Thoughts related to the Great Depression and the Current Economic Situation [Commontator update @ 84

Ray Malone.com ^ | March 24, 2009 | Ray Malone

[AFPhys]

Latest on Ray:

All,
My is so muddled right now, I don’t know who to post this to.
Ray is completly out of it now, not able to speak. I talked to his step-daughter a few minutes ago, and she said it is basically just a matter of time. I was going down tomorrow to see him, but she said that they prefer only close family to be there. Although I feel like I am Ray’s family, I will respect her wishes.
I’m just so blessed that just a few days ago, he gave me his last column, via telephone, which AF Phys helped me with. It’s on another thread.
I hope this post makes some kind of sense. My heart is hurting, I just pray for Ray to have a peaceful passing, and his step daughter said she would call me when that happens.
I can’t imagine my life without him. I guess I am in denial, I don’t know. All I can do is ask for your prayers.
Admin Mod please post the update for me.
Love and prayers,
Lisa Hello all. When I was talking to Ray on the phone yesterday, and told him about all the thoughts and prayers sent to me, he was overwhelmed. He said he would love to post something, and I told him I would write it down, and get it on here. Besides his thanks for all the well wishes, he, of course, being CT, wanted to make a polital statement. With the gracious help of AF Phys, who is and always has been, one of Ray's favorite FReepers made sense of my scribblings. So below is the post, what I was able to convey what Ray was telling me, clarified by AF Phys. Whether you agree or not, this was a joint effort, and I am so glad that I can get Ray's words on here again.

Love and prayers, Lisa

With great respect for CommonTator, I took notes scribed by Lisa from her phone conversation with him. I've done my best to flesh those notes out in the direction I believe he was heading to smoothly argue for that truth. In the process, I've expanded the notes by about a factor of four. Areas between [*** . . . ] I've added for clarification, not simply as interpretation of Lisa's notes. I've done my best to be true to his direction, and any failure in this presentation to effectively argue or present his points with his typical eloquence is solely mine. He may have removed some parts if he had chance to fact check, but I believe the argument does not rest on any such sections. - ###AFPhys

++++++++++++++++++++++++++++++++++++++++++++++

Until recently blame was assigned only to Herbert Hoover for causing the Great Depression, and credit was given to FDR for ending it. However, the truth is that major policy missteps were made during both administrations that had the effect of turning what would have been a typical, manageable recession into a 12-year Depression..

Herbert Hoover, of course, had the first opportunity. In an "attempt to fix" what was then a recession, Congress and Hoover created and enacted the "Smoot-Hawley" Tariff Act. [### Though its initial intent was to provide protection for farmers, extended discussion in Congress during the two years prior to its passage in 1930 extended its effect to 20,000 products, with record tariffs on many, and contributed to the general nervous psychology of markets worldwide. Within two years, over 25 countries retaliated with their own record tariffs. US imports plunged 66% and exports fell by 61%. This rapidly spread the Depression worldwide. ###AFPhys] Unemployment was at 8% in 1930 when the Smoot-Hawley tariff was passed, going to 16% in 1931, 25% in 1932, and 25% in 1933.

Franklin Delano Roosevelt was inaugurated in 1933, and set in to "Fix" the economy. Through the 1930's, the FDR administration and Congress tried three things to control the trajectory of the economy. All three of them failed.

First: FDR tried taxing the rich, using the simplistic reasoning is to get more money for the government to spend in order to hire people. [### The WPA, CCC, and TVA, among other projects.] FDR did not acknowledge this simple truth: that the rich people with disposable money can only do two things with it: Save it or Spend it. Either way, it gets directly plowed back into the economy and goes to work in the private sector to create economically productive jobs. When the government taxes that money away, people in the private sector get laid off. Even if the government is hiring people, the extra layers of bureaucracy ensure that inefficient use is made of the money, and fewer goods and services of economic value are produced. Unemployment rates remain essentially unchanged. [### 1930's unemployment stats: http://www.u-s-history.com/pages/h1528.html ]

Second: The government borrowed money. The money that they borrowed has to come from somewhere - and when the government borrows it, the result is that there is less money available for the private sector to borrow and utilize. The result, as before, is that people get laid off, and unemployment stays the same. [### 1920-40's Federal Debt table shows retirement of WWI debt in 20s, massive expansion in the 30's: http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo3.htm ]

Third: The government printed money. This is important: Since the cost of all goods and services is equal to the money that is in circulation, the cost of everything goes up. People can then afford fewer goods and services. [###, since during this type of inflation, the rise of wages always lags behind the rise in the price of goods and services.] Fewer goods are sold, and the number of unemployed stays the same or rises.

During the Great Depression, despite these efforts, the rate of unemployment went to 25%. Slowly, the excess inventory was consumed. Once the surplus goods had been consumed, then people must be hired to meet the (lower) current demand. With the stabilized lower demand, those workers didn't fear being laid off again. [### However, due to the massive uneconomically productive make-work projects, unemployment was still at 17% in 1939.]

Despite the slow operation, of this re-employment process, what actually fixed the Great Depression was WWII. [### The massive injection of buy orders by the government with relatively little change in the bureaucracy along with citizens' determination to contribute to productivity increases for the sake of the war effort were the determining factors.]

Looking at another very rough period in the Twentieth Century: The massive inflation, [### though due to somewhat different reasons] in the late 1970s essentially created the situation mentioned in point 3 above. People were able to afford fewer goods and services, and by 1980, overproduction created a recession.

Reagan came into office. Despite the high inflation rates and unemployment rates, he did not push for any of the three policy shifts mentioned above. In normal order, gradually the surplus goods were consumed, and people had to be hired to meet demand. [### CommonTator's strength was flagging here... he may have continued, "The FED cooperated by refusing to inject even more currency to force interest rates down which would have stoked inflation. Though Reagan's tax cuts were economically useful in the long term, the way they were delayed by Congress for over two years caused them to be relatively impotent, and they were not much of a factor in reducing the length or depth of that recession."] The recession ran a normal course, gradually weakening and ending after 16 months instead of being deepened into a depression.

As the 1980's drew to an end, finally production exceeded demand and the mild 1990 recession ensued. [### Ray ended the call here]

[### I'm not certain how Ray would have concluded. However, I am confident his major point of this simple analysis is that the methods chosen by both Hoover and FDR to deal with that recession were not only ineffective. In fact, they both deepened and lengthened it and created the Great Depression. This view is supported by many economists now, and CommonTator has here given his insight to help us understand the mechanisms that resulted from these presidents' missteps. ### AFPhys]

[PGalt]

Thanks Ray.

love

[SunkenCiv]

Whoops, *here’s* the Smoot-Hawley Tariff Act ping. [blush]

[Political Junkie Too]

I've been a quiet reader of CommonTator's writings from Day 1. They've been especially insightful to me during the election seasons.

Thanks for sharing the wealth of your experiences with us.

-PJ

[Lisa_from Buckeye Country]

All,
My is so muddled right now, I don’t know who to post this to.
Ray is completly out of it now, not able to speak. I talked to his step-daughter a few minutes ago, and she said it is basically just a matter of time. I was going down tomorrow to see him, but she said that they prefer only close family to be there. Although I feel like I am Ray’s family, I will respect her wishes.
I’m just so blessed that just a few days ago, he gave me his last column, via telephone, which AF Phys helped me with. It’s on another thread.
I hope this post makes some kind of sense. My heart is hurting, I just pray for Ray to have a peaceful passing, and his step daughter said she would call me when that happens.
I can’t imagine my life without him. I guess I am in denial, I don’t know. All I can do is ask for your prayers.
Admin Mod please post the update for me.
Love and prayers,
Lisa

[SuzyQue]

Godspeed, Tator.

[pinz-n-needlez]

Our prayers are with you, Ray, for safe passage.

May you find comfort and peace soon.

We will miss you so much and are so much the richer for having been blessed to know you.

Much love,
Pinz

[TASMANIANRED]

Prayers lifted for him and for you.

One day every tear will be wiped away.

[cricket]

God Bless the never common; always special and insightful ‘Common Tator’. Thank you, Ray for you many, many contributions here that so enrich all who share them. I wish you God’s Blessings always in life’s celebration.

[saveliberty]

Thank you for posting updates on our friend. Prayers for Ray, for you and for his children.

We are also praying for Ray here:

http://www.therightreasons.net/index.php?showtopic=13906&st=0&p=202618&#entry202618

[saveliberty]

Thank you for letting us know how Ray is doing and for sharing his thoughts with us from a few days earlier.

We are praying for Ray, for you and for his children.

http://www.therightreasons.net/index.php?showtopic=13906&st=0&p=202618&#entry202618

[saveliberty]

Oops.

Double post

[BigSkyFreeper]

Thanks for the update Lisa! Hugs and prayers to you and his kids!

[Eaker]

Prayers up!

[TenthAmendmentChampion]

RIP Common Tator/Ray. God bless your family at this difficult time.

[exhaustedmomma]

MeekOneGOP, thanks for the ping. Prayers for Commontater's family and friends.

How awesome that Commontater found the strength, and the fight, to post one last time!

Printing money, inventing money, spending money, borrowing money and creating "work"... de ja vu. There is a significant difference today from that "great depression", IMHO... we are not that society, not that people. Yes, there are still stout hearted folks. But, we are generally speaking another breed.

God's speed, Commontater!

[MeekOneGOP]

Amen!