The Nobel Prize in Economics in 2022 was awarded to the Americans Ben Bernanke, Douglas Diamond and Philip Dibwig for their "research on banks and financial crises".
This was announced on Monday, October 10, by the Nobel Committee of the Royal Swedish Academy of Sciences.
Renowned economist and MIT Ph.D. Ben Bernanke was born in 1953.
In the early 2000s, he served as chairman of the White House Council of Economic Advisers, and later led the US Federal Reserve.
The scientist analyzed the Great Depression of the 1930s in the United States and showed how the panic in the banking sector and the massive withdrawal of funds from deposits made the crisis protracted and deep.
After the collapse of financial institutions, valuable information about borrowers was lost for a long time, and the ability of society to channel savings into productive investments decreased.
Douglas Diamond, Professor Emeritus of Finance at the Booth School of Business at the University of Chicago, was also born in 1953.
For almost 23 years he has been a research fellow at the US National Bureau of Economic Research.
Philip Dibwig, professor at the Olin School of Business at Washington University in St. Louis, was born in 1955.
From 2002 to 2003, he was President of the Western Financial Association (WFA) in the United States, and after that he directed the Institute for Financial Studies at the Southwestern University of Finance and Economics in China.
In their work, Diamond and Dybvig proved that banks can be vulnerable to rumors of their imminent collapse, since in this case panic withdrawal by depositors can exacerbate the problems of a financial institution.
Economists say this can be prevented if the government provides deposit insurance and acts as a lender of last resort to banks.
“Modern banking research explains why we need banks, how to make them less vulnerable in times of crisis, and how bank failure exacerbates financial crises.
The foundations for these studies were laid by Ben Bernanke, Douglas Diamond, and Philip Dibwig in the early 1980s.
Their analysis is of great practical importance in the regulation of financial markets and the fight against financial crises,” the Nobel Committee said in a press release.
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According to the forecast of the World Bank and the International Monetary Fund (IMF), as early as 2023, the global economy may face a recession.
At the same time, UN experts do not rule out the possibility of a new global crisis worse than in 2008.
Against this background, the studies of the current Nobel Prize winners are becoming especially relevant, says Georgy Ostapkovich, director of the Center for Market Research at the Institute for Statistical Research and the Economics of Knowledge at the National Research University Higher School of Economics.
“The whole world is now on the verge of a recession, which is usually followed by a crisis.
Today it is one of the most acute global problems along with poverty and unemployment.
So research in this area is definitely useful, and if the decisions of scientists make it possible to at least partially stop the crisis, this will already be a big plus, ”Ostapkovich said in a conversation with RT.
A similar point of view is shared by the chief analyst of Teletrade, Mark Goykhman.
According to him, it is the banking sector that is considered the "circulatory system", the disease of which can affect a number of important "organs" of the economy.
So, traditionally, after the collapse of banks, the chain is followed by crises of non-payments, defaults on the debts of companies and the decline of the economy as a whole.
“Award-winning Ben Bernanke, for example, was once given the nickname “Ben the Helicopter.”
This is due to the fact that he advocated massive financial assistance to banks, companies, and the population, figuratively calling it "throwing money from a helicopter."
Largely based on such a policy, central banks acted during the last covid crisis of 2020.
Let it be at the cost of huge injections of funds, zero interest rates, but it was possible to prevent the collapse of the banking system and the economies of developed countries,” said Goykhman.
At the same time, such decisions remain controversial, since it was the actions of regulators during the pandemic that pushed the global economy to the current challenges.
Alexander Abramov, head of the laboratory at the RANEPA Institute for Applied Economic Research, spoke about this in an interview with RT.
“The recommendations proposed by scientists were not very consistent, especially in terms of monetary policy.
So, the too soft monetary policy of recent years has become one of the reasons that we now have high inflation throughout the world, ”said Abramov.
crisis manager
It is curious that it was Ben Bernanke who led the US Federal Reserve during the financial crisis of 2008.
Recall that then problems in the mortgage market in the United States led to the collapse of one of the largest investment banks in the country, Lehman Brothers, after which a number of other leading American organizations ceased to exist.
By the end of the year, the crisis had already affected most of the world's countries, and the collapse of the global economy exacerbated the situation with the repayment of loans and significantly worsened the financial situation of hundreds of millions of people.
As the Financial Crisis Inquiry Commission (FCIC) later found, such a collapse could have been avoided.
At the same time, experts placed responsibility for what happened on representatives of the two presidential administrations, Congress and a number of regulatory bodies, including the Fed.
“While there was some awareness, or at least discussion, of a real estate bubble, the evidence suggests that senior government officials did not recognize that the collapse of this bubble could threaten the entire financial system.
In the summer of 2007, Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson publicly assured that turmoil in the subprime mortgage markets would be contained,” the FCIC report said.
An American flag flies over the Federal Reserve building on May 4, 2021, in Washington
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© Patrick Semansky
Subsequently, the actions of the Fed and other regulatory bodies made it possible to stabilize the situation in the financial system and the economy as a whole, experts admit.
At the same time, as experts emphasized, the initially responsible departments ignored the impending catastrophe.
“Bernanke's empirical analysis made it possible, so to speak, to prevent a deep depression, and to some extent it helped to mitigate the 2008 crisis.
However, of course, the fact that he failed to foresee the crisis is his problem, which suggests that scientific theories are not omnipotent,” Alexander Abramov concluded.
The award for achievements in economic sciences was approved in 1968 by the Bank of Sweden and was called the Alfred Nobel Memorial Prize in Economics.
It has been awarded 54 times, with a total of 92 winners.
This year, the laureates will share 10 million Swedish kronor (about $884,000) among themselves.