Good article in the WSJ describing Ben Bernanke’s fascination with the Great Depression. His assessment is, apparently, that the Fed failed to print enough money to avoid deflation. The rising real value of debt in a deflationary environment where interest rates could not go below zero then crippled purchasing power and thence the economy.

This means that, for sure, he will send out the helicopters to drop money on street corners as threatened.

In the 1930’s, wages remained high in an uncompetitive US. Given the Bernanke path, it looks like the dollar will be depreciated so as to lower real wages while accelerating commodity price inflation.

WSJ: Long Study of Great Depression Has Shaped Bernanke’s Views

From Bill Fleckenstein, quoting an unnamed friend: “Ip writes: ‘While some have criticized him for saying in 2002 the Fed could print money to end deflation, the comments typify his willingness to question orthodoxy.’ Oh, no, they don’t. What his comments actually typify is Bernanke’s own brand of orthodoxy, at the root of which is an arrogant belief that a central bank can lead a market economy around by the nose. By manipulating the funds rate, says the Maestro-designate, the Fed can fine-tune the measured rate of inflation, promote full employment and assure financial stability. For Bernanke, booms have nothing to do with busts. The common-sense theorists of the so-called Austrian School (including Hayek and von Mises) might as well never have been born.