Bernie Sanders, the Senate's only self-proclaimed socialist, has placed a hold on Ben Bernanke's nomination to a second term as Fed chair, apparently on the grounds that Bernanke hasn't proven he's competent to run the place.  Economics of Contempt echoes the charge, and names what are indisputably two sizeable mistakes.

The problem is, to really evaluate how Ben Bernanke's doing, we should also be looking at what hasn't happened.  That's a little hard to do.  But I just finished reading an excellent new book, a diary of the Great Depression that was kept by Benjamin Roth, a young lawyer in Youngstown Ohio.

Reading it makes it clear just how hollow are comparisons between the suffering of the 1930s and what we're going through.  The Youngtown he describes in the early thirties is a place where markets have entirely broken down.  The three major banks are shut down, and those with cash can buy their savings passbooks at discounts of 40% or more, then turn around and use those passbooks at face value to pay off any debts they owe the bank.  Which sounds like a great scheme, except that no one has any cash.  Real estate cannot be sold at any price, and tenants can't pay the rent, so landlords are bulldozing the houses rather than incur taxes that they can't pay.  Without things like automatic unemployment insurance, the misery was grinding.

And who can we thank for that happy situation?  In large part, the Fed, which allowed money supply to radically contract, in part due to a power vacuum at the top, and in part due to an ill-advised desire to stay on the gold standard.  Ben Bernanke could undoubtedly have done better.  But he did well enough that we are having a miserable recession instead of an all out catastrophe.  Is that well enough?  I don't know.  But I wonder which of his potential successors would have done better.  They might not have made Bernanke's mistakes.  But they might have made others.

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