Big Ben: Bernanke, the Fed, and the Real Lessons of the Crisis

Book review published by Foreign Affairs

December 14, 2015

The biggest revelation offered by Ben Bernanke's memoir of his time as chair of the U.S. Federal Reserve is just how much the public, the media, and especially elected officials have misunderstood the real lessons of the 2008 financial crisis and the subsequent Great Recession—events that defined Bernanke's tenure, which began in 2006 and ended in 2014. Bernanke spends much of the book justifying what should be self-evident: that the risk of a second Great Depression called for precisely the sort of active monetary policy that he and his colleagues at the Fed pursued.

As Bernanke makes clear, the crisis was a traditional financial panic of the sort that led to the creation of the Fed in the first place. Bernanke and his colleagues responded correctly to the challenge, rapidly cutting interest rates to zero and then purchasing assets, primarily U.S. Treasury bonds, on a large scale, a practice known as "quantitative easing." Both steps aided the U.S. economy by increasing credit availability, raising inflation expectations, encouraging investors to repurchase risky securities they had sold off during the initial panic, and generally restoring confidence.

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