Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Markets Failing to Give Another AI Mega-trend Buying Opportunity - 6th Jun 20
Is the Stock Bulls' Cup Half-Full or Half-Empty? - 6th Jun 20
Is America Headed for a Post-Apocalyptic Currency Collapse? - 6th Jun 20
Potential Highs and Lows For Gold In 2020 - 5th Jun 20
Tying Gold Miners and USD Signals for What Comes Next - 5th Jun 20
Rigged Markets - Central Bank Hypnosis - 5th Jun 20
Gold’s role in the Greater Depression of 2020 - 5th Jun 20
UK Coronavirus Catastrophe Trend Analysis Video - 5th Jun 20
Why Land Rover Discovery Sport SAT NAV is Crap, Use Google Maps Instead - 5th Jun 20
Stock Market Election Year Cycles – What to Expect? - 4th Jun 20
Why Solar Stocks Are Rallying Against All Odds - 4th Jun 20
East Asia Will Be a Post-Pandemic Success - 4th Jun 20
Comparing Bitcoin to Other Market Sectors – Risk vs. Value - 4th Jun 20
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Revisionist History: Violation of Economic Laws, Why You've Never Heard of the Great Depression of 1920

Economics / Economic Theory May 23, 2010 - 04:16 AM GMT

By: Submissions

Economics

Best Financial Markets Analysis ArticleLets take a look at what happens when economic laws are violated. Revisionist history is a useful, potent tool. The cats out of the bag and everyone knows Obama is a closet socialist, but lets take a look at a American favorite, Franklin D. Roosevelt.

Despite all his spending programs, public works, quick fix legislations, radio talks, etc., it solved nothing. Years after his programs were in full swing even his Treasury Secretary, Henry Morgenthau admitted, "We have tried spending money. We are spending more than we have ever spent before and it does not work ... After eight years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!". To wit - at least back then a high government official payed lip service to the truth.


The problem is government not us. Small government would be a delight, but only if it can stay that way. That could possibly be a oxymoron. Now if you take a look at Herbert Hoover, that supposed "did nothing to help the economy" president, you will find the opposite. Hoover actually was a active president, and intervened more than those history books in school tell us. In fact, FDR expanded many programs from the Hoover Administration and created some disastrous ones of his own. Hoover started the government coercion, and FDR expanded it. Price fixing, credit expansion, central banking, fractional reserve banking, monopolizing in legal tender, socialism, re distributive wealth, any taxation, public works, subsidies, etc.; it's all the different products of the government, and all are unproductive and work against us. The government needs us, not the other way around.

The Great Depression became "Great" because of those spending programs. In comparison we can take a look at the fortunately, not-so-great Depression of 1920-21. The first year of this depression was worse unemployment wise and yet despite no quick fix spending programs, we were out of it in about a years time. In fact, the government drastically cut spending and lowered taxes. This 1920-21 depression alone can be used to show the paradox of government intervention.

The Hoover/FDR programs kicked the can down the road, and prevented businesses from adjusting to new reality or to put it another way, cleaning the system of mal-investments. Every boom must have a bust. We must embrace the bust, the problem is the boom. The 1920s boom started with credit expansion initiated from the Federal Reserve system (established 1914). The business cycle explanation can be summed up by Gary North:

"The Austrian theory of the business cycle, developed by Ludwig von Mises in 1912, teaches that when central banks inflate, in order to hold down interest rates, this creates false price signals. Specifically, it creates false signals regarding the price and availability of capital. This in turn leads entrepreneurs to borrow money and invest in new projects. When the central bank ceases to inflate, these projects are revealed as unprofitable ventures."

The bust was inevitable, but prolonged due to unnecessary government intervention. How can we all of a sudden in the 1920s have a boom, the likes never before seen in the history of the world? Businesses are popping up like never before. Then in the 1930s businesses are going bankrupt like never before. It's a simple answer: central banking, and a coercively powerful one at that.

Now, the Bush/Greenspan and Obama/Bernanke programs are huge compared to FDR's New Deal. One can only speculate as to how long it will take us to get out of this mess. Unfortunately the worst is not over.

By Viresh Amin


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

christian
24 May 10, 20:41
we need another stimulus

should u want to bring about a great depression please listen to this man and others like him

the economy is not self correcting these days!....cutting spending.....while we have high public and private debt...and a hollowed out economy....is so very poorly thought out......this is not the 1920 economy

we have consumption service jobs..cutting spending and not supporting a higher stock market...is a recipe for a re-inforcing cycle of unemployment and less spending..

we need another stimulus bill....spent on building up america....the funny thing is deficits pushed germany out of a depression like state several years after currency speculators shorted the currency into worthless ness...i.ehypperinflation.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules