We mentioned the answer to our question in Sunday’s post, Bernanke: No, but it is worth repeating as a stand-alone post.
Many supporters of Ben Bernanke (and other politicians) cite last year’s increase in the stock market as evidence that the he or they “saved the economy” and/or “prevented a depression.”
For those readers who don’t have the percentages memorized, the Dow Jones Industrial Average increased about 20% in 2009. From its nadir early last March, it increased about 61% by year-end. (Yeah, January and February ’09 were particularly cruel.)
That seems impressive, right?
Well, in 1932, the Dow Jones Industrial Average increased about 64%.
Recall that the Great Depression is supposed to have started with the stock market crash in October, 1929, and ended around 1940 or so. (Among economists who care about such things, there isn’t as much consensus about its ending as its beginning.)
Now, whether one takes the absolute peak or some other smoother measure of the index’s levels, it took until 1954 or 1955 to approach the highs of 1929 & 30.
So, while it’s very nice whenever equity markets increase, note that the extraordinary stock performance in 1932 did not signal an end to the depression.
Also, note that it took another 22 years (or so) to attain new equity index highs, and those latter highs were not adjusted downward (for the inflation) during the intervening 22 years.
So, while every reasonable and sane person hopes that the worst of the economic crisis is over, note that it need not be for many, many people or for the economy as a whole.
Now, perhaps we are inattentive, but we haven’t heard Mr. Bernanke take any credit for last year’s performance. We would attribute that to the fact that he knows more about the Great Depression than many of his supporters do.
