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Ben Bernanke: Virus Recession More Like Big ‘Snowstorm’ Than Great Depression
Ben Bernanke decided to grant an interview with CNBC's “Squawk Box” on Wednesday.
That makes sense on at least two levels. Bernanke spent a good part of his life studying the worst economic downturn in modernity and orchestrated the monetary policy response to the second-worst, so it's only "natural" that he should comment frequently on what may or may not end up being an economic catastrophe on par with the Depression.
And yet, because he failed to anticipate the 2008 crash, and because w
Sure like a nuclear winter type snowstorm… you know, the BIG kind.
A better snow metaphor is an avalanche. Yes, in time, we will separate the living from the dead, but the speed in doing so will be predicated on how much stuff is buried. In this snowstorm. It’s still wise to take global market cap divided into crashing GDP, and assume that this avalanche is massive and unparalleled!
Ben Bernanke made two comments that are of interest to me personally, as I’ve reflected on them a lot myself.
Everything I hear and read on financial sites treats “Japanification ” as a dirty word. I’ve been to Japan. My granddaughter law is Japanese. I’m in touch with her parents in Japan. There is a high level of prosperity in Japan. Medical care cost is very low compared to here. Education is excellent and of the same quality everywhere in the country. Income is more evenly distributed. And crime rates are ludicrously low. It seems to me that our quality of life would improve dramatically if we could somehow “Japanify” ourselves. So why do I perceive a gigantic gap between the way “Japanification” is viewed here versus the actuality of Japanese life.
Secondly, he comments on how interest rates have steadily declined since the eighties. My sense is that inflationary and deflationary cycles alternate over very long periods in capitalist systems and this cycle is reflected in interest rates (Bernanke may be afraid to use the unspeakable word “deflation”). This suggests to me that an irresistible deflationary force may be colliding with an immovable inflationary mindset. Hence market chaos.
In economics, Japanification was coined to describe long term economic stagnation (essentially a deflationary trap with collapsed demand). While there are demographic and sociological aspects to the phenomenon, as an economic expression it is considered to be free of chauvinism. The origin of the term is rooted in the fact that Japan was the first major advanced economy in the post WWII world to suffer from the above mentioned malaise. In fact, almost 30 years on, Japan is still struggling with it.
May be “Japan” is struggling, but Japanese people are not. I think that’s the point.
And Bernanke so presciently anticipated the ’08 meltdown. . .