I've noticed that a lot of people have been throwing around some misinformation about the Great Depression lately, which doesn't fit any of the real facts. Bernanke's heroes are evidently Irving Fisher and Milton Friedman.  Unfortunately, like Bernanke, they both had a bad habit of changing the facts to fit their theories, instead of the other way around.

1. Contrary to Bernanke, the government did NOT increase taxes in 1930. It was 1932, well into the Depression, and it was a matter of survival. Basically, it was a  choice between raising taxes or national bankruptcy.  And Hoover increased income taxes all the way from 1.5% to 4% for everybody but the richest 10% of the population in 1932.

http://www.taxfoundation.org/files/federalindividualratehistory-20080107.pdf

One reason that the government needed money in 1932 was the original bailout plan.  The Fed had shot 408% more liquidity into the banks, which was immediately sucked in like a black hole.

2. Hoover did NOT decrease government spending during the early years of the depression. Government spending INCREASED from $2.9 billion in 1928 to $4.66 billion in 1932. Why did Hoover have to raise taxes? The government collected $1.9 billion in taxes in 1932, but spent $4.66 billion. Hoover's final budget, for Fiscal 1933, projected revenues of $2 billion and expenditures of $4.6 billion. That kind of deficit spending makes the current deficit projections look positively tame by comparison.

3. It wasn't his fault. Calvin Coolidge had left him saddled with a $17.6 billion deficit, nearly 9 times the Federal budget. The government will collect over $2.5 trillion this year; think of it as a $20 trillion + deficit, in terms of today's Federal government budget. It was so massive that it was crushing the government's ability to do anything. The interest alone was costing the government nearly half of all the revenue it was collecting. The government didn't have much of a choice; it had to either increase taxes or go bankrupt. Coolidge, like Bush, left the next person in line to take the blame.

4.  The economy contracted during 1930-1933, but it actually expanded every year except one from 1934 until WWII; from the technical definitions that we use today, the economy was really only in a recession for 4 years.  In fact, it grew by over 25% in 1940 and 1941, while there was actually 1% DEFLATION in 1940. 

5.  The reason the entire decade is counted as a Depression is because there were 45.8 million employed workers out of a

work force of 47.7 million workers in the U.S. in 1928, for an

unemployment rate of 4.2%. The number of employed people decreased

to just 38.5 million workers out of nearly 48 million members of

the work force in 1932 and 1933, meaning that the actual

unemployment rate was 20% during the two worst years of the

Depression, before expanding back to 46 million employed workers by

1937. In other words, there was a period of nearly 8 years in which jobs were about as hard to find as a needle in a haystack.  Many people went back to a barter society during the "hard times" of the early 1930s; some even starved to death.  Fortunately, after 1933, the situation did get better each year.  Fewer people starved each year, and more and more of them got a new job and got back on their feet financially; from 1938 until WWII, unemployment was back to normal levels.  it will probably take about the same length of time for everything to get back to normal this time. Hooray, instead of the 12 years that people are talking about, it'll only take about 8 years for the economy to get back to normal.  Let's all jump for joy!

6.  One problem was demographics back then.  The Baby Boom from the Civil War reached 65 in 1930.  The Baby Boom from WWII will reach retirement age in 2010.  But some of them are taking early retirement at 62, so we're getting the first tremor of the coming financial consequences of a massive baby boom's retirement a couple of years early.  Several societies in the past had a solution to the problem:  they just killed all the old people and solved the fiscal crisis.  But we can't do that.

7.  Like today, the national debt was one of the largest contributing factors that caused the Depression.  The $17.6 billion in debt that Hoover inherited doesn't sound like much, until you remember that the government only collected $1.9 billion in 1932, and it had to pay 6% interest on that debt.

8.  I don't think that lowering the Fed funds rate drastically would have prevented the Depression.  It may have helped, but the banking system was a shambles.  At some point, cheap credit just can't fix a fundamental problem in which banks have more debts than assets and deregulation has allowed them to make risky gambles with their customers' money, as happened both in 1930 and today.