the gold standard works. 

I would have been bold enough to ask a few Great Depression questions, knowing that Professor Ben’s expertise on that subject is recognized worldwide. 

Bernanke contended the government did not respond adequately and did not provide enough liquidity during the Great Depression, a mistake HE won’t repeat at this point in time. 

However, in 1939, U.S. Treasury Secretary Henry Morganthau said that we were spending more money than ever before and it just didn’t work. 

In addition, Morganthau remarked that after eight years we had just as much unemployment, plus an enormous debt.  Mmmmm. 

Finally, university lecturer Ben stated the policies of FDR were needed in order to offset the problems created by the Federal Reserve. 

In my mind, I would have wondered if Professor Bernanke was referring to the Second World War. 

Nevertheless, after an hour of listening, questioning, and observing, I’m not sure if my raised hand would have been recognized more than once.  So many questions, so few answers. 

And about that Churchill thing, well David, I’m still waiting.