>>Our problems are closer to those of France about 1715.<<
I would be interested in more detail on this position.
As for "our problems", they are myriad. The ones that I believe Bernanke to have appreciated best from his history of the Great Depression of 1929-1939 is the importance of central banks in maintaining liquidity in financial markets.
For example, manufacturers depend on the ability to borrow short-term so that they can purchase materials and pay workers so that they can meet the demands of purchasers who won't pay until orders are delivered.
The example I am most familiar with, although I cannot recall where I first learned of it, is a business who is in the business of making items, say, an order of glassware, for a future event, say, Christmas.
If they can make the glassware and deliver it to the retailer, then they can get paid. Without a loan they cannot even take the order.
My family used to called these short term loans "90 day notes". They would mark down the orders and hand them over to their bank. It was a kind of money.
No 90 day notes, no business. They would have been forced out of business. Yet, they were willing, ready and able to fulfill the orders. They just needed a short term injection of capital.
In the Great Depression of 1929-1939, banks were unable, or unwilling, to lend any money at all, because they, themselves, had no resources to borrow from.
Money needs to keep circulating, otherwise our financial system collapses. |
