The wise and benevolent destiny made prof Ben Bernanke as
the successor to Alan Greenspan as the chief of the Federal reserve System-the
largest manufacturer of the world money ,namely the US dollar in September
2006.Within a year of his assumption of
office as the Fed chief, he had to confront and negotiate the worst recession
of the 20th century occasioned by the bursting of the US Housing Bubble,popularly and also
mistakenly known as subprime Lending crisis in 2007 August.
Students and professors know full well that Bernanke was a
dominant giant and authority on Depression Economics having read more,
researched more and also written more in this area. Did he learn the first
lesson somewhere at the young age. Yes, His recent Memoirs reveals the secret.
His grand Ma was the key behind in educating by stories.As
she lived through the turbulent period of the great depression of !930s Bernanke
recalls from the conversations he had with her when he was hardly six. She narrated how young children of those days went to
school either barefoot or in worn-out shoes.Bernanke asked the reason why did
the parents not buy new shoes. The old lady said:
”Their fathers had lost their jobs, as the shoe factory got
closed”.
“Why did the shoe factory close?”, the boy was curious to
know.
“because ,nobody had the money to buy shoes”.
My dear readers,this was what Thomas Robert Malthus told
long ago but he was bulldozed by David Ricardo who gave a wrong twist to the car of Economics as told by Haney once
, in so far as denying the general theory of glut.Mr Keynes had to rediscover
the merits of Mercantilism Economics and the greatness of Malthus work and their relevance in the great
depression period of 1930s
Under consumption and overproduction had to seek some
balance at one time in the capitalist order; in the face of inadequate and
shrinking demand ,the supply had to be reduced, and thus the production came to
a halt, throwing thereby the labourers
out of job ,shrinking their income and also others
income in a vicious circle,by curtailing purchasing power.
1 comment:
The correction of that imbalance is natural. Although it takes a terrible toll in productivity and sometimes forces one to focus on basic needs. The solution is to understand how we can come out of that pit. And I think the very first lesson in Economics I had there was one phrase that stood out "Dig a pit and fill it up". In the UK with the uncertainity over Brexit. The Governor of the Bank of England has suddenly become pessimistic and a key player Goldman Sachs has gone out to all its clients that any major investments or projects are risky right now. Code for stop investing. This will likely create a recession without any merit. So the BOE interest rate was taken down from 0.5% to 0.25%. All this talk of doom and gloom has had no effect on the might power of the British public for which retail figures went up in July 2016 by 1.9% compared to same period last year despite Brexit fears. Maybe a bit early but interesting to see. Hopefully that spending pattern will mean companies take notice and take action.
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