Lest you forget.................

.......that smooth economic sailing is not a feature of American history, check out this list from the folks at Wikipedia:

• Crisis of 1772
• Panic of 1792
• Panic of 1796-1797

• Panic of 1819, a U.S. recession with bank failures; culmination of U.S.'s first boom-to-bust economic cycle
• Panic of 1837, a U.S. recession with bank failures, followed by a 5-year depression
• Panic of 1847
• Panic of 1857, a U.S. recession with bank failures
• Panic of 1866
• Long Depression (1873–1896)
• Panic of 1873, a US recession with bank failures, followed by a four-year depression
• Panic of 1884
• Panic of 1890
• Panic of 1893, a US recession with bank failures   
• Panic of 1907, a U.S. economic recession with bank failures
• Wall Street Crash of 1929 and Great Depression (1929–1939) the worst depression of modern history
• OPEC oil price shock
• Black Monday (1987)
• Savings and loan crisis of the 1980s and 1990s in the U.S.
• Late-2000s Financial Crisis or the Late-2000s recession, including:
• 2000s energy crisis
• Subprime mortgage crisisUnited States housing bubble and United States housing market correction

You can go here to review a history of recessions.

You may be asking yourself what occasioned such cut-and-pasting on my part.  Good question.  It all started when I was led through the maze that is the Intertunnel (don't remember how, sorry) to this essay by Robert N. Solow.  Solow's essay, How To Save American Finance From Itself, points out the Federal Reserve was created by Congress in 1913 to reduce the financial turbulence.  Solow then suggests that, over the passage of time, Central Bankers have been asked to do often contradictory (and impossible) things.  He believes that Ben Bernanke was the right man doing the right things during the most recent unpleasantness.  Solow concludes with this question:

All of which leads to a broader issue that Chairman Bernanke could not possibly mention in these lectures or elsewhere, but that I wish Professor Bernanke would think about whenever he leaves office. Any complicated economy needs a complicated financial system: to allocate dispersed capital to dispersed productive uses, to provide liquidity, to do maturity and risk transformation, and to produce market evaluations of uncertain prospects. If these functions are not performed adequately, the economy cannot produce and grow with anything like efficiency. Granted all that, however, the suspicion persists that financialization has gone too far.

What would that mean? It would mean that the last x percent of financial activity absorbs more resources (especially intellectual resources) and creates more potential instability than its additional efficiency-benefits can justify. This charmingly subversive suggestion is easy to make, but it is extremely difficult to validate. Yes, it is hard to imagine that the Hedge Fund Operator of the Year does anything that is remotely socially useful enough to justify the enormous (and lightly taxed) compensation that results; but that is not really an argument. Much more significant is the fact that the bulk of incremental financial activity is trading, and trading, while it may provide a little useful public information about market opinion, is largely a way to transfer wealth from those with inferior information and calculation ability to those with more. There is no enhancement of economic efficiency to speak of. This is, you might say, the $64 trillion question. Maybe I shouldn’t wish it on Ben Bernanke.

Not being a trained economist, or a trained historian for that matter, I do have a few observations.  History would seem to suggest that as long as human nature is involved, economies will alternate between stability and turbulence.  When things get too good, they are about to get bad.  When things are too bad, they are about to get good.  Governments can help and governments can hurt.  Even the really smart people are guessing most of the time.  Avarice and sloth are still numbered among the seven deadly sins.  The truth is elusive, even for us history majors.