Andrew Ross Sorkin: belief

Transcript context

…If I had been alive back then, I would have agreed with those people, correctly or not. I think that’s a pretty good argument. The notion that 1920 to ’21 saw such a quick recovery — again, one would have been wrong, but the rational thing to have expected would be, once again, the same. It’s like, “Oh, let this crash, whatever. We’ll come back in a year or two.” Now, ex post, you can always say exactly how it should have gone, but ex ante, that would have been my reasoning. That may be, but I think there’re always two issues in a crisis. It’s can you prevent the crisis on the front end? And then what do you do once you’re in a crisis on the back end? It’s interesting that not only did they not choose to try to do something to prevent it, demonstrably, on the front end, and maybe you would have been very rational to have chosen not to do anything. But on the back end, when there was a debate about could you lower interest rates, flood the system with money? Obviously, the gold standard comes into play there and becomes very complicated, but there were obviously discussions about moving off of that, and that would have ultimately been the right thing to do, and probably would have been the right thing to do earlier than they did. For the most part, they sat on their hands. The good news is Ben Bernanke, I think, learned a lot of these lessons when he was doing his PhD at Princeton and took some of those lessons into the 2008 financial crisis, where he did decide to flood the system with money. While politically, it might have been a problem insofar as there were a lot of questions about bailouts and what the Fed did in that context, I think on a practical economic basis, it worked. I think two things I would have done is, have something like deposit insurance to begin with, and then do what Sweden did and get off the gold standard as quickly as is necessary, and then, I think, it would have been quite a mild downturn had one done those two things. And the Fed shouldn’t have to be worrying about what’s the right interest rate, because they don’t know, just like they don’t know now. They cut rates again as we’re speaking, what? It was yesterday. Some people think there is speculative fervor in the stock market. This is debatable, but it might be true, and they’re cutting rates? I don’t think they know.…

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