March 26, 2009

In 2002, Bernanke told us what was to come, and exactly what he would do. Read the "Helicopter Speech" again. Especially this part:

"Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation.

A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17

The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation."

- Ben Bernanke, Master of the Universe, November 2002

11 comments:

Anonymous said...

http://money.cnn.com/2009/03/25/news/fdic.hands.full.fortune/index.htm



Ummmm..... got gold.. like seriously....

vanilla ice said...

Maybe deflation isn't such a bad situation. However, workers simply will not accept their paychecks decreasing.

No monetary inflation with increased productivity, will see incomes decrease as prices decrease relatively faster. Our purchasing power goes up without it stolen by the insidious Federal Reserve and Treasury Conpartment.

will shill for coin said...

A month ago, reflecting on George W. Bush's near-doubling of the national debt, budget hawk David Walker told me that Bush was "the most fiscally irresponsible president in American history."

This week, reflecting on the possibility that Barack Obama could nearly redouble the debt, Walker said that Bush holds the irresponsibility record "to this point."

The former Comptroller General and now-president of the Peter G. Peterson Foundation and star of the movie "I.O.U.S.A.," Walker said it's too soon to tell whether Obama will match Bush in irresponsibility, but the signs are not encouraging.

http://tinyurl.com/d53y2u

Gary said...

Anyone who has any savings should be utterly terrified when they read that quote from Bernanke.

Anonymous said...

"...nowhere on the horizon today...

...Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation..."


I think the word you really wanted was "seizures"; wasn't it Ben?

supernintendo chalmers said...

we can all be comforted knowing it has zero chance of working.

we'll be in a funk for the next 2 decades or until the END of the next world war, whichever comes first.

patrat said...

Tea parties. April 15. Check it out - most cities will have one.

Nimesh said...

Listen, we are going to enter into a long period of deflation. And there is nothing the Federal Reserve can do to stop it. Just because they can print money won't end the deflationary depression from happening. Japan tried to fight off deflation by printing money and easing credit and it didn't work.

That is because in the end, there has to be action by individuals to take on more debt and businesses to expand while the consumer isn't in a mood to buy. Thus helicopter Ben can print as much as he wants, hell, he can even call him self B1-Ben and have thousands of B1 Bombers throw $100 bills throughout the U.S.A and it still won't make a difference. The deflation train has left station and it is just catching steam.

Anonymous said...

"...it has zero chance of working..."

That's the truly infuriating part.

What they are doing is a Final, Frantic Looting.

Anonymous said...

U.S. coins minted before 1965 - the only U.S. currency that has any value, 'cause it can't be churned out on Bernanke's printing press.

Anonymous said...

Luckily, Bernanke is a scholar of the great depression. All we have to do is sieze some gold, print some money and the depression will be over. Just like it ended in 1934.