Six - Interwar International Monetary Experiments

Summary

As a professor at Princeton, Ben Bernanke (2000, 149, 165) criticized the Japanese central bank for a lack of decisive action to address its economy’s “deep slump” in the 1990s by contrasting its inaction with the action of President Roosevelt in the Depression.

Franklin D. Roosevelt was elected president of the United States in 1932 with the mandate to get the country out of the Depression…. In the end, his most effective actions were the same ones that Japan needs to take – namely, rehabilitation of the banking system and devaluation of the currency. But Roosevelt’s specific policy actions were, I think, less important than his willingness to be aggressive and to experiment – in short, to do whatever it took to get the country moving again.

Bernanke (2002) returned to the issue of leadership when he wrote about the death of Benjamin Strong in 1928, governor of the New York Fed:

[T]he central bank … was essentially leaderless….This situation led to decisions, or nondecisions, which might well not have occurred under either better leadership or a more centralized institutional structure. And associated with these decisions, we observe a massive collapse of money, prices, and output.