@quantumushroom the response you'd get from modern Keynesians like Krugman is that the New Deal wasn't a big enough fiscal stimulus to fully end the depression and bring the country back to full employment, but it did help.

Look at unemployment during the Great Depression: http://en.wikipedia.org/wiki/File:US_Unemployment_1910-1960.gif

It rose starting in 1929, and kept going up while Herbert Hoover implemented tight monetary policy, fiscal austerity, and refused to interfere with the banking sector out of concern for creating moral hazard. The peak closely coincides with FDR's New Deal taking effect. After that, it fell fairly rapidly. As spending grew, GDP went up, and unemployment went down. The reversal happened in 1937 when they decided that the depression must be over, and switched to trying to reduce deficits, and tighten monetary policy again (to return to the gold standard). The economy crashed in response. So they resumed it, and the economy started getting better again.

What happened at the end? Well, the giant fiscal stimulus (and not incidentally, the near total socialization of the American economy), known as World War II, which brought us back up to full employment again.

Those data points all support, not discount, Keynes's General Theory.

@blankfist, I think my libertarian answers were actually better defenses of libertarianism.

And some of my answers were humorously echoed.

The Great Depression:

>> ^NetRunner:

The Great Depression was caused by government interference in the market, an no amount of historical or economic facts will ever convince me otherwise.
>> ^blankfist:

The great depression was prolonged by government. In fact, our recession has lasted longer already than the great depression. Thanks Bush and Obama.

Incidentally, you're citing Friedman the inflationist there, who said that the Great Depression was prolonged by government refusing to restore confidence to the markets by bailing out failing banks, and by trying in vain to hold to the gold standard when what it needed to do was print shitloads of money to counteract the drop in the money supply caused by people stuffing cash into their mattresses. Seriously, go look it up.

On Monopolies:

>> ^NetRunner:

Natural monopolies, where the cost of entering a sector of the market outweighs the expected return, are just part of market economics, and should be tolerated. Market leaders that become a de facto monopoly, but do not actually enjoy 100% market share (such as Microsoft Windows), are not monopolies, and also a natural result of the free market, so government must not interfere.

Government sponsored monopolies, like the USPS, are evil in ways the others are not because their existence is based on violent coercion, not natural market choice.
>> ^blankfist:
And monopolies? How about government monopolies on the postal system? Public utilities and railroads used to be public, but recent years have been privatized. Government runs monopolies on alcoholic and controlled substance distribution in a lot of states. And don't get me started on government granted monopolies.

On deregulation's benefits:
>> ^NetRunner:
Deregulation in Chile is a huge success story.
>> ^blankfist:

[A]ccording to wikipedia, today "Chile is ranked 3rd out of 29 countries in the Americas and has been a regional leader for over a decade. Chile's annual GDP growth was 3.2% in 2008 and has averaged 4.8% from 2004 to 2008." Not too shabby, though people like Neomi Klein may disagree.

Though technically that last was offered as a defense of violently implementing deregulation, even though you cited growth numbers from an era after they'd shifted from the Randian wet dream of Pinochet's rule to a more regulated and democratic system.

Oh, and on the aforementioned violent implementation of libertarianism:

>> ^NetRunner:

Only governments do those things! Wealthy businessmen would never go along with that, because they're all paragons of moral virtue. They'd never let a thing like considerable personal gain motivate them to call for these things in the first place...
>> ^blankfist:
The only group that tends to use violence to coerce people into doing what they want is government. Only a statist can conflate freedom with violence.

Lulz.

You asked a lot of questions, @dystopianfuturetoday. Let's jump in.

>> ^dystopianfuturetoday:

Underregulated markets in early America resulted in slavery, child labor, monopolies, labor abuse and the great depression. Why should we want to return to those dark days?

Patently false. Slavery was held over from early British rule. And a lot of industrialized nations followed the same trend of slavery and child labor, but that's more endemic of the path of civilization than free markets. To think child labor or slavery would come back to the US if we deregulated the markets is ridiculous.

The great depression was prolonged by government. In fact, our recession has lasted longer already than the great depression. Thanks Bush and Obama.

And monopolies? How about government monopolies on the postal system? Public utilities and railroads used to be public, but recent years have been privatized. Government runs monopolies on alcoholic and controlled substance distribution in a lot of states. And don't get me started on government granted monopolies.

>> ^dystopianfuturetoday:

Deregulation and privatization always seem to result in massive unemployment, economic inequity, inflation and corruption. Is this the desired effect?

I had to reread that a couple times. Always results in massive unemployment? Where has that happened once in history? Regulations have lead to less employment, because less people can create jobs. If you want to open a florist in some states, you must pay several grand to take a test and get a license. Or be a barber. And so on. Regulations kill employment opportunity.

And inflation is caused mainly by growing the money supply. And you have the central bank system and the government to thank for that.

>> ^dystopianfuturetoday:

There is no evidence to suggest a libertarian society would function at all. Why should I join you on blind faith?

There was no evidence to suggest an individualist society would work prior to the US. Good thing they took a chance.

>> ^dystopianfuturetoday:

Why do corporations fund your movement? What do they have to gain out of supporting your cause?

What movement is that exactly? Not too many corporations are really for a free market. A free market would add unwanted competition that would decrease their profits. But I take it you meant the Koch brothers supporting CATO? That's hardly my movement.

But for every one corporation you find in favor of Libertarianism, I can find you twenty against it.

>> ^dystopianfuturetoday:

Why does this American version of libertarianism require absolute fealty to market capitalism? Doesn't that kind of totalitarianism go against the concept of liberty?

If you mean the Libertarian Party, then they're acting in accord with capitalism just as Democrats and Republicans are. Because that's the current economic system. You want a better system? Then offer one up... oh, oops, you can't because we're not allowed those kinds of freedoms in this society, are we? It's the US Dollar or else.

For those of us who are libertarian in name (not party), it doesn't have to be capitalism. It doesn't have to be money. It just has to be voluntary.

>> ^dystopianfuturetoday:

Why is it that violence, blackmail and intimidation seem to be the primary ways of bringing these kinds of free market changes to other countries around the world? Liberty at the butt of a gun?

Interesting choice of words. The only group that tends to use violence to coerce people into doing what they want is government. Only a statist can conflate freedom with violence.

I doubt adoption of free markets is primarily done at the butt of the gun. I think you're alluding to Friedman and Chile. I doubt Friedman lead an army of Libertarians through Chile, but I know he was consulted regarding their economy. And according to wikipedia, today "Chile is ranked 3rd out of 29 countries in the Americas and has been a regional leader for over a decade. Chile's annual GDP growth was 3.2% in 2008 and has averaged 4.8% from 2004 to 2008." Not too shabby, though people like Neomi Klein may disagree.

But, to get back to your question, I don't know of any Libertarians that want to "bring" free markets to other countries; they just want to be able to freely provide for themselves and their families without other people telling them how to do it. Again, why not use your power of perception to look at the countless acts of violence perpetrated on the people by their government. And Chile is no different.

>> ^dystopianfuturetoday:

Why not answer some tough questions?

@blankfist, since you seem to be too chicken to take up DFT's challenge, how about I try to play devil's advocate and try to argue the libertarian position for you.

>> ^dystopianfuturetoday:
Underregulated markets in early America resulted in slavery, child labor, monopolies, labor abuse and the great depression. Why should we want to return to those dark days?

We wouldn't return to those days. To take on each in turn:

1. Slavery
   
   No one would be compelled by violence to do anything they like. People may choose to sell their entire lifetime worth of labor voluntarily if they so choose, but they will not be coerced to do so with violence.
   
   
2. Child labor
   
   Again, no one would be compelled by violence to do (or not do) things. If children don't want to work, they may choose not to. But if you're 9 years old and want to work 80 hours a week to help your family, what right does the government have to coerce people not to?
   
   
3. Monopolies
   
   Natural monopolies, where the cost of entering a sector of the market outweighs the expected return, are just part of market economics, and should be tolerated. Market leaders that become a de facto monopoly, but do not actually enjoy 100% market share (such as Microsoft Windows), are not monopolies, and also a natural result of the free market, so government must not interfere.
   
   Government sponsored monopolies, like the USPS, are evil in ways the others are not because their existence is based on violent coercion, not natural market choice.
   
   
4. Labor abuse
   
   Everyone is free to quit and seek employment elsewhere. It isn't abuse if you voluntarily subject yourself to it.
   
   
5. The Great Depression
   
   This was caused by government interference in the market, an no amount of historical or economic facts will ever convince me otherwise.
   

Of course there's no guarantee that none of these dark things will come back, I'm just saying it's totally legitimate for them to come back provided no violence is used to coerce people. Coercion in the form of economic desperation is totally okay though.

>> ^dystopianfuturetoday:
Deregulation and privatization always seem to result in massive unemployment, economic inequity, inflation and corruption. Is this the desired effect?

Deregulation in Chile is a huge success story. Ditto for China, Ireland, southeast Asia, etc.

On the other hand, the economies of Cuba and North Korea have remained depressingly stagnant. Everyone's equally poor.

To use John McCain's turn of phrase "I'm not worried about who's getting a bigger slice of the pie, I'm trying to grow the pie!"

Just...don't ask me about Sweeden, they give me a rash with their high equality, high tax, high growth model. Must be something unique and exceptional about Scandinavians that's superior to us Americans.

>> ^dystopianfuturetoday:
There is no evidence to suggest a libertarian society would function at all. Why should I join you on blind faith?

It's about doing what's right. When Lincoln tried to free the slaves, no one knew how the economy could function without slave labor. They did it anyway, because you have to do what's morally right!

In this case, we're talking about ending violent coercion, because everyone knows that only people who work for the government ever use violent coercion. Eliminate government, and it'll be gone forever!

>> ^dystopianfuturetoday:
Why do corporations fund your movement? What do they have to gain out of supporting your cause?

Good question, it must be patriotism, or altruism. Rich people are actually really nice, and very generous!

They're willing to adopt a radically unregulated, untaxed world, knowing that it's somehow against their interests. Much more altruistic than agreeing to let their taxes go up so the government can waste it on children's education, helping the poor, the sick, the elderly, maintaining roads...

>> ^dystopianfuturetoday:
Why does this American version of libertarianism require absolute fealty to market capitalism? Doesn't that kind of totalitarianism go against the concept of liberty?

No, you must adopt my narrow conception of liberty! Government telling you that you have to serve black people = tyranny, businesses telling you that you have to submit to a drug test as a condition of employment = liberty.

Once properly understood, it's about fealty to nonviolence, at least government-based nonviolence. Corporations using violence to enforce their rules on the use of their property is self-defense, and therefore totally morally justifiable. Duh.

>> ^dystopianfuturetoday:
Why is it that violence, blackmail and intimidation seem to be the primary ways of bringing these kinds of free market changes to other countries around the world? Liberty at the butt of a gun?

Only governments do those things! Wealthy businessmen would never go along with that, because they're all paragons of moral virtue. They'd never let a thing like considerable personal gain motivate them to call for these things in the first place...

Why not answer some tough questions?

Underregulated markets in early America resulted in slavery, child labor, monopolies, labor abuse and the great depression. Why should we want to return to those dark days?

Deregulation and privatization always seem to result in massive unemployment, economic inequity, inflation and corruption. Is this the desired effect?

There is no evidence to suggest a libertarian society would function at all. Why should I join you on blind faith?

Why do corporations fund your movement? What do they have to gain out of supporting your cause?

Why does this American version of libertarianism require absolute fealty to market capitalism? Doesn't that kind of totalitarianism go against the concept of liberty?

Why is it that violence, blackmail and intimidation seem to be the primary ways of bringing these kinds of free market changes to other countries around the world? Liberty at the butt of a gun?



(for starters)

He's speaking a half truth, but I don't think he's calling the Tea Party people who believe in the extermination of people based on race or anything like that. He's trying to point out that the Tea Party, similar to the Nazi party, is an anti-establishment movement that has been born out of a troubled economy. That he's right about. He's also correct in observing that there doesn't seem to be any charismatic leader within the Tea Party. He's also correct in stating that there's a higher risk of radical parties coming to power during times of socio-economic upheavals.

He loses me in stating that the Tea Party is only about fear and hate, and have no proposed solutions. They are proposing a radical change in the federal budget, including massive cuts that adhere to radical conservative political philosophies, including massive cuts typically in social programs instead of defense. I vehemently disagree with that, but that's still a stated solution. I just wish politics were more about discussing rationally the pros and cons of an idea instead of loose associations with clearly horrible groups from history. You could make the case that the American progressive movement was a reaction to poor political and social environments, but that doesn't make the Progressive Movement bad.

He also is oversimplifying the Nazi rise to power. When you think about it, he contradicts himself. If Hitler simply rose to power because of exploiting popular discontent with the economy, then why did he never get the support of the majority of Germans in a free and fair election? Hitler did in fact exploit fear and malcontent in the German population caused by the Great Depression, but he never would have come to power had the conservative parties not attempted to co-op the Nazis to fight off the political left Social Democratic party and the Communist Party in Germany.

The rise of an extreme party in the US in the same way Nazis took control of Germany is very highly unlikely. While there are obvious negatives to the US two party political system, one strength is it does a very good job of preventing extremists from taking over. In Germany, the Nazi party exploited the fact there were numerous parties - the Conservative party, the Catholic Party, the Social Democratic party, the Communist party, and of course the Nazis to name some. Sure the US has other parties than the Democratic and Republican parties, but they're virtually insignificant in numbers and support. That simply wasn't the case in Weimar Germany, and in order to get a coalition government to get anything done, parties had to compromise and work together. Unfortunately, the conservative parties decided to work with the Nazis, making Hitler Chancellor, even though the Nazis were clearly anti-democratic, because they politically disagreed with the Social Democratic party. You can call the Tea Party whatever you want, but they certainly are in favor of Democracy.

So, listening to it myself, I gotta say I'm in total agreement with Frum on this one.

To make my own personal observation, even to a pro-Hayek ideologue, don't you notice that he doesn't actually propose any economic theory at all? Not a hint of "I think if X happens, Y will result"? The only things he says are the usual political demagoguery of "if government does something, we're all doomed!"

The bumper-sticker version of Keynes's theory is that if a recession comes about from a slump in demand, government should try to step in and create demand by spending money. The Hayek answer given here is essentially "we don't understand economics," with the full meaning being "so when a major depression or recession hits, just bend over and take it like a man."

Keynes essentially says that economics is worthless as a science if it can't tell us what to do in crises like the Great Depression. In fact, that's the meaning of his "In the long run we are all dead" quote, when read in proper context:

But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.

As for the constant accusations of Keynes being a central planner, this too is based on ignorance. Read Brad DeLong, and this except from Keynes's General Theory.

For the most part, I gotta say that even in a video produced by people who clearly side with Hayek, Keynes comes away looking more rational, and more vindicated by history, while all Hayek does is sputter right-wing red meat, without presenting any rationale or evidence to support his views.

>> ^Winstonfield_Pennypacker:

The robber barons of America's past abused power in a way far more like what Stewart is whining about here. They ran roughshod over people, and there were no laws to stop them. A good thing happened, and the people forced government to pass laws that allowed government to regulate such abuses. It was a good thing.

Yes, so let's do that again. We just need to roll back the robber barons' acquisition of government. They took it over in the immediate aftermath of the progressive era in the early 20th century -- by 1929 they basically ran Washington, just like now.

Back then, people demanded a New Deal, and got one. We had an era of real growth, where the resulting prosperity was relatively equally shared. The rising tide really did raise all boats. Not because businesses were more kindhearted, but because we had strong unions, and regulators who saw their job as actually regulating business.

Then Ronald Reagan came along, and it became Mourning in America. Unions got systematically broken up and destroyed. Business was welcomed into Washington with open arms, and allowed to write regulation. An anti-Fed objectivist became chairman of the Fed. Taxes for the rich were slashed, so were benefits to the poor. Everyone (who matters) wins!

Now we're getting a Great Depression of our own, and it looks like instead of us getting a New Deal, the robber barons are. More union busting, more tax cuts for the rich, more deregulation, and all so we can "compete" with authoritarian dictatorships that run sweatshops, by setting up our own here at home.

Think of it as trickle up economics. Through taxes, you take stagnant funds from the super rich and use them for infrastructure projects (taking up the slack for the lack of decent paying private sector jobs) and in the process creating jobs and wealth for the working class. Then these newly employed people put all that earned cash back into the economy, creating profit for business and tax revenue for the government. It's redistribution of wealth, but done in such a way that the money trickles back to where it started, helping everyone else along the way as that money finds its way once again into corporate coffers. In order to make a big enough dent in unemployment, the stimulus package needs to be massive. This plan worked well for FDR, effectively ending the great depression, which is no small feat. Obama's much less ambitious stimulus plan was not enough to get the job done.



>> ^blankfist:

^Haha. Obama's stimulus was too small, he says. Fuck me sideways, I'll never understand you statists. Maybe we should print another couple trillion or so, keep feeding it to the top percent in the corporatist and banking machine see if that helps the poor out this time? Maybe the banks will lend this time? Or maybe the corporatist giants won't take the golden parachute this time and instead will reinvest in American jobs?
If it doesn't work, we can always say the amount wasn't enough and start all over again.

Obama's stimulus was too small and didn't put enough people to work, unlike FDR, who got us out of the great depression with his stimulus plan. Economist Paul Krugman correctly predicted that Obama's plan was big not enough to make dent: http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/ >> ^quantumushroom:

So the "Stimulus" was an abject failure? Statist idiots.

So it's been two years. I hope everyone is doing well. A little older, a little wiser? Better, faster, stronger, smarter?

It looks like @NetRunner and @dystopianfuturetoday are still up to their old haunts. Learn anything in the last two years? History impart any lessons? A lot has happened since then. War, recession, inflation, destruction, pollution, the devaluing of the dollar.

Maybe meet up in another two years to see if anything more has changed? That is, if it is even possible. By then, we may have already lost net neutrality and the world wide web will a corporatized splash screen. "Choose your website from the following options." Worse yet, this site could be bought out by DynCorp and transformed into another corporate puppet ala Digg.com.

That is, if any of us even have jobs or savings to pay the internet bill. What with the massive inflation from the multi-trillion dollar "bailouts," handouts, QE3, QE4, QE5 etc. Ever pay attention to your supermarket bill over the years? What will the dollar be worth in two years if it has already decreased in value by upwards of 50% in the last few years? How about employment after the looming double-dip, recession, or second great depression. How many of the posters here will even have jobs anymore?

One thing is for certain, there is nothing special about American labor. China is in the lead in education, America is barely in the top 20. The average salary in America is somewhere in the $40,000 range. In China, less than $7000. I hope you've enjoyed the run while it lasted. Be prepared to swallow your pride along with your massive pay-cut as you realize the only thing sustaining this country is reckless consumerism. What do they tell you every Black Friday? Spend, Spend, Spend? Buy what you can't afford so you can be paid what you don't deserve. Nothing exists in nature "above unity," not even the American dream.

Forget the economy, what will our government be like in 2 years? Already, we sell little boys to afghan leaders and our presidential candidates threaten journalists with murder. Perhaps worse is all of our presidential candidates are identical. "Do you want the red or blue pill? They both taste the same." We torture our own citizens with solitary confinement for 6 months without trail. We've killed over 1 million civilians in Iraq, 15% of the way to our own holocaust. Corporations lay waste to our environment with no consequence. When they commit fraud, we give them billion dollar bonuses instead of criminal charges.

The internet is the primary source of dissent and "free thought" in the modern era. Two things diametrically opposed to corporate and governmental dictatorship. You forget because your mind doesn't think on large time scales, but the internet is just a baby. How long has it really been around, 20 years? That's not even old enough to drink alcohol. You've already seen what governments can do to the internet in China. You've already seen what corporations can do to the internet in Canada. How long before that becomes the norm and not the exception? You take it for granted what you have, then they turn your head while they steal it piece-by-piece. How often did you turn your head, when it wasn't yours they took?

"They came first for the Communists,
and I didn't speak up because I wasn't a Communist.

Then they came for the trade unionists,
and I didn't speak up because I wasn't a trade unionist.

Then they came for the Jews,
and I didn't speak up because I wasn't a Jew.

Then they came for me
and by that time no one was left to speak up."

Yeah, things have been going quite well "as is." Keep you finger's crossed for the next new political "savior" and I'll see you in another 2 years...maybe.

There is a two-way contractual system The bank agrees to loan, taking on all the risks associated with such load. The borrow does the same. ... You say the borrower should check his account, but that is barely his job: whereas it is the job of the banks.

I'm having a tough time conjoining these two bits here. We both agree that the loan is a two-way contract where the bank agrees to lend, and the borrower agrees to borrow - and that both parties agree to the risks involved. And yet there is this second bit here where you say that it is 'barely the job' of the borrower to check his balance and manage his end of the contract. If someone agrees to a contract that carries the risk of bankruptcy, homelessness, or financial ruin then to say it is 'barely' thier job to check the account comes off to me as insanely negligent.

I'd be interested to hear your explanation for all the banks that are doing just fine because they didn't buy into the mortgage scheme. I've heard radio interviews where they simply say that they didn't lend to anyone who couldn't be reasonably expected to pay for it. How did they escape your Catch-22?

Depends on the bank. Peeling back the onion that is the banking industry is complex, but back in the 90s the ones that were really pushing for the repeal of Glass-Steagall were not 'banks' in the sense that most people think about them. They were large, multi-national financial institutions and insurance companies - AIG being the principle player. These kinds of big money houses saw a way to make profit on the buying & selling of mortgages as financial packages WITHIN the financial industry itself. Effectively, the customer getting the loan was utterly irrelevant to these big players. They were interested in the financial packaging - not the loans themselves.

So when the law was changed, it allowed them to throughput mortgages within their own organizations. Historically, Glass-Steagall made it illegal for a financial house like AIG to buy & sell mortgages from banks that it owned or partnered with. But after the change, they could pool all the loans together and market them as a product. They started putting pressure on the smaller players to churn out more debt. There were banks that didn't play the game, but it was tough becuase all through the late 90s and early 00s, people were making money hand over fist the sl-easy way.

I have no doubt that there were politicians who pushed for easier mortgages to please their vocal minority constituents, but the people who stood most to gain were the wall street big money handlers. In your estimation, which of these groups tends to get their way in politics most readily? And therefor, which of these groups is more to blame?

Your question is this... Who is more to blame - the person MAKING A BRIBE or the person TAKING THE BRIBE? My answer is that the person TAKING THE BRIBE bears the greater guilt. All the bribes in the world are worthless if the other guy doesn't TAKE it. Businesses have no power to pass laws. That power rests in Congress. They are the stewards. They are the gatekeepers. They are the ones that are given public trust to only pass good laws, and to guard against this kind of crap.

Sadly - this is what happens when you allow a strong, central government to exist. I remember VERY clearly in the 90s that when AIG, Barney Frank, and a bunch of other guys were strong-arming the repeal of Glass-Stegall they were VERY insistent and persuasive that they were doing a really GOOD thing. It was going to lower the cost of housing. It was going to get more poor people into homes. It was going to make a lot of money for the middle-class, and ease the burden of the poor. In fact, the "repeal Glass-Stegall" guys were vociferious in accusing those OPPOSING their plan of being evil, selfish, cruel, and racist. And until October of 2008, who could really argue with them?

Government should have known better. Glass-Steagall was made a law SPECIFICALLY to prevent housing market collapses like this. It was implemented as a direct result of similar shenanigans which caused the Great Depression and the crash of the 20s. But because government people were wanting votes and conduct 'social engineering', they changed the laws. AIG didn't change the laws. Government did. They bear the ultimate responsibility.

In no way does this absolve folks like AIG. Quite frankly, the federal bailout is a massive crime aginst the people. It dumped money into financial houses to shield them from the consequences of their stupidity. The banks should have been allowed to fail. When this kind of thing happens, you let the chips fall and then the system rebuilds itself. And it does so rather quickly when government isn't there screwing things up like they did in the 30s.

Enjoy your Second Great Depression.

"Guess Who?"

by

Thomas Sowell

Guess who said the following: "We have tried spending money. We are spending more than we have ever spent before and it does not work." Was it Sarah Palin? Rush Limbaugh? Karl Rove?

Not even close. It was Henry Morgenthau, Secretary of the Treasury under Franklin D. Roosevelt and one of FDR's closest advisers. He added, "after eight years of this Administration we have just as much unemployment as when we started. . . And an enormous debt to boot!"

This is just one of the remarkable and eye-opening facts in a must-read book titled "New Deal or Raw Deal?" by Professor Burton W. Folsom, Jr., of Hillsdale College.

Ordinarily, what happened in the 1930s might be something to be left for historians to be concerned about. But the very same kinds of policies that were tried-- and failed-- during the 1930s are being carried out in Washington today, with the advocates of such policies often invoking FDR's New Deal as a model.

Franklin D. Roosevelt blamed the country's woes on the problems he inherited from his predecessor, much as Barack Obama does today. But unemployment was 20 percent in the spring of 1939, six long years after Herbert Hoover had left the White House.

Whole generations have been "educated" to believe that the Roosevelt administration is what got this country out of the Great Depression. History text books by famous scholars like Arthur M. Schlesinger, Jr., of Harvard and Henry Steele Commager of Columbia have enshrined FDR as a historic savior of this country, and lesser lights in the media and elsewhere have perpetuated the legend.

Although Professor Schlesinger admitted that he had little interest in economics, that did not stop him from making sweeping statements about what a great economic achievement the New Deal was.

Professors Commager and Morris of Columbia likewise declared: "The character of the Republican ascendancy of the twenties had been pervasively negative; the character of the New Deal was overwhelmingly positive." Anyone unfamiliar with the history of that era might never suspect from such statements that the 1920s were a decade of unprecedented prosperity and the 1930s were a decade of the deepest and longest-lasting depression in American history. But facts have taken a back seat to rhetoric.

In more recent years, there have been both academic studies and popular books debunking some of the myths about the New Deal. Nevertheless, Professor Folsom's book "New Deal or Raw Deal?" breaks new ground. Although written by an academic scholar and based on years of documented research, it is as readable as a newspaper-- and a lot more informative than most.

There are few historic events whose legends are more grossly different from the reality than the New Deal administration of Franklin D. Roosevelt. And there are few men whose image has been more radically different from the man himself.

Some of the most devastating things that were said about FDR were not said by his political enemies but by people who worked closely with him for years-- Secretary of the Treasury Henry Morgenthau being just one. Morgenthau saw not only the utter failure of Roosevelt's policies, but also the failure of Roosevelt himself, who didn't even know enough economics to realize how little he knew.

Far from pulling the country out of the Great Depression by following Keynesian policies, FDR created policies that prolonged the depression until it was more than twice as long as any other depression in American history. Moreover, Roosevelt's ad hoc improvisations followed nothing as coherent as Keynesian economics. To the extent that FDR followed the ideas of any economist, it was an obscure economist at the University of Wisconsin, who was disdained by other economists and who was regarded with contempt by John Maynard Keynes.

President Roosevelt's strong suit was politics, not economics. He played the political game both cleverly and ruthlessly, including using both the FBI and the Internal Revenue Service to harass and intimidate his critics and opponents.

It is not a pretty story. But we need to understand it if we want to avoid the ugly consequences of very similar policies today.

>> ^nock:

The authors themselves state that there is a direct link between the Great Depression and deflation. They then go on to say that besides that unfortunate link, there is only a small connection between the two.
Anyways, like I said, not necessarily titans of the field. They have a few grants, most university PhD's get those now and then.
Also, I wouldn't go around saying that the linked article is a report from the Fed. As best I can tell it was a research paper with one of the authors being employed by the Fed at the time, not an officially accepted Fed position.
Thinking outside the box is fine, just as long as it's not just for the sake of thinking outside the box.


I was never arguing that there was no link to the Great Depression and deflation. My point was that minor cases of either deflation or inflation are negligible mirco and macro economically speaking. It may well be that deflation in a population that is growing isn't optimal, but that isn't what I was ever saying in the first place (and is debated even by those that work for the fed). My main topic of interest was that as far as it concerns all the things that I buy, prices are rising steadily, and in other cases, rapidly. That holds to all but loans, of which abound with new, cheaper offers of refinancing, and mortgages.

And your right, it would be more correct to say a report from people of the fed, not "the fed" itself, thought that would be self evident...we all know the Ben Bernanke position on the Great Depression. And in this case, I don't believe I am thinking outside the box without merit. More like not handing the keys to the guy who either A...didn't see it coming or B...flat out mislead people. Either way, the Ben Bernanke's interpretation of our current financial position is about what I come to expect from most appointed government officials, lacking.