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How much would you pay to avoid a second Depression?

Ben Bernanke

Investment banks manage to go bankrupt through their investment-banking activities, commercial banks manage to go bankrupt through their commercial-banking activities.
BEN BERNANKE

Banking Banks Commercial Investment
It must be awfully frustrating to get a small raise at work and then have it all eaten by a higher cost of commuting.
BEN BERNANKE

Cost Frustrating Raises
I don’t see much evidence of an equity bubble.
BEN BERNANKE

Bubbles Equity Evidence
The risk exists that, with aggregate demand exhibiting considerable momentum, output could overshoot its sustainable path, leading ultimately in the absence of countervailing monetary policy action to further upward pressure on inflation.
BEN BERNANKE

Demand Path Risk
Economics is a very difficult subject. I’ve compared it to trying to learn how to repair a car when the engine is running.
BEN BERNANKE

Car Running Trying
I don’t think that Chinese ownership of U.S. assets is so large as to put our country at risk economically.
BEN BERNANKE

Country Risk Thinking
If your uniform isn’t dirty, you haven’t been in the game.
BEN BERNANKE

Dirty Game Graduation
House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.
BEN BERNANKE

Fundamental Past Strong Years
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.
BEN BERNANKE

Growth Home Jobs
While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.
BEN BERNANKE

Delinquency Rising Years
The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.
BEN BERNANKE

Months Past Risk
Under current law, on January 1, 2013, there’s going to be a massive fiscal cliff of large spending cuts and tax increases.
BEN BERNANKE

Cutting Important Law
We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.
BEN BERNANKE

Employment House Thinking
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.
BEN BERNANKE

Depression Financial Great Result
It’s true that the Federal Reserve faces a lot of political pressure and is unpopular in many circles.
BEN BERNANKE

Circles Political Pressure
In fact, the world needs more nerds.
BEN BERNANKE

Needs Nerd World

How much would you pay to avoid a second Depression?

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How much would you pay to avoid a second Depression?

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