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
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Look at What 'Worked' in the Great Depression

Economics / Economic Depression Feb 05, 2012 - 07:16 AM GMT

By: Jesse

Economics

Best Financial Markets Analysis ArticleHere is a fairly simple picture of some of the major metrics during the Great Depression. Too simple yes, but it tracks most of the major indicators.

Hoover followed a policy of 'deleveraging,' that is, allowing for the economy to liquidate its prior excesses without changing much else. The Fed did respond to this crisis by expanding the monetary base fairly significantly as you can see.


The recovery began under Roosevelt, who declared a 'bank holidy' and struck at the heart of the problem, clearing the banking system. But he also followed through with a major currency devaluation, stimulus programs, and significant financial reform.

And that last point is the most important. Hoover's Fed supplied stimulus, but there was really nothing done to fix the system that had caused the Great Crash of 1929 in the first place. And I suspect that if Roosevelt had not taken strong steps to clean up the fraud in the stock market and the banking system, his own stimulus would have fluttered and failed.

Now the common knee jerk reaction to this from those who study the schoolbook given by the monied interests is twofold.

First, that Hoover simply did not go far enough, and if they had only allowed the Depression to continue to deepen, eventually it would have bottomed and things would have improved. I think the answer is clear, in the examples of Italy, Germany and Japan. When an economy is tortured to that extent, the people do not continue to endlessly suffer in silence. They react, badly, and take matters into hand one way or the other.

They say you cannot fix debt with debt. And I say that like most simplistic slogans it is intended to mislead. The real issue is reform and how the debt is used and the gains distributed.

Secondly, they say that the Roosevelt recovery did not last. And it did not continue on a steady trajectory. The Fed engaged in some policy errors and caused a secondary slump in the late 1930s. And the world economy remained troubled. Roosevelt also faced an obstructionist Congress, and a Supreme Court that overturned many of his New Deal programs.

He also faced an attempted military coup d'etat funded by a few of the monied interests who also busy doing business with Mussolini and Hitler, as testified by one of its more decorated war heroes, but the history books don't like to talk about that. Just another nut job.

Globally, the monied interests seemed to have choose amongst three options: 1. Go along grudgingly with reform and accept a smaller percentage of the overall economy (Roosevelt), 2. Fund an oligarchic takeover of the government and seek to control it (Hitler), 3. Sew your wealth into the dresses of your children, and die with them in a basement (Russia).

The US, like all other nations, has plenty of its own dirty little secrets that no one likes to talk about.

The point of this is that austerity following a financial collapse based on fraudulent imbalances does not work and almost always leads to civil disorder. And that stimulus alone does not heal the damage, although it does help to ease the pain if applied correctly.

No, the most important ingredient for a sustained recovery is to reform the abuses that allowed for such a spectacular bubble of excess to exist in the first place. It was all about the misallocation of productive capital and the negative effects of monopolies and financial frauds on the real economy.

At some point this lesson will be burned into our minds by the continuing stagnation of the unreformed economy, even if it is sold as 'the new normal' and not so bad on paper. It will be a living hell for many, and they will eventually push back, and then things will be resolved, one way or the other.

I hope that the new school of economic thought that rises out of the ashes of what we have now is more serious and mature and thoughtful, if not wise. But I have not found many economists capable of such original thinking, even among those who claim to carry the progressive banner.

And certainly not among the ideological schools, who start with an a priori set of premises and then beat reality and torture the market participants to death with them and their supporting statistical and logical fallacies. Since these schools are based on top down principles and assumptions, they are notoriously slow to change and adapt, but often most vociferous and extreme in their arguments, with adherents whose allegiance is less informed by the intellect and an actual understanding of things, and more like a belief system based on stubbornly held slogans and prejudices.


By Jesse

http://jessescrossroadscafe.blogspot.com

Welcome to Jesse's Café Américain - These are personal observations about the economy and the markets. In providing information, we hope this allows you to make your own decisions in an informed manner, even if it is from learning by our mistakes, which are many.

© 2012 Copyright  Jesse's Café Américain - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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


Post Comment

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

6 Critical Money Making Rules