Misunderstanding the Causes of the Great Depression
As the financial crisis intensifies, the government keeps upping the ante, crossing more and more boundaries that would have been unthinkable--especially coming from "free market guys" like Bush and Paulson--just last year. Even more sickening is all the "free market" pundits who are cheerleading the literal nationalization of the US financial industry.
Of course, the justification for all of this is that it is "necessary to prevent another Depression." But this entirely misconstrues what caused the Great Depression.
The stock market crash of 1929 didn't cause the Depression. Even the Fed didn't cause the Depression. No, the Fed caused unsustainable malinvestments through the 1920s with artificially low interest rates (which went hand-in-hand with phony fiat credit getting pumped into capital markets). The stock market bubbled up, and then crashed in 1929.
At that point, if Herbert Hoover had simply kept his hands off, there would have been a sharp economic downturn--what was called a depression back in those days. It probably would have been the most severe up till that point in American history (because the newly created Fed had engineered the largest boom in American history during the preceding decade), but it would have been over within a few years at most. People would have been poorer because of the whole episode, but unemployment would have been in regular territory by, say, 1933. After all, in previous panics and depressions in US history, the recovery was usually underway after two years.
But we all know from our history classes that things were not back to normal by 1933. Nope, when FDR took office that year, unemployment stood at a staggering 24.9 percent. And then--despite claims that Roosevelt "got us out of the Depression"--the unemployment rate was still 19 percent five years later in 1938.
As I said above, this decade-long slump was not the fault of a stock market crash, or even the malinvestments of the 1920s caused by the new Fed. A relatively free market can handle huge disruptions. E.g. if an asteroid smashed into Chicago in 1929, that might have caused a sharp economic downturn too, but it wouldn't have caused double digit unemployment 10 years later.
So what did cause the severity and length of the Great Depression? The New Deal. (And let's realize too that Herbert Hoover was no laissez-faire guy; he did a New Deal-lite in the latter half of his presidency, and bragged about his ignoring the "liquidationist economists" on his stump speeches running against FDR.)
The New Deal represented the most comprehensive "war on depression" ever waged by the US government. And, just like the War on Drugs and the War on Terror(ism), the war on depression waged by FDR gave us the worst depression in US history.
All of the "unprecedented" measures that have been taken in the last 14 months are making things worse. Suppose Bernanke and Paulson had announced in September 2007, "Yep, a bunch of banks made goofy loans to unqualified applicants, and a bunch of whiz kids on Wall Street bundled them together with fancy models that, in retrospect, were totally wrong in their estimates of massive defaults. We feel your pain, fellas, but this is America where we have a profit and loss system. If you had been right, you would have kept your profits, and since you were wrong, you go belly up. Better luck next time."
That tough love would have been painful. Plenty of investment banks would have folded. The stock market would have tanked. The dollar would have gotten hammered in the foreign exchanges. But, on the bright side, major firms would have written off their multibillion dollar losses, capital would have been rearranged in light of the new information, and then economic growth would have resumed. There would have been a recession, but there have been lots of recessions over the years. Life would have gone on.
Instead of that, though, Bernanke and Paulson decided they were going to somehow magically erase all of the mistakes that bankers and investors made from 2001 to 2007. They were going to prevent a recession.
Guess what? All of the negative consequences (folding investment banks, tanking stock market, falling dollar) happened anyway. Recession, though postponed, is still coming.
And on top of that, the taxpayers are out at least a trillion dollars (and counting). Moreover, the banking system is about to be nationalized. Even if Ron Paul won the election, by this point so much harm has been done that investors around the world would still be spooked for years to come about investing in the US financial sector. Too many rules have been broken in the last few months. Nobody has any idea what crazy move the feds will take from one day to the next.
So it's true that we may suffer through a second Great Depression. But if we do, it will be because of the government's (ostensible) efforts to prevent it. A closing piece of evidence: We were told the bailout was necessary to thaw the credit markets and prevent panic on Wall Street. Well, we got the bailout (and paid a hefty price for it I might add), and the credit markets are still officially frozen, and the stock market just had its worst week in history.
Categories: Finance
Tags: great depression, bailout
Showing comments 1—42 of 42
Posted 10/12/08 07:04 AM
Spencer
Rocky Mount, NC | Now if we could only get about 100,000,000 people to read this, we might avoid the coming tyranny. |
Posted 10/12/08 07:05 AM
BillNM
Carlsbad, NM | Not sure I am buying all of this. It does not answer what triggered the depression. Would we have had the crash in the first place if the FED had not existed? |
Posted 10/12/08 07:12 AM
Fu Manchu
Belleville, MI | To BillNM: No, no we would not. The great depression was completely controlled by the FED. Funny how history repeats itself... |
Posted 10/12/08 07:15 AM
Fu Manchu
Belleville, MI | I encourage everyone to go to zeitgeistmovie.com and watch the part about the federal reserve toward the end of the movie. |
Posted 10/12/08 07:30 AM
mookrit
Melbourne, Australia | The author of this post forgot to explain what prolonged the recession and caused the depression of the 1930s..
Bob just said that there would have been a recession anyway, regardless of what the politicians do. But how exactly do bailout packages and lowering interest rates further worsen a recession and convert it into a depression? |
Posted 10/12/08 07:33 AM
rdrews1052
Poway, CA | To BillNM, Fu is right. We may of still had a depression or recession in 1929, they are part of the normal process of capitalism. The great farst was the manipulation spun by those bankers,socials and politicians in the early 20th century that were magnifying the outcry of the public about terrible effects of capitalism. Sure there were things were things negative about "laisee-fair capitalism". Such as sweat-shop conditions and abuse of labor like under Carnegie. BUT this was largely blown our of proportion as the usually do. Government has some role to protect the public and have humane conditions. But the Fed was the cause of the great depression. If the money supply and credit (and margin loans on the stock market) were controlled in proportion with the economy, the bubble never would of existed. There may have been a recession at some point, but not a crash. Further, the depression deepened because of what his article said. That is true. It was also maginified by the fact the FED not only slowed the money growth - they cut it off ! The fed allowed member banks to CUT OFF WHAT THEY COULD LEND. There was no credit at all !! Remember that in 1920 the "banking crisis" then was all fabricated by JP Morgan and others. This was an attempt to consolidate other small mom and pop local banks (can't have competition you know) and part of the CFR grand scheme of getting all of government and economics under one elite rule (we are not capable of auto-national rule according to them). That "depression" of 1920 did not last long. They were not complete in their attempt. So, the FED this time went to try it again. They re-inflated the bubble and when it was time, they popped it.Then this time they did not re-inflate it (i.e. pump up the money supply /credit) THEY SHRANK IT. This and with what the article points out about the government (hoover/fdr) is what deepened the depression. There were other things going on though that added to it. But from a monetary point of view and government aspects, this is largely correct.
Yes Spencer is right too. If more peope could do a little reading we would not have these problems possibly.
Ron Paul is the greatest public servant of the 2nd half of the 20th century and this century. Noone is even close intellectually and considering integrity.
regards liberty brothers and sisters.
Roger
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Posted 10/12/08 07:40 AM
Centurio
Miami, FL | We need to get 200,000,000 people to read this!! |
Posted 10/12/08 07:40 AM
rdrews1052
Poway, CA | recessions are a normal part of capitalism. They wipe out the malinvestment and bad decisions people make. The government/fed exaserbated the situation in 1929-1932 and beyond. They created it in large part prior to 1929, popped it, and prolonged it (for the most part).
Yes. Watch the Zeitgeist movie. It has correct information in it, though there are some insinuations and suggestions in it we need to be careful with. Such as the 9/11 pre-text to war and so forth. As always, be discerning. But yes the movie has much that is factual in it and verifiable. |
Posted 10/12/08 08:07 AM
WILL WORK FOR PEACE
Idaho falls, ID | There is still so much pain to come. With or without the $700 billion, we're in a world of hurt for the foreseeable future. There's a dominoe effect coming the likes of which the world has never seen before, IMO.
Instead of propping up the dead bodies, let's just bury them.
http://georgewashington2.blogspot.com/2008/10/next-derivatives-bloodbath-ins urance.html |
Posted 10/12/08 08:31 AM
DaleInVirginia
Lynchburg, VA | Very highly recommend Amity Shlaes' book
The Forgotten Man |
Posted 10/12/08 08:40 AM
bmorris
CIRCLEVILLE, OH | This is more of a Reader's Digest version of complicated events. Need a bit more explanation. Good start, though!
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Posted 10/12/08 08:40 AM
Matt R.L.
Lido Beach, NY | To the above posters: Recessions are NOT a normal part of capitalism. Let me repeat: Contra Marx, a completely free-market capitalist economy is not bound to be plagued by the business cycle of booms followed by busts. The business cycle is a function of the central bank artificially playing with interest rates, with interest rates pushed artificially below what the market rate would be spurring bubbles and the eventual raising of those rates causing crashes.
Dr. Murphy's point is that while a crash and a recession were inevitable in 1929, extending through the next year or two, it would never have turned into a GREAT depression had the government not meddled incessantly in the economy. Prices were kept artificially high, the execrable Smoot-Hawley Tariff which crippled international trade was passed, and the business/investment climate was SHATTERED by year after year of fascist and unpredictable policy.
To sum up: The Federal Reserve was responsible for the panic and the crash of 1929, but it was the Hoover and Roosevelt Administrations (and their willing accomplices in Congress) that were responsible for the GREAT Depression.
RECESSIONS ARE NOT PART AND PARCEL OF A FREE MARKET. Please make use of the Education Section of this website; members of this site should know better than to spout nonsense like this. |
Posted 10/12/08 08:57 AM
BillNM
Carlsbad, NM | Matt, I had no problem grasping the point Bob was making regarding the causes for the protraction of the depression. But he did appeal to the immutable law of cause and effect without addressing the first cause. He goes on to absolve the FED of any responsibility. I don't profess to be expert in either history or economics, but my common sense tells me that centralization is just problematic. Banks have to make a profit in a capitalist society and they generally work on 4%. They begin with paid in capital and then supplement that with deposits. Without a lender of last resort there would be no fractional reserve lending and no moral hazard. Therefore, the prudent man rule would cause them to exercise good judgement and any bank failures would be distributed locally. That would seem to me that there would be no pervasive credit crunch. So, all I was asking was what triggered the event.
Try to take it easy on some of us who aren't quite up to speed with you yet. |
Posted 10/12/08 08:58 AM
StatusQuoJoe
Westminster, CO | There are a myriad of theories to explain the economic factors that prolonged the great depression and the cyclical nature of boom and busts much of which I am trying to learn. But how many of us out there wonder if these failures (called adjustments) are a result of deception and dishonesty. The main dishonesty is the legality behind the central banks (Federal Reserve) authority to print money and set its value versus the constitution's definition that congress should coin money and set its value. Then there is the deception as to the Federal income tax, constitutionally it has no legitimacy. The federal income tax is used primarily to pay off the interest on the national debt that occurs from our government borrowing money from the central banks. If congress were to coin money and set its value then both problems would be solved. At least amend the constitution and clearly set out the Federal government's legal authority to tax personal incomes and end the deception and confusion. A sound economic policy does not begin with deception it begins with honest and straightforward policies. |
Posted 10/12/08 09:04 AM
Matt R.L.
Lido Beach, NY | BillNM,
Allow me to quote from Dr. Murphy's post:
"The stock market crash of 1929 didn't cause the Depression. Even the Fed didn't cause the Depression. No, the Fed caused unsustainable malinvestments through the 1920s with artificially low interest rates (which went hand-in-hand with phony fiat credit getting pumped into capital markets). The stock market bubbled up, and then crashed in 1929."
He did not absolve the Fed of responsibility. On the contrary, he gave it exclusive credit for the crash, but his entire point is that even a central bank-induced crash need not lead to anything resembling the Great Depression. That catastrophic event only came to pass because of the many federal government interventions into the economy, both by the Hoover Administration (which was far from the apathetic, laissez-faire presidency you were taught it was in school) and the Roosevelt Administration.
I'm sorry if I came across unduly critical, accept my apologies. It just strikes me as essential that those of us on board the liberty 'ship' have all the intellectual ammunition we need to impress upon people the rightness of our cause. To say wrongly that recessions are a necessary part of capitalism undermines the very cause we fight for. That is what irked me, but I shouldn't have been so overbearing. My bad. |
Posted 10/12/08 09:16 AM
rayendra
Jakarta, Indonesia | A few question to make some points clear, for austrians newcomer like me :)
1. So before the fed was created, there are no such thing as boom/bust? In other words, is central bank the only factor that could cause a bull/bear market?
2. So a true austrian free-market capitalism will demolish recession for good? That the market will continue to grow, without a "bear" market at all? |
Posted 10/12/08 09:17 AM
BillNM
Carlsbad, NM | OK. So the FED caused the crash indirectly. Then the government policies protracted it. I cannot explain adequately to younger folks how much Roosevelt was admired. The people had been sold a bill of goods and bought it lock, stock, and barrel. Not everyone was stupid. When Roosevelt died all the folks were around the dining room table in the boarding house where I stayed in real grief. My mother walked in from work and said, well the old SOB is finally dead. If looks could kill..... |
Posted 10/12/08 09:22 AM
An Individual
Allison Park, PA | Matt, an innocent question. Are you justified in claiming that recession is not a natural consequent of capitalism? After all, isn't that economic "theory?" I have been approaching the problem from a Marxian (contra Marxist; Marx himself had said "I am not a Marxist") perspective. In some ways, even Lyndon Larouche is a quasi-Marxian since he approaches the economy existentially.
Let me reneg. I suppose it is not clear in Marx whether a recession is a natural part of the ebb and flow of the economy. He never comments that it is necessary (those after him will take this up); he simply points it out. Thus Keynes comes along and says, "Look, Marx showed us where all of the problems are, and we can fix it. Follow me! To the Batcave!" At least a couple of relevant, contributing factors: 1) if there is a problem arising between the modes of production and the material conditions (a "Larouchian" point, in a way; perhaps our failure to develop quickly enough and our dependence on limited resources are catching up with us?); 2) enter the misers who choose to hoard and fail to reinvest capital back into the system (a la, in some ways, our wall street fiasco?).
Just a few interesting thoughts.
An additional, unrelated comment: I would like to see an article that comments or suggests how we might prepare for the coming depression, and / or, how we might even take advantage of our foresight. |
Posted 10/12/08 09:30 AM
deb4523
Delta Junction, AK | I also would like to see a whole article to prepare for the coming depression, and / or, how we might be able to take advantage of our foresight. |
Posted 10/12/08 09:37 AM
Fu Manchu
Belleville, MI | To Matt R.L.: Are you suggesting that in completely free market the sun would always shine? If that is the point you were trying to make in an earlier post, you are completely wrong. While a truly free market would be great, it would have ups and downs as well. Not manipulated or controlled mind you, but you would have to take the good with the bad. As technology evolves, people, along with the markets would change. Supply and demand could also be manipulated in a free market as well. To think a corporation wouldn't falsely keep supplies low to keep demand up is arrogant. Likewise a company that ignorantly "floods" the market with a product, would have the opposite effect. There is a fine medium to the free market and your not always in it. So to sum up, recessions, along with the good times, would still happen in a free market. |
Posted 10/12/08 10:04 AM
An Individual
Allison Park, PA | I would like to think he is not suggesting that a free market functions unconditionally great. I took him to suggest that a free market functions optimally. In other words, the free market is forced to always operate within and according to the conditions of the market. When any kind of interventionism occurs (government or otherwise), it destabilizes everything, specifically, the relationships between the monetary unit's value, commodities, the demands of the market, and its conditions. In such a scenario, a recession then has to occur as it acts as a counterweight ensuring the stabilization of the system.
But maybe I misunderstood.... |
Posted 10/12/08 10:04 AM
WILL WORK FOR PEACE
Idaho falls, ID | "Only a crisis, real or perceived, produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable."
- Milton Friedman
----------------------------------------
This is our strategy, then, is it not?
We need to keep alternative ideas alive until their implementation becomes politically possible. As long as people believe that government can save them, our ideas are not going to go anywhere. It is only when governments fail that the people will have the will to wrest control from the institutions that failed them.
Let's educate the public so that through our hard work the seeds of liberty have been sown - even if they are only ideas, even if they lay dormant for a time. People are looking for answers. When the proper time comes, when big government and corporatism fails, then these seeds can grow.
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Posted 10/12/08 10:14 AM
C00kieM0nster
Oxnard, CA | Well, purely free markets don't experience recessions per se, but you will tend to have reallocation of capital from time to time, depressing specific industries, or sectors.
This would often be the a result of technological advancements, or natural disasters. What we have now allows a few bankers to manipulate the world, and they will starve as many as they can to accomplish that goal.
There should be a covert mission to Wall St. to cut the head off the bull. |
Posted 10/12/08 12:42 PM
Spencer
Rocky Mount, NC | I think the world has made economics sound far too complicated. I must have read 50 economics books over the last 40 years and when it's all cut down to the basics, it's very simple. If we were on the gold standard or whatever based on real value and you could go down to the bank and demand that real value in exchange for your "legal tender", the banks would be very careful with loans. The constant fear of a "run" would keep the bank honest. This is simplified of course but if you take this principle and apply it overall I think you'll agree it's a good system. This is the message I gather from Mr. Paul's comments and I couldn't agree more. The idea that we can expect the Fed (more bankers) to keep the system honest is like having the fox guard the hen house. Our inability to demand real value for our greenbacks has allow the banks with Government help of course to go completely nuts with credit. The ingenius ways they have come up with to expand credit are amazing. I don't think anyone knows how much debt there really is.
My great fear is some scheme will come out of this weekend's meetings advocating another world "something" to "make sure we don't have this situation again". In the meantime our liberty goes south and Big Brother takes even more control over our lives. |
Posted 10/12/08 1:01 PM
Matt R.L.
Lido Beach, NY | To my detractors: Absolutely NOWHERE did I say that free market capitalism would usher in some kind of kingdom of heaven. Nor did I say there wouldn't be business failures under free market capitalism. I didn't even say there wouldn't be the occasional perturbation resulting in what we would consider a downturn.
What I did say is that it is the system of fiat credit expansion and contraction, today run by a central bank (The Federal Reserve), that is the sole cause of the business cycle -- the oscillation between boom and bust that is omnipresent in the modern 'capitalist' economy. In an ACTUAL FREE MARKET ECONOMY gumdrops will not rain from the sky nor will the rivers flow with chocolate, but we will be rid of the business cycle; the economy will, with very infrequent aberration, increase in productivity and, therefore, magnitude each and every year, and prices will march steadily downward.
I hope that clears up my position. Again, please make use of the new Education Section. |
Posted 10/12/08 1:05 PM
cugir321
Boynton Beach, FL | This is the best interview I've heard yet....the greed and corruption of both party's to get us where we are...be prepared to be angry. http://www.netcastdaily.com/broadcast/fsn2008-1011-2.mp3 |
Posted 10/12/08 1:14 PM
ScottFox
Atlanta, GA | These economics articles and interviews are really fantastic. Just what the doctor ordered. =)
For interested folks, also be sure to make Mises.org and LewRockwell.com part of your daily reading list! |
Posted 10/12/08 1:32 PM
steamedturtle
Columbia, MD | Ignoramuses like Paulson, Berkanke, Bush, Pelosi et al. think that we live in this magical world where there can be no consequences for actions. Bad decisions occurred with influence from terrible legislation and businesses failed. These bad decisions had to due with credit which is not real money and has no value unless it's paid off - which it wasn't . Now they want to 'solve' the crisis with more credit. They have no common sense. |
Posted 10/12/08 1:47 PM
T.WALT
Waco, KY | I liked the article. I will pass it on to everyone I know
and maybe even some people I don`t know. The easier it is to explain and understand, the easier it is for an ignorant public to grasp.
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Posted 10/12/08 5:42 PM
charleydan
Littleton, CO | One has to recognize the difference between inflation, deflation versus boom and busts. Boom and busts do exist in a gold standard system. Inflation and deflation is man created by manipulation of money in a fiat monetary system.
Metal or Asset Monetary Standard:
Boom and Busts are created by a builder deciding they must build this faster or now. This increases the cost. Yet, if that builder does not have a buyer that has the same desire the builder goes bust. Or an rancher that decides the land next to him is worth far more then anyone else would give. Then wants to sell. Busted. This can even happen on greater magnitude. The dot.com era was of this magnitude. Everyone was buying with no underlining value. The creators were glad to sell to investors that did not look at true value.
The gold rush was a boom and bust period. It hurt many, but those that participated to one degree or another was the confined area.
In this situation the markets are confined and not a national autracity of theif.
Fiat Monetary System:
Under the fiat monetary system it is the government orchestrating the wealth to the bankers and entrepeneurs and dissolving your GNP wealth to inflation. It also allows politicians to buy votes and tax the populist further for bigger government.
In a fiat monetary system the Fed's raise interest rate to slow growth and lower it to increase spending.
The GNP is watched closely. The Fed's maestro's want the creation of money not to be greater then the GNP or inflation nightmare is created.
Politicians have constituents to make happy. Both corporate lobbyists and public votes. This is what makes the imbalance or creates a bubble of inflation that can only result in deflation to bring products back to value.
Let me side step here and explain how this works in more detail.
Workers work creating more products or value for the American dollar. Referred to in Fed's language as GNP.
GNP is what makes the dollar stronger or worth more. Instead every generation listens to their parents say, when I was a kid we paid....
The Fed's increasing interest rates causing more loans for bankers. Who do not have the money. So the Fed's create it(thin air, paper, printing, non-existing--hard to believe possible, but true).
This money goes out to the bank and the entrepeneur loan, builds a mall, buying at todays prices. Sells it down the road at inflated prices of two bucks now, because there are more dollars in existence. Seems like he made a fortune.
Americans do this also. They buy a house today. Inflation pushes the house up. He buys a bigger house counting on inflation again to be greater on bigger values. False value. No value of hard work here and that is why they say inflated.
In this enviroment if the investor is not selling high and buying lows or speculating he is damaged. For those that hold it is fine as long as these dips do not happen at the end of your life.
The problem is their is no value there. Not talking value of the product. It is the dollar with no value. Americans work hard all week and come home bone tired and can not buy and takes the desire out of wanting. Just surviving is the mode. Until the consumer decides value exists. The down slope continues. All created because of inflation by a fiat system.
This may sound confusing. You see to bring the dollar to value you must either call them fake dollars back or lower product prices or get one big raise. And wages generally stay the same bringing value to the dollar as prices drop.
World Monetary:
Americans have been buying abroad or imports galore. This has created a trade inbalance. This inbalance is corrected by foreign countries buying American Assets bringing dollars home, balancing the trade.
Then this deflation we have not only steals their wealth but income that we origninally owed them. An Americans wonder why the world despises us. Of course without us, many of their economies would not exist. What a love, hate affair.
This is only minut or a warning of what will happen when the World rejects this monetary system by deflationary coming to value for the world currency. Since America is a leader it is only plausible that Americans lead the cause. Not only for our good, but for the world over. |
Posted 10/12/08 7:25 PM
Mike in Virginia
Fredericksburg, VA | For a terrific exposition of the great depression, I highly recommend Rothbard's "America's Great Depression". For those who do not have the time to wade through that book, Karen DeCoster recommends in a lewrockwell.com blog "Great Myths of the Great Depression" by Larry Reed. I have not read the latter book, and have to read Rothbard's book again to get close to a full understanding of it.
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Posted 10/12/08 7:56 PM
JANET
FORT MILL, SC | I just want to thank you ALL for this learning experience! The system is complicated.
I'm impressed by all the knowledge you wonderful people possess! I won't pretend to understand it all, but I trust Ron Paul and you over the bankers, and over GDubya and his administration that's for sure!
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Posted 10/12/08 8:21 PM
RWGoble
Manhattan, KS | I'm reading Rothbard's "What Has Government Done To Our Money?" It's very easy to understand and simply written. It's where I've chosen to begin my economics self-education(outside of this site and various short articles), and I'm very glad I did. Here's the address... http://mises.org/money.asp
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Posted 10/12/08 9:25 PM
Mike in Virginia
Fredericksburg, VA | RWGoble, that is a great book; it brought a lot of things into focus for me; for example, I had never understood Gresham's law before Rothbard's wonderful explanation of it. You might want to continue with Henry Hazlitt's "Economics in One Lesson". It's totally brilliant also.
If only the rulers in DC would read and understand those two books, we would all be so much better off. My greatest fear is that they do understand, and they are deliberately destroying our economy and our nation. |
Posted 10/12/08 9:37 PM
Ronald H Levine
Sandy, UT | Let's keep our Constitutional republic form of representative self-government. Once lost, it is not merely just voted back. From our Founding Fathers on, generations have made great sacrifices to pass on our heritage to their posterity including future generations beyond ours and not intending for it to stop with us. We are about to experiment with straying from our form of government which has been tested and proven to be an unprecedented success in thousands of years of history of hundreds of nations. Our children and grandchildren and all future generations will revile us, if we do not heed our Founding Fathers admonition to be ever vigilant and we fail to pass on our United States of America to them in favor of an experiment with global governance which we approach as one "solution" after another is taken in response to contrived problems. RonaldHLevine@gmail.com |
Posted 10/13/08 09:00 AM
DaleInVirginia
Lynchburg, VA | Before we become too transfixed on the Crash of '29 and the depression that followed, We need to look a bit father back in U.S.history. It seems that prior to the 1929 crash and following depression ... Panics and depressions were
more common and numerous than a politician's promise.
Do visit this site;
http://thehistorybox.com/ny_city/panics/panics_article1a.htm
Here is a list of Panics and Depressions that occurred prior to the "Great Depression" ... I have also included some Presidential quotes that, in light of what is happening today, seem rather prophetic.
There was the;
The Panic of 1819
Panic and Depression 1832
Panic and Depression 1836
"Volume: III Page: 340 (extract) "Amidst all conflicting theories, one position is undeniable, the precious metals
will invariably disappear when there ceases to be a necessity for their use as a circulating medium. It was in strict accordance with this truth that whilst in the month of May last they were everywhere seen and were current for all ordinary purposes they disappeared from circulation the moment the payment of specie was refused by the banks and the community tacitly agreed to dispense with its employment. Their place was supplied by a currency exclusively of paper, and in many cases of the worst description.
Already are the bank notes now in circulation greatly depreciated, and they fluctuate in value between one place and another, thus diminishing and making uncertain the worth of property and the price of labor, and failing to sub-serve, except at a heavy loss, the purposes of business. With each succeeding day the metallic currency decreases; by some it is hoarded in the natural fear that once parted with it can not be replaced, while by others it is diverted from its more legitimate uses for the sake of gain. Should Congress sanction this condition of things by making irredeemable paper money receivable in payment of public dues, a temporary check to a wise and salutary policy will in all probability be converted into its absolute destruction."
M. VAN BUREN
The Panic of 1837
Which led to a Six Year Depression that lasted until 1843
During the term of John Tyler while in office as President, April 4, 1841 to March 4, 1845.
Washington, December 6, 1842
"To The Senate and House of Representatives of the United States:
The political party which should be so blind to the true interests of the country as to resort to such an expedient
would inevitably meet with final overthrow in the fact that the moment the paper ceased to be convertible into specie
or otherwise promptly redeemed it would become worthless, and would in the end dishonor the Government, involve the
people in ruin and such political party in hopeless disgrace. At the same time, such a view involves the utter
impossibility of furnishing any currency other than that of the precious metals; for if the Government itself can not
forego the temptation of excessive paper issues what reliance can be placed in corporations upon whom the temptations of individual aggrandizement would most strongly operate?"
The Panic of 1857
Panic and Depression 1869-1871
Ulysses S. Grant
Executive Mansion, Washington, D. C., December 6, 1869
To the Senate and House of Representatives:
Volume: VII Page: 29 (Extract) "Among the evils growing out of the rebellion, and not yet referred to, is that of an
irredeemable currency. It is a duty, and one of the highest duties, of Government to secure to the citizen a medium of
exchange of fixed, unvarying value.
The Panic of 1873
The Panic of 1893
and
The Panic of 1901
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Posted 10/13/08 10:00 AM
rayendra
Jakarta, Indonesia | For JustinMurray thank you for the answer!
So there will be a boom/bust after all even when the Fed didn't exists.. although i think that kind of boom isn't as artificial as the fed did in previous bubbles.. |
Posted 10/13/08 10:02 PM
MisterGoldbug
Elliston, VA | A really good book to read on the Federal Reserve is Secrets of the Federal Reserve authored by Eustace Mullins. This book was the basis for G. Edward Griffith's book.
Great article post. Thank you. |
Posted 10/14/08 06:09 AM
SMaturin
HAwthorne, NY | Excellent article, excellent discussion!
Eustace Mullins' book is a bit chilling, sometimes sounding paranoid, but worth a look. It has been posted online in a couple of places.
Even better, as the definitive rational analysis of the causes of the Great Depression, there is no better source than Rothbard's "America's Great Depression." It was mentioned by at least one poster above. It should be made required reading in high school history classes, but that will never happen in state-controlled schools.
The Ludwig von Mises Institute has generously made it available for download (or you can purchase a hard copy, then donate it to your local library after reading it):
http://mises.org/rothbard/agd.pdf |
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