Speaking in London, Federal Reserve chair Janet Yellen Tuesday predicted that the ‘the system is much safer and much sounder’ and explained that the Federal Reserve is prepared to deal with numerous enormous shocks to the economy.
In her conversation with Lord Nicholas Stern, Yellen also went on to list the reasons that, thanks to central bank intervention, there is unlikely to be another financial crisis ‘in our lifetimes.’
For those who have lived through more than one business cycle, however, alarm bells tend to go off every time an economist, central banker or high-ranking government official declares that there’s little to no danger of economic turmoil in the near future.
There is a long history of spectacularly bad predictions being made shortly before economic crises. Famously, shortly before the Crash of 1929 – one of the earlier crises that occurred on the Federal Reserve’s watch – Herbert Hoover proclaimed that ‘We in America today are nearer to the final triumph over poverty than ever before in the history of any land.’ But, we certainly don’t have to go back that far.
This post was published at Ludwig von Mises Institute on July 4, 2017.