Ben Bernanke and the Great Recession
For economics nerds only
The seminal event that led to the creation of the study of Macroeconomics is the Great Depression (Bernanke, 1995). It is not surprising that this event would leave such a lasting mark on our national psyche. After all, in the period from 1929 to 1933, the net national income in current prices fell by more than one half, net national income in real prices declined by more than a third, and the number of commercial banks operating in the U.S. dropped by a third (Friedman & Schwartz, 1963). In response to the financial crisis, as one of its first acts, the incoming Roosevelt administration imposed a bank holiday closing all commercial banks in the country for more than a week (Friedman & Schwartz, 1963). Such a disruption did not occur before the Depression nor since. These shocking statistics make it clear why scholars would focus on understanding the causes of this crisis with an aim of avoiding its repetition.
Perhaps the most influential study of the origins of the crisis was the book A Monetary History of the United States by Friedman and Schwartz (1963). Although purportedly covering nearly a century between the end of the Civil War and 1960, the authors make it clear that their primary goal is explaining the Depression. In so doing, they offer several contributions. First, they suggest that although the…
