December 2, 2008
Federal Reserve chairman Ben Bernanke said Monday the current economic situation bears “no comparison” to the much deeper crisis of the 1930s Great Depression.
- A d v e r t i s e m e n t
“Well, you hear a lot of loose talk, but let me just … say, as a scholar of the Great Depression — and I’ve written books about the Depression and been very interested in this since I was in graduate school, there’s no comparison,” Bernanke said in a question period after an address in Austin, Texas.
Bernanke cited “an order-of-magnitude difference” in the current situation compared to the 1930s.
“During the 1930s, there was a worldwide depression that lasted for about 12 years and was only ended by a world war,” he said.
“During that time, the unemployment rate went to 25 percent, at least, based on the data that we have. The real GDP (gross domestic product) fell by one-third. About a third of all of the banks failed. The stock market fell 90 percent.”
Bernanke said the situation at that time represented “very difficult circumstances,” because “we didn’t have the social safety net that we have today. So let’s put that out of our minds; there’s no — there’s comparison in terms of severity.”
He added, “We’re very lucky to live in a country as rich and diversified as the one we have. And I hope that we will have a quick and rapid recovery from the current slowdown.”
Still, the Fed chief said lessons learned from the Depression may still apply today, including the “excessively tight monetary policy” that led to higher interest rates and deflation of about 10 percent a year over the first three years of the 1930s.
“We have learned from that experience that monetary policy has got to be proactive and supportive of the economy in a situation of difficult financial conditions,” he said.