‘Nobel Economics Prize’ Bernanke: "Different from 2008... Must Watch War, King Dollar, etc."

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[Asia Economy New York=Special Correspondent Seulgina Jo] Ben Bernanke, former chairman of the U.S. Federal Reserve (Fed) and co-recipient of this year’s Nobel Prize in Economics, recently warned that although the current economic situation differs from the 2008 global financial crisis, risks arising worldwide due to factors such as war and the strong U.S. dollar must be closely monitored.

At a press conference held on the 10th (local time) at the Brookings Institution in Washington, D.C., Bernanke stated, "The U.S. financial system is not in as severe a predicament as it was 14 years ago," while emphasizing the need for vigilance. Bernanke, who led the Fed from 2006 to 2014, was the figure who implemented zero interest rate and quantitative easing policies in response to the global financial crisis.

He pointed out, "Various events occurring around the world can worsen financial conditions," adding, "Although the current situation is not similar to 2008, financial risks can emerge without warning." This serves as a warning that incidents in regions such as Europe and Asia could shake not only the U.S. but the global economy as well.

In particular, Bernanke cited Russia’s invasion of Ukraine and the ultra-strong U.S. dollar as concerns. The prolonged Russian invasion is already causing economic ripple effects in the European market, such as disruptions in natural gas supply. The strong dollar is also raising concerns about capital outflows, especially in emerging markets like Asia.

He emphasized, "Even if financial problems do not start from a single event, over time they can compound and worsen the situation," calling this "an aspect we must truly keep a close watch on."

On the same day, Bernanke mentioned that a key difference from the 2008 global financial crisis is that the current economic situation stems from external factors. While past financial crises began with internal problems within the financial system, such as bad loans, and led to the collapse of major banks, this is not the case now. As advice to young economists, he said, "One of the lessons of my life is that you never know what will happen."

Professor Douglas Diamond, University of Chicago, USA
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Philip Deepvig, Professor at Washington University in St. Louis [Photo by Reuters]

This year’s Nobel Prize in Economics was jointly awarded not only to former chairman Bernanke but also to Douglas Diamond, professor at the University of Chicago, and Philip Dybvig, professor at Washington University in St. Louis. They were recognized for their contributions to improving understanding of the role of banks during financial crises.

In a 1983 paper, Bernanke statistically analyzed how bank runs during the Great Depression in the 1930s led not only to the failure of banks but also to the collapse of the entire economy. Bernanke evaluated this by saying, "At the time, this was not a widely accepted claim." He added, "I did not expect to receive the Economics Prize at all," recounting, "I turned off my cell phone and went to sleep the night before, and my daughter living in Chicago called our home landline to inform me of the award."

Professors Diamond and Dybvig analyzed how market rumors about bank crises lead depositors to run on banks, ultimately causing bank failures. At a separate press conference that day, Professor Diamond diagnosed that in the current situation where simultaneous interest rate hikes by major countries have sharply increased financial market instability, "When people lose trust, financial crises worsen." He pointed out, "During times of rapid global interest rate hikes and other unexpected events, fear can spread," adding, "Even organized systems are vulnerable to fear itself."

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