Posted on 06/27/2007 5:10:50 AM PDT by Kaslin
In her vital and fascinating new book, "The Forgotten Man: A New History of the Great Depression," Amity Shlaes tells a story about national icon President Franklin Delano Roosevelt. Shortly after FDR took office, Shlaes explains, he began arbitrarily tinkering with the price of gold. "One day he would move the price up several cents; another, a few more," writes Shlaes.
One particular morning, Shlaes relates, FDR informed his "brain trust" that he was considering raising the price of gold by 21 cents. His advisers asked why 21 cents was the appropriate figure. "It's a lucky number," stated Roosevelt, "because it's three times seven." Henry Morgenthau, a member of the "brain trust," later wrote: "If anybody knew how we really set the gold price through a combination of lucky numbers, etc., I think they would be frightened."
Ignorance of basic economics -- and the concurrent attempt to obfuscate that ignorance by employing class-conscious demagoguery -- remains the staple of the Democratic Party. For over 60 years, Democrats and their allies in the media and public school system have taught that the Great Depression was an inevitable result of laissez-faire economic policies, and that only the Keynesian policies of the FDR government allowed America to emerge from the ashes. The Great Depression, for the left, provides conclusive proof that when it comes to economics, government works better than business.
This point of view has a sterling reputation. That reputation, unsurprisingly, was created by FDR himself. FDR turned the Great Depression into a morality play -- a morality play in which those in favor of individual initiative were the sinners, while those who relied on government were the saints. "We have always known that heedless self-interest was bad morals," Roosevelt intoned in 1937. "We know now that it is bad economics."
This, as Shlaes convincingly shows, is hogwash. The Depression lasted nearly a decade longer than it should have, due almost entirely to governmental meddling under both Herbert Hoover and FDR. High tariffs and government-sponsored deflation followed by enormous taxation and unthinkable government expenditures turned a stock market stumble into a decade-long nightmare. Only the devastation of World War II lifted America out of the mire, solving the drastic unemployment problem and providing a legitimate medium for FDR's pre-war wartime policies.
Nonetheless, the myth of a grinning FDR leading America forth from the soup kitchens remains potent. And today's Democrats rely desperately on that fading falsehood, hoping to bolster their bad economics with worse history. Hillary Clinton routinely hijacks Rooseveltian language, most recently disparaging the "on your own society" in favor of a "we're all in it together society." John Edwards' "two Americas" nonsense drips of FDR's class warfare. Never mind that Keynesian economics does not work. Never mind that it promotes unemployment, discourages investment and quashes entrepreneurship. For Democrats, the image of government-as-friend is more important than a government that actually protects the rights that breed prosperity.
"The impression of recovery -- the impression that a President was bending the old rules and, drawing upon his own courage and flamboyance in adversity and illness, stirring things up on behalf of the down-and-out -- mattered more than any miscalculations in the moot mathematics of economics," novelist-cum-economist John Updike recently wrote, defending FDR from Shlaes' critique. "Business, of which Shlaes is so solicitous, is basically merciless, geared to maximize profit. Government is ultimately a human transaction, and Roosevelt put a cheerful, defiant, caring face on government at a time when faith in democracy was ebbing throughout the Western world. For this inspirational feat he is the twentieth century's greatest President, to rank with Lincoln and Washington as symbolic figures for a nation to live by."
For Updike and his allies, image trumps reality. The supposed harshness of the business world matters more for Updike than the fact that profit incentives promote economic growth, efficiency and creativity. The "caring face" of government is more important for Updike than creating a framework that produces jobs and affordable commodities. Updike's sporadically employed father liked FDR because FDR made him feel "less alone." No doubt Updike's father would have felt less alone if he had been steadily employed by a private enterprise -- the kind of enterprise stifled by Roosevelt.
"We are beginning to wipe out the line that divides the practical from the ideal," FDR announced in 1937, as unemployment stood at 15 percent, "and in so doing we are fashioning an instrument of unimagined power for the establishment of a morally better world." Today's Democrats continue to embrace the vision, even at the cost of a prosperous reality.
“He’ll go from revered to reviled in less than a generation”
I was born in the depression and he was reviled by my parents.
I was taught he was the worst president this country ever had before I was 2 years old.
Scary.
Utopianism. It's the MOST scary thing.
Or something like the credit card explosion where anyone can buy on credit and many fail to repay their debts? For a great explanation of the causes of the Great Depression, read “The End of the Rainbow,” a truly disturbing book.
Since taxi drivers and garbage collectors were making money on investments, Hoover made several threats that he was going to do something about the stock market, but they were ignored. Finally Hoover took real action. He directed the Federal Reserve to raise margin rates so high that nobody would borrow. This caused the big money investors to sell their stocks, and short some more, and the crash began. Most of the speculators were long gone. Instead, everbody would be punished, the real investors, and all the productive people in the economy.
Actually, Keynes recommended that debt be used to finance government spending, whereeas Roosevelt insisted on raising taxes and balancing the budget.
On the other hand, my parents and grandparents and most others in the community worshipped FDR as some kind of minor deity and they all voted for RATs for years. He was a disaster with severe leftist ideas and policies.
Republicans are almost as bad. It was Nixon who said "We are all Keynesians now." Bob Dole made a joke about supply siders. He said there was good news that a busload of supply siders that went over a cliff. The bad news was there were three empty seats.
And looking at some of the comments on this thread about how the robust stock market caused the Depression, I wouldn't say that Conservatives or Republicans in general are much better.
So what's happened to the prices of commodities under our current Republican president?
Only in the sense that most people have no clue why the real estate market went up, so they'll blame it on things and people they don't like.
The article doesn’t mention FDR raising the minimum wage and destroying government food stocks upon taking office in 1933.
At the same time he was putting several million people out of work, he was causing skyrocketing food prices.
Just so he could create his new government department to set wages and prices for everything in the country.
I have seen a dynamic where a fellow buys at 160K because he plans to sell within a year at 190K...which he can only do because the buyer also plans to sell within another year at 220K...which he can only do because a year after that, the house will sell at 250K. Eventually there's nobody left to buy at the latest highest price, and the market quits acting like a Ponzi scheme and goes back to resembling a place where housing is bought and sold.
In the late 50s a friend of a friend was being interviewed for a job in a bank.
He was asked: “What is the most significant thing FDR did?”
Friend of a friend didn’t answer with the expected bank holiday reply but said: “Died!”
Questioners: “What?”
Friend of a friend: “Died! The SOB died!”
He was hired.
The market was reacting to changing conditions, of which most people aren’t aware. All rising markets have speculators, but they are only a small percentage. It sounds to me like you have an issue with them. The people you don’t like I mentioned in my previous post.
"Don't like" is rather a stretch. "Consider unwise" is closer to the truth. I'm more of a disinterested observer, talking about markets like you would talk about the weather. But...and this may be telling...my current housing expenses are under fifteen percent of my income. I'm deliberately limiting my stake in the real estate market.
The Great DepressionINTERVIEWER: You've written that what really caused the Depression was mistakes by the government. Looking back now, what in your view was the actual cause?
MILTON FRIEDMAN: Well, we have to distinguish between the recession of 1929, the early stages, and the conversion of that recession into a major catastrophe. The recession was an ordinary business cycle. We had repeated recessions over hundreds of years, but what converted [this one] into a major depression was bad monetary policy. The Federal Reserve system had been established to prevent what actually happened. It was set up to avoid a situation in which you would have to close down banks, in which you would have a banking crisis. And yet, under the Federal Reserve system, you had the worst banking crisis in the history of the United States. There's no other example I can think of, of a government measure which produced so clearly the opposite of the results that were intended. And what happened is that [the Federal Reserve] followed policies which led to a decline in the quantity of money by a third. For every $100 in paper money, in deposits, in cash, in currency, in existence in 1929, by the time you got to 1933 there was only about $65, $66 left. And that extraordinary collapse in the banking system, with about a third of the banks failing from beginning to end, with millions of people having their savings essentially washed out, that decline was utterly unnecessary. At all times, the Federal Reserve had the power and the knowledge to have stopped that. And there were people at the time who were all the time urging them to do that. So it was, in my opinion, clearly a mistake of policy that led to the Great Depression.
Meanwhile, the luxury division of the company he founded back in 1908, GM, was putting out the most magnificent American automobile ever, the Cadillac V16. They first arrived in early 1930, and sold pretty well, all things considered, through the decade. Too bad Billy couldn't much afford one after the Fed's monetary gaming and a Republican Congress that further torched the economy with the tariff.
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