Once in a Century

Greenspan Says Crisis May Be `Once in Century' Event (Update1)

``This is a once in a half century, probably once in a century type of event,'' Greenspan said. ``We shouldn't try to protect every single institution. The ordinary cost of financial change has winners and losers.''

1800

Long Depression

In the United States, the meltdown of the European economies led directly to the Panic of 1873 and ushered in the Long Depression.

Panic of 1873

Years of government-promoted speculative credit created vast overexpansion of the nation’s railroad network. The failure of the Jay Cooke bank set off a chain reaction of bank failures and temporarily closed the stock market.

1900

Great Depression

Another explanation comes from the Austrian School of economics. Austrian theorists who wrote about the Depression include Hayek and Murray Rothbard, who wrote America's Great Depression in 1963. In their view, the key cause of the Depression was the expansion of the money supply in the 1920s that led to an unsustainable credit-driven boom. In their view, the Federal Reserve, which was created in 1913, shoulders much of the blame.

2000

October 27, 2005
Bernanke: There's No Housing Bubble to Go Bust

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households.

Let's not forget the "unsustainable credit-driven boom" that we also saw in the previous two "once in a century" events. I'm surprised that wasn't mentioned. After all, the Fed did lower interest rates to 1% in 2004.

"Without these policy blunders by the Federal Reserve, there is little reason to believe that the 1929 crash would have been followed by more than a moderate dip in U.S. economic activity," Bernanke wrote.

It seems Bernanke's finding some difficulty these days sustaining an unsustainable credit-driven boom. Go figure.