Our Solutions are Too Harsh, They Say
We said, "take one year of pain and the economy will readjust and move in the right direction. People will lose their jobs, but the recovery will be swift and those people will be absorbed into businesses that can adapt."
They said, "you were right about the problems, but your measures are just too harsh. We need to help those in need, (quantitatively) ease the economy back onto its feet, and save those companies that are too big to fail."
In the end, their policies are the ones that will be the most harsh. In Japan, they are suffering two lost decades because of these ideas. We asked for one lost year.
Since 1914, only twice has American policy during Depression deviated from the status quo of economic theory.
In 1920-21, America suffered a correction that was more severe than the 1929-1930 correction. President Harding slashed government spending and allowed wages to fall. The economy was flying again in 18 months.
In 1946, the American economy was still in the Great Depression of 1929. Only WWII had masked the insufferable two decade contraction. Government spending was finally slashed (government expenitures plummeted from $82 billion to $27 billion from 1945 to 1946), much to the horror of mainstream economists, all of whom predicted the worst. The economy rebounded with a vengeance.
I ask you, whose solutions are too harsh, those that ask for a year of pain or those that promise decades of suffering?
1920-1921 Great Depression (This is a video link (.wmv file) and should open up a video lecture of Thomas Woods explaining the 1920-1921 crash and recovery.
America's Great Depression (free book on pdf) by Rothbard
Post War Depression and Recovery(pfd essay)
David in Qatar