What Bernanke Knows About the Great Depression

Last month, I met up with David Cowen, CEO of the Museum of American Finance in New York, for a tour and chat about financial history.

In this clip, Cowen discusses monetary policy during the Great Depression, and what current Federal Reserve Chairman Ben Bernanke learned from it. Have a look. (A transcript follows.)

David Cowen: Well this is something that's very interesting, because it's called Depression-Era Scrip, and most Americans don't realize that President Roosevelt, during the Depression, closed the banking system for a hundred days. A result of that was there was no money supply in circulation and individual municipalities therefore had to issue their own scrip.

Why is this germane today? We all know Ben Bernanke, the head of the Federal Reserve, is a student of the Depression, and he knows all about this problem, that there was no money in circulation. And so I have a suspicion that that's why he's doing QE1, QE2, and they'll keep going to QE25 -- or Twist 1, Twist 2 all the way to Twist 25, or Bond Buyback 1, Bond Buyback 2, etc., because he knows the flip side of that coin is disastrous in what we had to go through during the Depression.

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