Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Great Depression- Then and Now and Mainstream Journalists

Economics / Mainstream Media Mar 23, 2009 - 12:18 AM GMT

By: Gerard_Jackson

Economics Best Financial Markets Analysis ArticleThe economic crisis and the debate -- what there is of one -- about the alleged anti-recessionary effects of big government spending policies has once again raised the spectre of the Great Depression and once again our commentators get it wrong, particularly journalists, that pesty brood of pseudo intellectuals for whom honest research appears to be an anathema.


Several years ago Alan Wood, The Australian's economics commentator wrote about the dismal fate of the "US economic forecasting industry" that flourished in the 1920s ( Dangerous complacency increases investors' appetite for risk , 22 January 2005). It was their "failure to see the depression coming [that] put them out of business," wrote Mr Wood. Just as I expected the tiresome Mr Wood did -- as nearly all journalists do when writing about the Great Depression -- turn to J. K. Galbraith's The Great Crash of 1929 for wisdom.

Wood related how Harvard Economic Service's forecasts failed to warn business of the impending depression. Even in November 1929 it declared "a severe depression like that of 1920-21 is outside the range of probability. We are not facing protracted liquidation." (Galbraith, ibid). The preceding, according to Wood, is "a prudent reminder of the fallibility of forecasts at a time of the year when the voices of economic and market prognosticators are loud in the land." But is it?

Anyone who relies on Galbraith's account of the Great Crash is going to be seriously led astray, which accounts for why reporters are absolutely lousy on this subject. His book is a shallow and misleading work that lacks any permanent value. (The classic work is Murray N. Rothbard's America's Great Depressio , Richardson & Snyder, New York City. There is also Benjamin M. Anderson's Economics and the Public Welfare , LibertyPress, Indianapolis).

What Wood and his fellow hacks clearly do not know is that during the 1920s some economists did warn that a severe depression was unavoidable. In early 1929, for instance, Friedrich von Hayek warned that the US economy was heading for a crash. Writing for the Austrian Institute of Economic Research Report, February 1929, he successfully predicted that "the boom will collapse within the next few months." (Factory production began to contract about six months later).

Then there was Colonel E. C. Harwood -- who founded the American Institute for Economic Research -- persistently warned that the Fed's monetary policy would cause a recession. Benjamin M. Anderson used his position as chief economist at Chase National Bank and editor of the Chase Economic Bulletin to sound the alarm about the Fed's monetary policy and the coming crisis that it was generating.

The brilliant Mr Keynes was not so prophetic. Felix Somary, a Swiss banker, recalled in his The Raven of Zurich (London: C. Hurst, 1960) that Keynes had approached him in the mid-20s for stock recommendations. Somary, who subscribed to the Austrian School of economics, refused to give him any, warning that a speculative bubble was emerging.

Keynes cockily replied: "There will be no more crashes in our lifetime." The financial collapse apparently did nothing to dent his self-confidence. Once the depression was underway he still hailed the price stabilization scheme that caused it as a "triumph." When it suited him, Keynes' conceit apparently left him unfazed by mere facts. On the other hand, D. H. Robertson who had been a supporter of the Fed's monetary policy began to have serious doubts about it once the depression struck.

Ludwig von Mises refused an important job at the Kreditanstalt Bank because, as he told his fiancé, "A great crash is coming, and I don't want my name in any way connected with it." Mises had been warning for years that the central banks' loose monetary policies would bring on a depression.

It is therefore not a question of unsound forecasting but of unsound economics. Under the influence of Irving Fisher virtually the whole of the American economics profession had fallen prey, and still has, to the fallacy that a stable price level means there is no inflation. (Sir Ralph Hawtrey was one of the guiding lights of this fallacy in England). Unfortunately the same situation prevails around the world, hence the present crisis.

The Austrians, however, explained in considerable detail how trying to stabilise the price level will actually destabilise the economy and bring on the very depression the policy was designed to avoid. According to the Austrians the Fed's credit expansion would trigger a speculative boom, which it did; eventually the Fed would be forced to apply the monetary brakes, which it did in December 1928 when it froze the money supply; this would cause malinvestments created by the credit expansion to start emerging by about the middle of the 1929, which is exactly what happened; the bubble would then quickly burst and the economy would go into a fully fledged depression -- the rest, as they say, is history.

Yet 80 years later we are still being told that economics still failed to predict the Great Depression, despite the historical fact that a group of economists succeeded where the mainstream forecasters failed. Widespread ignorance of this fact among those who are paid to know better is an intellectual scandal.

Unfortunately Brookes is the only Australian publication in which you can find this knowledge. You will certainly never find it in Australia's mainstream media.

By Gerard Jackson
BrookesNews.Com

Gerard Jackson is Brookes' economics editor.

Copyright © 2009 Gerard Jackson

Gerard Jackson Archive

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


Comments

Tony Fox (Australia)
25 Mar 09, 04:22
parallel universe ?

"Once the depression was underway he still hailed the price stabilization scheme that THAT CAUSED IT".

This is taking the short-term view to the nano level! Are you in a parallel universe or just suffering from a delusional illness? The other 6 billion people on this earth are wondering.

BTW - On the evidence of this article, we are not surprised that the US has fallen into an abyss.


Post Comment

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