Ben Bernanke doesn’t like gold and doesn’t hate the New Deal

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I checked out Fed Chairman Ben Bernanke’s 2000 book Essays on the Great Depression at the library the other day. It’s not what you’d call a page turner, but it does offer some cool insights into his thinking. It’s a collection of lectures and journal articles, some going as far back as the early 1980s, but as he doesn’t disavow any of them in the introduction I think it’s safe to assume that they fairly reflected his thinking in 2000 and, presumably, now.

First, gold bugs are right to distrust Bernanke. Alan Greenspan had at least pined in 1981 for a return to the gold standard (although his actions as Fed chairman indicated that he subsequently changed his mind). Bernanke had this to say:

[S]ome governments responded to the crises of the early 1930s by quickly abandoning the gold standard, while others chose to remain on gold despite adverse conditions. Countries that left gold were able to reflate their money supplies and price levels, and did so after some delay; countries remaining on gold were forced into further deflation. To an overwhelming degree, the evidence shows that countries that left the gold standard recovered from the Depression more quickly than countries that remained on gold. Indeed, no country exhibited significant economic recovery while remaining on the gold standard.

Bernanke is a Republican, appointed by that George Bush guy, but he makes clear that he doesn’t share the belief held by many conservatives that the New Deal was a complete bust:

Summarizing the reading of all of the evidence by economists and by other students of the period, it seems safe to say that the return of the private financial system to normal conditions after March 1933 was not rapid; and that the financial recovery would have been more difficult without extensive government intervention and assistance.

He also seems to think it wouldn’t hurt the economy for workers to get more money and corporate shareholders less:

Maybe Henry Ford and Herbert Hoover were right: Higher real wages may have paid for themselves in the broader sense that their positive effect on aggregate demand compensated for their tendency to raise costs.

Finally there’s this observation, which is a little cryptic but seems to fit some of the summer’s events:

Institutions which evolve and perform well in normal times may become counterproductive during periods when exogenous shocks or policy mistakes drive the economy off course. The malfunctioning of financial institutions during the early 1930s exemplifies this point.

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