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Our Solutions are Too Harsh, They Say

Recs

33

July 05, 2009 – Comments (5)

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?

Sources:

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

5 Comments – Post Your Own

#1) On July 05, 2009 at 12:26 PM, whereaminow (42.76) wrote:

In case that Woods' link does not work for you - you can also get there by going here, then scroll down to Why You've Never Heard of the Great Depression of 1920 for the video or just the audio of the lecture.

David in Qatar

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#2) On July 05, 2009 at 2:20 PM, PrestonCheek (31.09) wrote:

David, it has proven it's self time and time again, not only in economics but life as well. When you prop things up, in the long run they fall harder and longer. It can be related to any walks of life, drug abuse, gambling, shopping habits, it doesn't matter, when you force the problem to face it self then it finds away to rebuild, plain and simple. Of course I know the American economy is much more complicated but it's the same purpose, sometimes we over complicate things to confuse.

I hope I did not stray from what you were trying to debate here.

I hope things aer going well for you.

Preston

 

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#3) On July 05, 2009 at 6:13 PM, JGus (28.98) wrote:

David,

Excellent Work, As Always!

JGus

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#4) On July 06, 2009 at 7:08 AM, whereaminow (42.76) wrote:

PrestonCheek,

Thanks! Great comment. I'm doing good I suppose - but missing my sweetheart.

JGus,

Awesome! Glad you liked it.

David in Qatar

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#5) On October 03, 2009 at 3:28 PM, silverminer (31.38) wrote:

I missed this post the first time around ... I'm glad you linked back to it.

1st rate!

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