Posted on 08/18/2011 11:51:30 AM PDT by markomalley
I’m a bit late to commenting on Christina Romer’s Sunday op-ed on monetary policy and the Great Depression, but it makes a point that bears repeating. The story most of us know about the Great Depression, the one in which Herbert Hoover screws up but then Franklin Delano Roosevelt comes in and hires people to paint murals and repair roads and defeat Hitler and that solves the problem, is wrong, or at least incomplete. Monetary policy — Boring, hard-to-understand, no-one-likes-to-talk-about-it, increases in the money base — was really the key to getting the economy back on track.
To get even more specific, the two policies Romer identifies as being key to the recovery were FDR’s decision to sign Executive Order 6102 and Hitler’s decision to overrun Europe.
Executive Order 6102 sounds pretty bizarre when you explain it. Remember that in the 1930s, dollars were backed by gold. Your dollar was worth what it was worth because the American government was committed to giving you a certain amount of gold in exchange for it. In Executive Order 6102, FDR forced every American to turn in almost all of their gold at a price of about $20 an ounce. Then he said that gold would stop being worth $20 per ounce and begin being worth $33 an ounce. This meant a massive devaluation in the dollar, which sounds bad, but actually meant a huge stimulus: our exports became cheaper and more popular, which in turn meant we created jobs because we needed more people to manufacture stuff that we could export.
(Excerpt) Read more at washingtonpost.com ...
“FDR created it? Huh?”
If I may put words in the mouths of others, perhaps the point was that prior to the New Deal it was a recession, not a depression. A severe recession, perhaps. But we’d had those before, as recently as ‘21. Never before FDR’s revolution were they ever so Great.
But each time without fail, new fools rise up and say, "This time it will work. I'm smarter than those other guys. I can achieve success with this."
The sin of pride. It's Luciferian.
The Feds artificially manipulated interest rates and other stuff which led many investors and companies to take a wrong view of the market and make decisions based on this false view. That is what led to the crash.
Anyone doubt whether Dear Leader would start a World War for a second term?
“Throw in terrible drought conditions, and other Gov’t spending and you get a Depression”
Unless “other government spending” is wider than I guess, you’ve gotta add about a hundred bullet points to understand why the depression lasted so long. Tariffs weren’t FDR’s idea, so I’ll give him that. But squarely on his shoulders lie the bank holidays, destruction of the gold standard, abrogation of contracts, massive work programs, wage and price controls, encroachment on other branches of government, and that vague but never to be underestimated phenomenon called “regime uncertainty,” to name but a few.
But, then, in FDR's time the White House, the Congress, and the Senate were all in dim-0-crat control.
The model for the Clinton DoJ is like that of the Obama DoJ and they also follow the percepts set by FDR's DoJ.
“The command economy may be necessary during a world war for survival but it certainly is not the way for a nation to increase wealth in other times.”
You’re on the right track so I hate to criticize, but look at how you phrase it. You say, “it certainly is not the way for a nation to increase wealth in other times.” It’s not the way to increase wealth in war time, either. War economies are NEVER about increasing wealth. They are about fighting wars. Wars consume wealth (unless you use your army to steal wealth, but that never happens on a sufficient scale anymore). Why is this so hard for people to understand?
I have no doubt he will do something significant next year, just not sure exactly what (race war, martial law, something).
I have no doubt he will do something significant next year, just not sure exactly what (race war, martial law, something).
If the Democrats want my gold I’m going to give them my lead reserves first.
“It was indeed the war that ended the Depression”
No it didn’t. War production is not productive. The only reason people were employed to build stuff to be shipped overseas and blown up was because of artificial, non-economic demand. This is not how wealth is created, nor utility met.
“And government regulation did not choke off development of new industry and economic expansion”
How do you know? Remember the forgotten man. Broken windows!
>>FDR created the depression.<<
In fairness to history, the Great Depression started with the crash of 1929 and was then exacerbated by the great drought in the midwest (that had NOTHING to do with global warming). FDR inherited the Depression and then went right to making it worse by attacking industry and seizing people’s wealth both outright and via confiscatory tax rates. Prior to the New Deal the Depression was arguably ending. The New Deal and FDR’s dictatorial acts (Supreme Court packing) prolonged the Depression.
The similarities are striking and true. Once the economy started crashing, both turned to Gov't instead of the markets.
We were already in a Depression when FDR took control, and blamed said problems on the President before him. While he prolonged the Depression, he was not the origin.
And yes, we will continue to spiral down into our Depression today, because our leaders continue down that same path. One merely has to look to the past for answers, and unfortunately, War is on the horizon.
It is striking to me that people are so upset about the S&P downgrade.
Obviously, the US government has a long history of defaulting. In 1933 it defaulted on its own citizens by refusing to redeem gold certificates and making ownership of gold illegal. In 1934, it defaulted by unilaterally devaluing the dollar from $20 to $35 per troy ounce of gold. In 1971 it defaulted on the rest of world when Nixon announced that it would no longer redeem dollars at all.
Roosevelt’s executive order was endorsed by Congress when it later enacted the Emergency Banking Act of 1933. Unlicensed private ownership of gold in the US remained illegal until 1975. Even though private ownership is now allowed, at no time did the Supreme Court rule that the confiscation of gold or the prohibition of its ownership violate the constitutional rights of Americans.
In 1933 the Feds paid the official rate of $20.67/oz and shortly thereafter reset the official rate to $35/oz. Today’s official rate is $42.22/oz of gold.
FDR did not start the hole but he broke out bigger shovels and dug more enthusiastically.
If this is how a clever use of monetary policy works (and it is!!!) then no thanks. I'll take tax cuts and regulation reform every time over this crap which is really just an excuse for the politicians to do what they like to do most - spend money.
|
Depression Era Unemployment Statistics
|
||||
|
Year
|
Population
|
Labor
Force |
Unemployed
|
Percentage of
Labor Force |
|
1929
|
88,010,000
|
49,440,000
|
1,550,000
|
3.14
|
|
1930
|
89,550,000
|
50,080,000
|
4,340,000
|
8.67
|
|
1931
|
90,710,000
|
50,680,000
|
8,020,000
|
15.82
|
|
1932
|
91,810,000
|
51,250,000
|
12,060,000
|
23.53
|
|
1933
|
92,950,000
|
51,840,000
|
12,830,000
|
24.75
|
|
1934
|
94,190,000
|
52,490,000
|
11,340,000
|
21.60
|
|
1935
|
95,460,000
|
53,140,000
|
10,610,000
|
19.97
|
|
1936
|
96,700,000
|
53,740,000
|
9,030,000
|
16.80
|
|
1937
|
97,870,000
|
54,320,000
|
7,700,000
|
14.18
|
|
1938
|
99,120,000
|
54,950,000
|
10,390,000
|
18.91
|
|
1939
|
100,360,000
|
55,600,000
|
9,480,000
|
17.05
|
|
1940
|
101,560,000
|
56,180,000
|
8,120,000
|
14.45
|
|
1941
|
102,700,000
|
57,530,000
|
5,560,000
|
9.66
|
We’re way past doubling-down. Bush made the original Keynesian bets and doubled down with TARP. Meanwhile, Bernanke got himself a bazooka. Obama has since quadrupled down and Bernanke has deployed nuclear weapons.
The War did not end or lift the Depression. It simply converted it into a full employment depression. People did not eat any better or live any better. They worked at frozen slave labor wages.
Keynesianism is not economics. It is political control of the economy by indirect means for the benefit of the ruling elite. It was near universally adopted because it put control of the economy into the hands of politically chosen “experts” on the specious theory that these experts could tame the chaos of supposedly anarchic markets and create prosperity.
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