Mr Bernanke has admitted that he was wrong about the effects of loose mortgage lending on the economy. He is going to have to eat these words, too:

Federal Reserve chairman Ben Bernanke said Monday the current economic situation bears “no comparison” to the much deeper crisis of the 1930s Great Depression.

“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.”

I wouldn’t say it was an order of magnitude difference, but the debt bubble this time is somewhere between two to three times as large, relative to GDP, as the one that preceded the Great Depression. So it is not unreasonable to expect this depression to be more severe. You may be a scholar of the Great Depression, Mr Bernanke. But you have not learnt anything. Your economic doctrine has closed your eyes and ears. Like your predecessor Mr Greenspan, your forecasting ability is nil, as shown by your track record so far.

The social safety net is only as good as the economic fabric from which it is constructed. And that fabric is being torn asunder because it has been weakened by years of over-consumption and malinvestment. I just hope we don’t have to end this one with war.