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Rusty Shackleford
Joined: 08 May 2008
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 Posted: Fri Nov 27, 2009 8:26 pm Post subject: How to end the depression. |
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http://mises.org/daily/3788
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The economic situation in 1920 was grim. By that year unemployment had jumped from 4 percent to nearly 12 percent, and GNP declined 17 percent. No wonder, then, that Secretary of Commerce Herbert Hoover � falsely characterized as a supporter of laissez-faire economics � urged President Harding to consider an array of interventions to turn the economy around. Hoover was ignored.
Instead of "fiscal stimulus," Harding cut the government's budget nearly in half between 1920 and 1922. The rest of Harding's approach was equally laissez-faire. Tax rates were slashed for all income groups. The national debt was reduced by one-third.
The Federal Reserve's activity, moreover, was hardly noticeable. As one economic historian puts it, "Despite the severity of the contraction, the Fed did not move to use its powers to turn the money supply around and fight the contraction."[2] By the late summer of 1921, signs of recovery were already visible. The following year, unemployment was back down to 6.7 percent and it was only 2.4 percent by 1923. |
Here is the movie version of this article.
http://www.youtube.com/watch?v=czcUmnsprQI |
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Kuros
Joined: 27 Apr 2004
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| Posted: Sat Nov 28, 2009 2:15 am Post subject: |
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Excellent contribution, Rusty.
The prevailing narrative about the 1930s (and the 1920s) is pretty much backwards.
The ideal solution: reduce taxes, reduce spending, reduce the deficit.
Obama's solution: reduce taxes, increase spending, increase the deficit.
Bernanke's solution: slash Fed rates to make leveraged lending even more attractive, thereby creating massive asset bubbles leading to half a decade of stagflation. |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Sun Nov 29, 2009 9:47 am Post subject: Re: How to end the depression. |
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| Rusty Shackleford wrote: |
http://mises.org/daily/3788
| Quote: |
The economic situation in 1920 was grim. By that year unemployment had jumped from 4 percent to nearly 12 percent, and GNP declined 17 percent. No wonder, then, that Secretary of Commerce Herbert Hoover � falsely characterized as a supporter of laissez-faire economics � urged President Harding to consider an array of interventions to turn the economy around. Hoover was ignored.
Instead of "fiscal stimulus," Harding cut the government's budget nearly in half between 1920 and 1922. The rest of Harding's approach was equally laissez-faire. Tax rates were slashed for all income groups. The national debt was reduced by one-third.
The Federal Reserve's activity, moreover, was hardly noticeable. As one economic historian puts it, "Despite the severity of the contraction, the Fed did not move to use its powers to turn the money supply around and fight the contraction."[2] By the late summer of 1921, signs of recovery were already visible. The following year, unemployment was back down to 6.7 percent and it was only 2.4 percent by 1923. |
Here is the movie version of this article.
http://www.youtube.com/watch?v=czcUmnsprQI |
Great vid.
This is a good place for those interested in actually understanding economic history to start.
Watch the vid.
Read the books by Tom Woods. |
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