“It is possible there’s going to be a very sharp, short, I hope short, recession in the next quarter because everything is shutting down of course,” he said. “If there’s not too much damage done to the workforce, to the businesses during the shutdown period, however long that may be, then we could see a fairly quick rebound.”
Bernanke helmed the Fed when it was going through the financial crisis of 2008, and the subsequent recession that followed. He was the first chairman to bring the benchmark interest rate to almost zero, and he implemented other measures that have since been copied by successors.
He is also a known authority on the Great Depression.
“This is a very different animal from the Great Depression,” he said, which he explained “came from human problems, monetary and financial shocks. This is has some of the same feel, some of the feel of panic, some of the feel of volatility that you’re talking about. It’s much closer to a major snowstorm or a natural disaster than a classic 1930s-style depression.”
He said the most important thing for society to do is control the virus. After that, policy will be able to work the way it is supposed to.
“Nothing is going to work, the Fed is not going help, fiscal policy is not going to help if we don’t get the public health right, if we don’t solve the problem of the virus, of the infection, so making sure that the risk has declined sufficiently before [putting] people back in the line of fire,” Bernanke said.
The Fed has also pulled down benchmark rates, and it has activated a number of programs to help keep liquidity flowing throughout the financial system.
“I think the Fed has been extremely proactive, and [Chairman] Jay Powell and his team have been working really hard and gotten ahead of this and shown they can set up a whole bunch of diverse programs that will help us keep the economy functioning during this shutdown period, so that when the all-clear is sounded, we will have a much better rebound than we otherwise would,” Bernanke said.