Mr. Bernanke is a standout example. The former head of the Princeton University economics department knows all there is to know about a depression – except the important part. He doesn’t understand what causes them. And he completely misunderstands what the role of government should be in dealing with them. But we have already explained all this to you, dear reader, so we won’t repeat ourselves here…except to say that any truck driver and hair stylist knows you can’t spend your way out of debt. Mr. Bernanke doesn’t believe it. That’s the very definition of Boobus Americanus Economistica; he has educated himself out of his common sense.
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My thoughts: In case you missed the Mogambo Guru's rant on the Fed, it is easy money and credit that causes the unsustainable boom that inevitably leads to a bust. So this Greenspan/Bernanke recession can be blamed on the Greenspan's attempt to prevent a market correction when he took rates to 1.00% thus fueling massive amounts of malinvestments. He was successful in papering over a recession temporarily. He was also successful in guaranteeing that the next next recession would be much more severe. So does Bernanke learn? Yes, but it is the wrong lesson. When the economy starts to head south in late 2007, Bernanke starts lashing interest rates. He takes them down to between 0.00% and 0.25%. Instead of allowing a market correction that would have put the economy back on solid ground (like 1920-21), we are facing a double dip recession, double digit recession, and possibly a lost decade of economic growth.
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