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The following article appeared in Left Business Observer #125, February 2010. Copyright 2010, Left Business Observer.

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How to learn nothing from crisis

This is the edited text of a talk given by LBO editor Doug Henwood at the Studies in Political Economy annual meeting in Ottawa, January 29, 2010.

Greetings from the USA, where a populist rebellion is underway. Let’s take its measure.

First, for a moment it looked like Ben Bernanke faced rough sledding in his bid for a second term as chair of the Federal Reserve. In the run-up to the confirmation vote, a swelling roster of Senators of both parties said they wouldn’t vote for him. Of course, when it was over, he won, 70–30—a squeaker as these things go, but a landslide by any reasonable standard.

One reason for Bernanke’s unpopularity: he failed to acknowledge, much less deflate, the housing bubble back in 2005. Right, up to a point, but had he raised interest rates or cracked down on the availability of mortgage credit he would have faced…a populist outcry. American populists love nothing more than easy credit and rising house prices. But another reason for his unpopularity: pumping billions—trillions, if you’re an aggressive counter—into the financial system after the bubble burst. If he hadn’t done that, we’d all be wearing barrels. He could have done it more transparently and justly, but the principle of pumping aggressively to avert deflationary collapse has been pretty well