Here’s a letter that I sent yesterday to the Washington Post:
Praising Pres. Obama’s reappointment of Ben Bernanke as Fed Chairman, Robert Samuelson says that “We will never know whether the world might have suffered a depression if Bernanke’s Fed had not responded so aggressively. But that is plausible” (“For Obama, the Only Choice for the Fed,” August 26).
Counterfactual history is inherently hazardous, but that Dr. Bernanke’s unprecedented aggressiveness was key to saving the economy is nowhere near as “plausible” as Mr. Samuelson thinks.
First, it’s unclear that the worst of our economic woes are behind us. Second, and more importantly, the economic downturn of 1920-21 was in many ways deeper than the current downturn. Wholesale prices during that recession fell by 45 percent; the Dow fell by 19 percent; and industrial output fell by 23 percent. Yet within a year of its trough the economy had recovered fully with no intervention by the Fed.
Donald J. Boudreaux