We Still Haven’t Learned The Right Lessons From The 2008 Crash

Financial media-administered history lessons — whether by commentaries or interviews — on the Great Crash that occurred 10 years ago are frightening. The would-be history teachers are in total denial (or ignorance) of the key fact that 2008 was a monetary-made disaster. This climate of denial continues to foster ever greater danger in the future not to mention a heavy cumulative burden in the decade since — as measured by prosperity lost.

In effect, the Central Bankers Club and their backers among the political elites have been totally successful, it seems, in expunging monetary forces as the key driver — or even as a major factor — in the journey to the 2008 Crash. This started with President George W. Bush nominating Ben Bernanke as a Fed Governor (effective August 2002) in the clear expectation that this Princeton Professor would prove effective in implementing the monetary inflation which he preached. True, Alan Greenspan was still the chief, but by then on shaky footing, given the known hostility of the Bush-Baker “clan” which resented his earlier close cooperation with the Clinton Administration. And Before that, Greenspan was perceived to have some responsibility for the 1991-2 economic downturn which spelled defeat for the older Bush. The implicit term extension deal for Greenspan in 2003 (by two years) was that he would “listen” to the new Governor from Princeton.

George W. Bush’s expectations were met when the Greenspan/Bernanke Fed in early 2003 decided on the novel policy of “breathing in inflation” from what it perceived as too low a level. The Princeton Professor was a zealot of the 2-percent inflation standard and had no truck with concerns that the rhythm of prices was now downwards for some time due to the nature of technological change and globalization. The result; monetary inflation in the asset markets (credit, real estate, in particular) developed in a virulent form (including its well-known aspect of rampant financial engineering).