Lessons from the Depression
Paul Mason highlights this superb but pretty scary Wall Street Journal article today. The WSJ isn’t exactly what you would call a liberal paper which makes one section towards the end of the article even more striking. Wondering why the capital market crisis hasn’t yet spread more fully into the real economy, the article’s authors say:
In part, that’s because government has reacted aggressively. The Fed’s classic mistake that led to the Great Depression was that it tightened monetary policy when it should have eased. Mr. Bernanke didn’t repeat that error. And Congress moved more swiftly to approve fiscal stimulus than most Washington veterans thought possible.
If all this turmoil is a precursor to something much worse, then the failure of UK policymakers to even debate fiscal stimulus and the failure of the Bank to ease interest rates is very worrying in the light of the WSJ observation.