A lesson from two depressions
After my post yesterday about Harry Reid's comments, I received some interesting feedback in one particular forum where I linked the post. A couple of people appeared to be amused that I considered the New Deal and the government aggression leading up to it to be destructive. The following was basically my response to them (and it seemed like it would make a good stand-alone blog post):
The Great Depression was the result of the bursting of a government-created inflationary bubble (sound familiar?) combined with government policies pushed first by Republican Herbert Hoover and then by Democrat FDR that prevented prices and wages from falling to their natural market level and prevented unsound investments from being liquidated, which, while being temporarily painful, would have initiated a rapid readjustment of supply and demand and a return to productivity and employment--all without the government programs that plunged the country into permanent (seemingly) socialism and monetary manipulation.
Note that when the same basic initial conditions occurred in the early 1840s, the government did nothing to prevent the necessary price adjustments, and the period 1839-43 experienced a decrease in investment but an INCREASE in real consumption of 21% and in real GNP by 16%, whereas the period 1929-33 (with government controls interfering with the operation of the market) saw a DECREASE in real consumption of 19% and of real GNP by 30% (as discussed by Murray Rothbard in A History of Money and Banking in the United States).
So, the earlier depression came to a swift end when the government did not attempt to 'soften the blow' or prop up the house of cards, but the Great Depression dragged on for years and caused incredible ruin when the government tried to work its Keynesian voodoo on the economy. Sadly, we appear today to be following the path of oppression and ruin rather than freedom and rebuilding.
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