Monday, August 30, 2010

Bernanke's admission and Keen's critique

Bernanke has admitted that the "recovery" has stalled:
In sum, the pace of recovery in output and employment has slowed somewhat in recent months, in part because of slower-than-expected growth in consumer spending, as well as continued weakness in residential and nonresidential construction
- The Economic Outlook and Monetary Policy, August 27
Steve Keen's analysis (What Bernanke doesn’t understand about deflation) is that although Bernanke has read Irving Fisher (who was burned by the Great Depression but then underwent an intellectual transformation) he didn't understand him fully:
You would think Bernanke, as the alleged expert on the Great Depression—after all, that’s one of the main reasons he got the job as Chairman of the Federal Reserve—had read Fisher’s papers. And you’d be right. But the problem is that he didn’t understand them—and here we come back to the belief problem. The Great Depression forced Fisher—who was also a Neoclassical economist—to realize that the belief that the economy was always in equilibrium was false. When Bernanke read Fisher, he completely failed to grasp this point.
You can read Irving Fisher's analysis of the Great Depression here (pdf, 21pp):
The Debt Deflation Theory of Great Depressions (1933) by Irving Fisher

No comments: