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98 Comments
- BotchaMcCoola, on 10/30/2009, -4/+19Aw, it ain't no fun to learn from history.
- EddiePotato, on 10/30/2009, -2/+14There can be no absolute "proof" of economic cause and effect on a national or global scale. So many variables and unknowns make it akin to chaos theory, and grappling with large scale economics is more of an art than a science. This is why 10 different economists will usually give 10 different answers to the same question.
- felman87, on 10/30/2009, -7/+171929-1932 says hi.
- DiggerLater, on 10/30/2009, -6/+15In other news, the FED has decided to keep interest rates artificially low until we all have no money and our country has been completely fleeced of gold reserves.
- thecoolestguy, on 10/31/2009, -2/+10the natural recovery that started in 1933 was hamstringed by FDR. Unemployment stayed unnaturally high through the late 30's due to FDR's mandates to keep wages artificially high.
- LinuxLiberty, on 10/30/2009, -12/+20During WW1 the Federal Reserve System engaged in massive inflation creating a credit bubble to fund the war. After the war the bubble burst, Harding let prices and wages fall, cut taxes AND GOVERNMENT SPENDING, the recession ended in about a year. In the late 1920's in an effort to bail out the Bank of England, the Fed pumped massive credit into the market. In 1929 the bubble burst.
Hoover passed the biggest tax hike in history, attempted to hold prices and wages up, and increased government spending. The result a disaster. FDR was elected and expanded on Hoover's policies, stopping any recovery and creating the worst economic disaster in history.
We should follow the policies of Harding, not of Hoover and Roosevelt. Only I would go farther than Hoover, I would eliminate the source of the problem and abolish the Federal Reserve and fractional reserve banking and go to an honest 100% gold standard.
Unfortunately we don't learn from history or more accurately were brainwashed by government schools and the government court historians who rewrote history to conform with the government's propaganda. - GREGDREW, on 10/30/2009, -4/+11Yeah, not many know about the 1920 depression, Hoover was President Harding's Secretary of Commerce, he urged Harding to stimulate the economy and he was ignored. Federal budget gets cut in half, and all of a sudden the economy gets better.
Too bad Hoover gets his chance to screw things up though. I think most people mistakingly accuse him of being "free market" oriented.
Agreed, no learning from history. - cybrguy, on 10/30/2009, -0/+7Yes, but its difficult to see it properly when looking through tinted glass.
- LinuxLiberty, on 10/31/2009, -4/+10Your graphs just prove my point. The GDP didn't permanently reach 1929 levels until 1939 and even then that was only because the GDP includes government spending and and government mandated prices for military supplies. The depression didn't end until 1946 after the war was over. Unemployment remained above 15% until the bombing of Pearl Harbor when it declined because people were drafted into the war.
http://www.sjsu.edu/faculty/watkins/recovery.htm
That is the worst and longest economic depression in history. Compared to recessions under both Harding or Martin Van Buren, who both responded by reducing the size of government resulting in both recessions ending very shortly and unemployment being kept very low. - KJGJ, on 10/31/2009, -3/+9I think the fact that the economy crashed in 1937 after FDR slashed federal spending helps to prove LinuxLiberty's point. Yes the stimulus created jobs and somewhat inflated the economy (Mostly the fault of the federal reserve) but it shows that the government's stimulus really had no REAL effect. As soon as the government got out of the way everything crashed because it was built upon false credit created out of thin air (See current recessions and attempts to fix it). It wasn't until the lend lease act that business had something worthwhile to produce and market.It's clearly seen on these graphs that as soon is this act is passed and business are allowed to operate under their own reigns that the national GDP skyrockets and the depression is ended.
- cybrguy, on 10/30/2009, -6/+12He is seemingly more conservative economist, but he is no Peter Schiff. No demonstrated foresight. He does reference history which is good, but he forms the wrong conclusions.
"policymakers today reacted much more swiftly and more appropriately than they did after 1929. "
Borrowing money and throwing under a falling bubble or a failing business is not an appropriate reaction. There is a reason the bubble is falling and there is a reason the business is failing. Fix what causes the bubbles to form or fix what causes the businesses to not be competitive if you can. But using all your energy to re-inflate a leaking tire over and over is not the right course of action. We should patch the tire.
Peter Schiff made some much more relevant comparisons today in his video blog.
http://www.youtube.com/watch?v=OKv1qg-K78o
Explaining GNP growth or similarly GDP growth does not mean the economy is recovering. - CheesyPoofs, on 10/30/2009, -1/+6I was hoping to see graph comparisons.
- herojon, on 10/31/2009, -0/+5If the current crisis is caused by money disappearing, and it is money that exists only in accounting books and not actual cash, then that means it was created by inflationary monetary policy. His recommended cure: more inflationary monetary policy. What does this mean? Another boom and a bigger bust that results from even more money appearing and then disappearing.
Fix the money supply at a constant level and stop changing it at all and we won't have these problems. The money he is talking about that has disappeared can only disappear because it never physically appeared. Cash doesn't disappear.
Unfortunately in reality BECAUSE we have allowed credit expansion we are trapped in a "catch-22." If we don't reinflate then yes we might get stuck in a rut so to speak, but if we do, we WILL create another bubble. America's (and all economies with expansionary central banks) are doomed to boom bust cycles because of this.
Economies free of inflation won't have booms and busts, but they may grow much slower as a result of not being able to pull the future into the present. Pick your poison I guess. - herojon, on 10/31/2009, -3/+8If government spending through inflation was good for economies Zimbabwe would be the strongest economy in the world right now.
- Jordan117, on 10/30/2009, -8/+13"FDR was elected and expanded on Hoover's policies, stopping any recovery and creating the worst economic disaster in history."
The financial data of the time does not agree with you:
http://www.ourfuture.org/files/images/Depression-G ...
http://www.ourfuture.org/files/images/Depression-G ...
As you can see, the economy began to recover immediately under Roosevelt's New Deal policies, and in fact recovered to 1929-levels by 1936 (unemployment, as a lagging indicator, had not yet caught up). It wasn't until FDR slashed government spending in an attempt to balance the budget that the market crashed again, plunging us into the latter half of the Depression that ran from 1937-40. As soon as he reinstituted the gutted programs, the recovery resumed, and was only strengthened by the massive boost in government spending brought on by WWII.
So, say what you want, but the hard data tells a different story. - publiclurker, on 10/30/2009, -4/+8Bush set us up for sure, but Obama is actually trying to fix the mess. Try actually reading a history book instead of listening to the blather of the proven failures. Just because you think you can use their ***** to screw others over does not make it true.
- BlacklabelSAR, on 10/31/2009, -2/+5Why are you so focused on Obama's middle name? And have you noticed that no matter which party is in power, that it's really the Banks that are actually in power?
I wish more people were not too distracted to notice this. - skews13, on 10/30/2009, -3/+6Show me "proof" of how doing nothing would have made it better.
- greenm1981, on 10/30/2009, -3/+6There is zero empirical evidence that the inflation of WW1 was attributed to an expansion of the money supply.
The true cause of inflation during that period was the fact the US economy was running at or in excess of full employment. The agricultural output of Europe ground to halt after it drafted most of its workforce to fight. Furthermore, it's virtually impossible to farm when people are locked in trench warfare on your land. As a result, the US retooled its economy to provide food for the whole of Europe during the war and shortly thereafter.
Another factor was the extraordinary rate of output in arms and soldiers. Towards the end of WW1, we had amassed a tremendous army and arms, which were sold to allied forces. With the end of the war, the demand for those troops and arms fell and investment fell with them. Also, farm prices fell as surplus built following a rebound in European agricultural output.
You are correct in that prices fell following the war, but inflation during the war was not the result of monetary policy. - apollomurga, on 10/30/2009, -1/+4that comment was full of fail. Edit: "good night and good luck"
- geekee, on 10/31/2009, -2/+5Here is Ron Paul's recent commentary on the dollar and the Fed:
http://digg.com/business_finance/Ron_Paul_Let_the_ ... - bollyuk, on 10/30/2009, -0/+2they're doing this in the uk too - don't sell it you fools!
- BlacklabelSAR, on 10/31/2009, -0/+2I remember what Dave Mustaine said in The Decline of Western Civilization2.
Something to the effect of: "you know what's wrong with America? We don't make things that everyone buys."
He then askes people how many of them own a nuclear missile vs how many of them own a VCR. Everyone owned a VCR of course. He was so right. - argoff, on 10/31/2009, -0/+2It is not mentioned much, but some people made a ***** of money during the great depression. They knew the federal reserve was printing more money (credit) than there was gold to back it up, they knew the fraud was coming to an end, and they saved up all their money and saved up gold, and then bought up tons of properties for pennies on the dollar when it all went to hell. Were these people rewarded for their wisdom and insight, nope, instead the government taxed the ***** out of them to pay for everyone else who were bubble happy idiots and to bail out the central bankers who ***** up the economy.
A lot of people don't understand why central banks exist, because the reasons they give are *****. You see, in a normal free market economy people learn how to become more productive and efficient, and that means that the purchasing power of their income goes up. However it is very hard to reduce peoples pay .... especially when their productivity is increasing, so instead they pay them in dollars and water down the money. That way the workers in society become 10% more efficient, they water down your money 10%, and nobody knows the difference. However they don't just water down the money by printing, they print it and they loan it out ... so there is always pressure to repay it back and so that there is competition for the new cash. However, that is also not enough, so they coerce people to pay income taxes with that currency too. That way, people who create wealth beyond the loans are trapped in their system as well. The government always wanting to borrow money to pay favors to cronies is always happy to oblige.
Anyhow, the lesson we should have learned from the great depression is "don't print up and loan out more money than you have gold to back it", however the lesson they did learn is "don't have your money backed by anything". And so you can count on this great depression not only being a great depression, but a hyper-inflationary great depression. It hasn't hit yet, but anybody who is not an idiot should be collecting gold (and silver) like a lunatic. - N01SE, on 10/31/2009, -1/+3@Kwanijml
you are asking people to predict the future?
recessions are merely a red flag indicating that our current system has flaws that need to be corrected. People can't always wait around and hope the market will act a certain way. Maybe you can, but lots of people are really hit hard during recessions, and I mean really hard, as in eating through all their savings. Markets move really slow during a recession, it would basically have been a much longer and drawn out recovery. - aadyss, on 10/31/2009, -1/+3p51d007,
You were not around in 1983 when unemployment was over 10% were you? From 1975 through 1985 the mortgage rates to purchase a home were 9.15 to 14.67%. I paid 9 1/4 percent for 30 years on one of my homes. My point, life gets better and a world war is not required so chill while we will all hope that Obama will not do something really stupid. - URnotheonly1, on 10/31/2009, -1/+3facts are facts
- thecoolestguy, on 10/31/2009, -2/+4Bruce Bartlett also misses a key point in this comment:
---
The faster prices adjust, the faster the economy will turn around and resume growth. The problem is that prices are sticky--they don't adjust quickly to changes in monetary conditions--and wages are even stickier. Getting workers to accept large pay cuts is extremely difficult, especially in heavily unionized industries.
---
Yes, inflation makes it easier to cut real wages when decreased production and increased unemployment demands it, but the other side of that coin is that inflation makes it easier for employers to freeze wage growth when the economy warrants wage increases.
In the 19th century, and in the US from 1946 until 1971, when the US was on the gold standard, real wages increased every year. Since 1971, the year the US went off the gold standard, real wages have not grown in the US. Wage growth has been around zero. This is because keeping real wages frozen is easy to do when there's inflation, as employers can increase nominal wages by a couple percent each year, without actually increasing real wages, since the nominal increase only matches inflation.
The result of this is a society that's under the illusion of advancement, when it's actually stagnant. It reduces drive and leads to wages and a standard of living that are less than the full potential that a society is capable of attaining.
I'll note that it was the decision to take the dollar off the gold standard in 1971 that prompted Ron Paul to decide to run for office, because he knew it would lead to long term economic problems. - mishabear, on 10/30/2009, -1/+3The TRUE way to develop wealth is to create something. You make a washer from raw materials. The current means of "making money" in America is simply shifting from one place to another...moving funds. Those who are able to collect more funds become richer while those spending become poorer, shifting their funds to the wealthier. America is losing wealth by not creating as much as they spend. China is becoming incredibly wealthy because they are creating the things we are spending on. If America is to rebound, we need to create things. We need manufacturing to return to the states.
- Canada2, on 10/31/2009, -0/+2This comment makes more sense than the forbes article.
- thecoolestguy, on 10/31/2009, -1/+3Inflating money supply through government spending to offset a credit crunch brought on by cascading bank defaults solves the short term problem of rapid deflation, but is an unsustainable strategy, that just leads to more financial/economic problems in the future, and a need for even greater government stimulus/inflation to offset those problems. The end result of all of this is a long term drain on economic growth, and lower wages and standard of living than the nation would otherwise enjoy.
- Abatrour, on 10/30/2009, -4/+6Much of it was caused by the Federal Reserve.
Your government used to create their own currency through the Bank of America and supply it to your government with NO INTEREST.
Then the Federal Reserve was created on Christmas day 1913 while everyone was with their families and not paying attention to the news.
The Federal Reserve is a grouping of private banks which print your money out of thin air and then charge you compounding interest on it. It costs them NOTHING to give you the money but it costs you REAL money.
After years and years of compounding interest, your country has paid off the initial amount it borrowed but now owes MORE than it borrowed. 80 - 90% of your tax dollars go to pay off the INTEREST!
If you want to avoid another economic problem you need to shut down the Federal Reserve and begin a citizen lead investigation into the atrocities the private banks have committed. - kingmanic, on 10/30/2009, -1/+3The 'sins' of the government were largely insisted upon by private industry through heavy lobbying by the banking industry. Again the little problem you point at was a small sliver of the over all problem in the system.
- argoff, on 10/31/2009, -0/+2By the way, one more thing. How would you like it if you walked into wal-mart, and then were mugged by security and they took $1000 from your wallet on the grounds that nobody else was going to give you a better deal and so you were going to buy $1000 worth of stuff from them anyhow, and if you disagreed you had to PROVE you could get a better deal some place else.
Well, FDR took our money by force, and some ***** in this discussion want every one else to prove that things would have worked out better if he didn't interfere. Well, to those people I say, ***** you, since you are on the side of taking the money the onus is on you to prove that no other solution would have worked better, not the other way around. Good ***** luck.
Of course, wal-mart would never do that because people would immediately stop doing business with them. Yet, try not doing business with the government. Nothing holds them accountable, that's the bottom line. - BlacklabelSAR, on 10/31/2009, -0/+2So you just have a general fixation on presidential middle names...
- dstz, on 10/31/2009, -0/+2AVG detected a threat on that page, wtf?
- herojon, on 10/31/2009, -0/+1Also, how can you fault a business owner for paying a worker who will willingly work for say 50 cents an hour? He would be stupid not to pay the worker which can produce the most relative to his wages. If he didn't outsource those jobs, he would not be able to compete with those who did. Sure it sucks for the worker, but if his job is really that important to him, he should accept lower wages to make himself a relatively more productive worker.
We are victims of our high standard of living as Americans. We expect to be the wealthiest as is reflected by the wage we willingly accept. As a result we HAVE to be that much more productive in order for it to be cost effective, and competitively effective for our businesses to employ us. If we make 20 times as much wage, but only produce 10 times as much output then surely our businesses will fail and we will end up unemployed. Logically it is the only possible outcome in an open economy which trades with the rest of the world. - emmeron, on 10/31/2009, -0/+1The only issue is that he's one of them:
He thinks the argument is "what should they do" not "they shouldn't be there pulling strings."
Aside from that, he writes quite well and was quite compelling... it's too bad he didn't really substantiate his conclusions at the end. Of course, he can't, since it's "theory." Economic theory is known to hard-scientists as "belief." But I split hairs... - aadyss, on 10/31/2009, -0/+1Well, I hope you are not correct but who knows.I sure didn't vote for him but here we are, stuck with him for another 3 years.
My only salvation in the Carter years was that my job was being eliminated so was able to gain employment in Saudi Arabia for a number of years and missed most of the misery while saving enough for retirement. In a really bizarre way, Carter helped me. - herojon, on 10/31/2009, -0/+1Real wages may be declining, but if you look at how much "stuff" the average American or American family has today vs 30 years ago, you will see that we are still much better off. Also if you look at real GDP per capita, you will see that per person we produce about 4 times as much as we did in 1980. ($12,000 per capita in 1980 $47,000 in 2008 it dropped for the first time in this period in 2009 assuming it doesn't pick back up in the next two months.)
http://bea.gov/national/nipaweb/TableView.asp?Sele ...
Global real GDP per capita has more than doubled from $4000 inflation adjusted dollars to around $9000.
So on average people produce more than twice as much globally as they did in 1980 per person. The laws of supply and demand tell us then that this means we can consume about twice as much globally as we did back then. So our real wages have dropped, so what if our standard of living is that much higher? - kuzotz, on 10/31/2009, -0/+1I thought it was Coolidge that did nothing, and Hoover inherited the *****, and so all the hate went onto him XD
- rxbudian, on 10/31/2009, -0/+1"Some economist saved capitalism by blaming the GD on the Fed cutting the money supply by a third...."
If the Fed is creating the problem with money supply manipulations, wouldn't it be better to remove the Fed's power to control the money supply, or even getting rid of it? - thecoolestguy, on 10/31/2009, -1/+2The gold standard has every thing to do with this. The gold standard is a lock on money supply, not allowing the government to inflate and spend however much it wants. It keeps inflation low or negative, and keeps long term prices stable. Btw, I'm not pro-gold-standard, but I am anti-fiat-currency.
- piznut, on 11/02/2009, -0/+1The 1st and 2nd Republican Depressions.
- monkeyrun, on 10/31/2009, -0/+1I believe that we are in a marvelous depression....
- 380ppm, on 11/02/2009, -0/+1youre an idiot. there i said it. You obviously dont know that the government encouraged a bubble by having the fed loosen monetary policy in 2001 for political expediency. The government caused this problem now theyve brainwashed you into thinking that they saved the economy...what a farce!
- X9001, on 10/31/2009, -0/+1Especially when you have all those revisionists who like to make up their own version like a bad fan fiction
- falser, on 10/31/2009, -0/+1It's way way worse these days. Things are so bad for so many people that they're actually downgrading to BASIC cable instead of Premium Cable with HBO.
The horror... - kuzotz, on 10/31/2009, -0/+1lol yea AMerica did go fascist right after WW2.... I Think we ignore that tidbit and believe the propaganda that we are a free people. Of course I am reminded that we aren't when I travel to other developed countries. And realize there is more freedom their than here. ITs odd.
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