Federal Reserve Chairman Ben Bernanke is speaking this morning at the Council Foreign Relations. Carlyle CEO, David Rubinstein, asked Mr. Bernanke what were two things he learned from his study of The Great Depression.
Ben Bernanke outlined two lessons below:
Monetary policy needs to be supportive and not have a contracting policy, which could cause massive deflation as it did in the 1930s. The fed is supporting this expansion theme by cutting rates to essentially 0 and implementing other creative strategies.
The second lesson Bernanke mentioned is you need to have a stable financial system. During the Great Depression, the government did not intervene to assist the banks. It is vital to have a commitment to stabilize the financial system. He did note it is not ideal to be put in a situation to have firms to big too fail.
Some other interesting items Bernanke mentioned include:
He noted anyone who subscribed to the belief that letting banks fail, should now abandon that theory at this point.
Ben Bernanke also said he does not support suspending mark-to-market.
Finally, Bernanke said “we will definitely recover”, but it is just a question of timing, and he says the main determinant of that is how quickly we stabilize the financial system.
Hopefully, Bernanke is right, but I still think housing will continue to undermine the system.
Posted by eministrader 
