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    Two words missing from Ben Bernanke’s 3,500-word statement

    Two words missing from Ben Bernanke’s 3,500-word statement

    Ben Bernanke gave a very lengthy answer to the question “why has the recovery from the crisis been so slow and erratic?,” but Bernanke danced around the obvious:

    Why has the recovery from the crisis been so slow and erratic? Historically, recessions have typically sowed the seeds of their own recoveries as reduced spending on investment, housing, and consumer durables generates pent-up demand. As the business cycle bottoms out and confidence returns, this pent-up demand, often augmented by the effects of stimulative monetary and fiscal policies, is met through increased production and hiring. Increased production in turn boosts business revenues and household incomes and provides further impetus to business and household spending. Improving income prospects and balance sheets also make households and businesses more creditworthy, and financial institutions become more willing to lend. Normally, these developments create a virtuous circle of rising incomes and profits, more supportive financial and credit conditions, and lower uncertainty, allowing the process of recovery to develop momentum.

    Yes, normally a recession is self-correcting, but not this recession.  Hmmm … I wonder why?

    Bernanke never gets there, simply repeating that the recession was severe and worldwide, and there was a Tsunami “Japanese disaster,” blah blah blah.

    Has there never been a worldwide recession, a “disaster” in a major global economic player, or all of the other minutiae mentioned in the 3,500 word statement?

    So why of all the recessions, some of which have been very deep, why is this one not self-correcting?  Like I said, he never gets there.

    Words, just words.  Over 3,500 in total.  But two were missing.  The two which hold the answer to the question.

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    Comments


    Keynesian economics was close.

    What we are really suffering from is a Keynesian Depression.

    We saw one in the 30’s and Japan has muddled through their own for 20 years.


     
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    Samuel Keck | August 27, 2011 at 2:40 pm

    Two words: Capital strike.

    “Capital strike.”

    From the perspective of popular culture “Capital strike” leaves the impression that capitalism is to blame.


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