a great economist and thinker describes why common citizens prosper better when eft alone and without government.
Transcript of greatmyths
1. Mackinac Center for Public Policy | Great Myths of the Great
Depression 1 Great HERBERT HOOVER believed government should play
no role in the economy. Myths GOVERNMENT PROGRAMS helped lower
unemployment by of the putting many Americans to work. Great
FRANKLIN ROOSEVELTS New Deal saved America from the failure of
free-market capitalism. Depression This edition is a joint project
of the Mackinac Center for Public Policy These and other myths are
dispelled by the facts in this and the Foundation for Economic
Education essay by economist Lawrence W. Reed
2. Mackinac Center for Public Policy | Great Myths of the Great
Depression 2 To James M. Rodney a great friend of truth, character
and liberty Great Myths of the Great Depression by Lawrence W.
Reed. Original edition printed in 1981. This edition was printed in
2010 as a joint project of the Mackinac Center and the Foundation
for Economic Education.
3. Mackinac Center for Public Policy | Great Myths of the Great
Depression 1Great Myths of the Great DepressionS tudents today are
often given a skewed account of the Great Depression of 1929-1941
that condemns free-market capitalism as the cause of, and promotes
government intervention as the solution to, the economic hardships
of the era. In this essay based on a popular lecture,
MackinacCenter for Public Policy President Lawrence W. Reed debunks
the conventional view and traces thecentral role that poor
government policy played in fostering this legendary catastrophe.
four workers was out of a job at Introduction the Depressions
nadir, and uglyMany volumes have been written rumors of revolt
simmered for theabout the Great Depression of first time since the
Civil War.1929-1941 and its impact on thelives of millions of
Americans. The terror of the Great CrashHistorians, economists and
has been the failure to explain it,politicians have all combed the
writes economist Alan Reynolds. THE GREAT DEPRESSION devastated
everywreckage searching for the black People were left with the
part of America, even its smallest towns.box that will reveal the
cause of feeling that massive economicthe calamity. Sadly, all too
many contractions could occur at of capitalism, the stock market,of
them decide to abandon their any moment, without warning, crashed
and dragged Americasearch, finding it easier perhaps without cause.
That fear has into depression. Presidentto circulate a host of
false and been exploited ever since as the Herbert Hoover, an
advocateharmful conclusions about the major justification for
virtually of hands-off, or laissez-faire,events of seven decades
ago. unlimited federal intervention economic policy, refused to
useConsequently, many people in economic affairs.1 the power of
government andtoday continue to accept critiques conditions
worsened as a result.of free-market capitalism that Old myths never
die; they just It was up to Hoovers successor,are unjustified and
support keep showing up in economics Franklin Delano
Roosevelt,government policies that are and political science
textbooks. to ride in on the white horseeconomically destructive.
Wi t h o n l y a n o c c a s i o n a l of government intervention
exception, it is there you will find and steer the nation towardHow
bad was the Great what may be the 20th centurys recovery. The
apparent lessonDepression? Over the four years g re ate st my th: C
apit ali sm to be drawn is that capitalismfrom 1929 to 1933,
production at and the free-market economy cannot be trusted;
governmentthe nations factories, mines and were responsible for the
Great needs to take an active role inutilities fell by more than
half. Depression, and only government the economy to save us
fromPeoples real disposable incomes inter vention brought about
inevitable decline.dropped 28 percent. Stock prices Americas
economic recovery.collapsed to one-tenth of their But those who
propagate thispre-crash height. The number version of history might
justof unemployed Americans rose A Modern Fairy Tale as well top
off their remarksfrom 1.6 million in 1929 to 12.8 According to this
simplistic by saying , And Goldilocksmillion in 1933. One of every
perspective, an important pillar found her way out of the
forest,
4. Mackinac Center for Public Policy | Great Myths of the Great
Depression 2Dorothy made it from Oz back There was already a longto
Kansas, and Little Red Riding history of margin lending onHood won
the New York State stock exchanges, and marginLottery. The popular
account of requirements the sharethe Depression as outlined above
of the purchase price paid inbelongs in a book of fairy tales cash
were no lower in theand not in a serious discussion late twenties
than in the earlyof economic history. twenties or in previous
decades. In fact, in the fall of 1928 margin People who argue that
the free-market requirements began to rise, and THe Great, economy
collapsed of its own weight in borrowers were required to pay
Great,Great,Great the 1930s seem utterly unaware of the a larger
share of the purchase Depression critical role played by the
Federal Reserve Systems gross mismanagement of money price of the
stocks.To properly understand the and credit.events of the time, it
is factually The margin lending argumentappropriate to view the
Great was disastrous intervention by doesnt hold much water.
MischiefDepression as not one, but four government, often in the
form with the money and credit supply,consecutive downturns rolled
into of political mismanagement of however, is another story.one.
These four phases are:2 the money and credit supply. None of these
depressions, Most monetary economists,I. Monetary Policy and the
however, lasted more than four particularly those of the Austrian
Business Cycle years and most of them were School, have observed
the closeII. The Disintegration of the over in two. The calamity
that relationship between money World Economy began in 1929 lasted
at least supply and economic activity. three times longer than any
of the When government inflates theIII. The New Deal countrys
previous depressions money and credit supply, interestIV. The
Wagner Act because the government rates at first fall. Businesses
compounded its initial errors with invest this easy money in newThe
first phase covers why the a series of additional and harmful
production projects and a boomcrash of 1929 happened in the
interventions. takes place in capital goods. Asfirst place; the
other three show the boom matures, businesshow government
intervention costs rise, interest rates readjustworsened it and
kept the economy Central Planners Fail upward, and profits are
squeezed.in a stupor for over a decade. Lets at Monetary Policy The
easy-money effects thus wearconsider each one in turn. A popular
explanation for the off and the monetary authorities, stock market
collapse of 1929 fearing price inflation, slow the concerns the
practice of borrowing growth of, or even contract, the Phase I:
money to buy stock. Many history money supply. In either case, The
Business Cycle texts blithely assert that a frenzied the
manipulation is enough toThe Great Depression was not the
speculation in shares was fed by knock out the shaky
supportscountrys first depression, though excessive margin lending.
But from underneath the economicit proved to be the longest.
Marquette University economist house of cards.Several others
preceded it. Gene Smiley, in his 2002 book Rethinking the Great
Depression , One prominent interpretationA common thread woven
through explains why this is not a fruitful of the Federal Reserve
Systemsall of those earlier debacles observation: actions prior to
1929 can be found
5. Mackinac Center for Public Policy | Great Myths of the Great
Depression 3in Americas Great Depressionby economist Murray
Rothbard.Using a broad measure thatincludes currenc y, demandand
time deposits, and otheringredients, he estimated that theFed
bloated the money supply bymore than 60 percent from mid-1921 to
mid-1929.3 Rothbardargued that this expansion ofmoney and credit
drove interestrates down, pushed the stockmarket to dizzy heights,
and gavebirth to the Roaring Twenties.Reckless money and credit
growth Unemployment skyrocketed after Congress raised tariffs and
taxes in the early 1930s and stayed high as policies of the
Roosevelt administration discouraged investment and
recoveryconstituted what economist during the rest of the
decade.Benjamin M. Anderson calledthe beginning of the New Deal4
prices lower than they would bank took further deflationary the
name for the better-known have otherwise been. action by
aggressively sellingbut highly interventionist policies gover nment
s e c ur itie s forthat would come later under Regarding Fed
policy, free- months after the stock marketPresident Franklin
Roosevelt. market economists who differ on crashed. For the next
three years,However, other scholars raise the extent of the Feds
monetary the money supply shrank by 30doubts that Fed action was
expansion of the early and mid- percent. As prices then tumbledas
inflationary as Rothbard 1920s are of one view about throughout the
economy, thebelieved, pointing to relatively what happened next:
The central Feds higher interest rate policyflat commodity and
consumer bank presided over a dramatic boosted real
(inflation-adjusted)prices in the 1920s as evidence contraction of
the money supply rates dramatically.that monetary policy was not so
that began late in the decade. Thewildly irresponsible. federal
governments responses Th e m o s t c o m p r e h e n s i v e to the
resulting recession took chronicle of the monetar ySubstantial cuts
in high a bad situation and made it far, policies of the period can
bemarginal income tax rates in far worse. found in the classic work
of Nobelthe Coolidge years certainly Laureate Milton Friedman
andhelped the economy and may his colleague Anna Schwartz,have
ameliorated the price The Bottom Drops Out A Monetary History of
the Unitede f f e c t o f Fe d p o l i c y. Ta x By 1928, the
Federal Reserve States, 1867-1960. Friedman andreductions spurred
investment was raising interest rates and Schwartz argue
conclusively thatand real economic growth, choking off the money
supply. the contraction of the nationswhich in turn yielded a burst
of For example, its discount rate money supply by
one-thirdtechnological advancement and (the rate the Fed charges
member between August 1929 and Marchentrepreneurial discoveries of
banks for loans) was increased 1933 was an enormous drag oncheaper
ways to produce goods. four times, from 3.5 percent to the economy
and largely the resultThis explosion in productivity 6 percent,
between January 1928 of seismic incompetence by theundoubtedly
helped to keep and August 1929. The central Fed. The death in
October 1928
6. Mackinac Center for Public Policy | Great Myths of the Great
Depression 4of Benjamin Strong, a powerful Then, on October 3,
political forces for higher trade-figure who had exerted great
stocks suffered their worst damaging tariffs were makinginfluence
as head of the Feds pummeling of the ye ar. gains on Capitol
Hill.New York district bank, left the Margin calls went out;
someFed floundering without capable traders grew apprehensive. The
stock market crash was only aleadership making bad policy But the
next day, prices rose reflection not the direct causeeven worse.5
again and thereafter seesawed of the destructive government for a
fortnight. policies that would ultimatelyAt first, only the smart
money produce the Great Depression: the Bernard Baruchs and the The
real crunch began on The market rose and fell in almostJoseph
Kennedys who watched Wednesday, October 23, with direct
synchronization with whatthings like money supply and what one
observer called a the Fed and Congress were doing.other government
policies Niagara of liquidation. Six And what they did in the
1930ssaw that the party was coming million shares changed hands.
ranks way up there in the annalsto an end. Baruch actually The
industrial average fell 21 of historys greatest follies.began
selling stocks and buying points. Tomorrow, the turnbonds and gold
as early as will come, brokers told one Buddy, Can You1928; Kennedy
did likewise, another. Prices, they said, hadcommenting, only a
fool holds been carried to unreasonably Spare $20 Million?out for
the top dollar.6 low levels. Black Thursday shook Michigan harder
than almost any otherThe masses of investors But the next day,
Black state. Stocks of auto and miningeventually sensed the change
Thursday, stocks were dumped companies were hammered. Autoa t t h e
Fe d a n d t h e n t h e in even heavier selling ... the production
in 1929 reached anstampede began. In a special ticker fell behind
more than all-time high of slightly moreissue commemorating the
50th 5 hours, and finally stopped than 5 million vehicles,
thenanniversary of the stock market grinding out quotations at
quickly slumped by 2 million incollapse, U.S. News & World 7:08
p.m.7 1930. By 1932, near the deepestReport described it this way:
point of the Depression, they had At their peak, stocks in the Dow
fallen by another 2 million to just Actually the Great Crash Jones
Industrial Average were 1,331,860 down an astonishing was by no
means a one- selling for 19 times earnings 75 percent from the 1929
peak. day affair, despite frequent somewhat high, but hardly
references to Black Thursday, what stock market analysts Thousands
of investors October 24, and the following regard as a sign of
inordinate everywhere, including many weeks Black Tuesday. As
speculation. The distortions in well-known people, were hit early
as September 5, stocks the economy promoted by the hard in the 1929
crash. Among were weak in heavy trading, Feds monetary policy had
set the them was Winston Churchill. after having moved into new
country up for a recession, but He had invested heavily in high
ground two days earlier. other impositions to come would American
stocks before the crash. Declines in early October soon turn the
recession into a Afterward, only his writing skills were calle d a
desirable full-scale disaster. As stocks took and positions in
government correction. The Wall Street a beating, Congress was
playing restored his finances. Journal, predicting an autumn with
fire: On the very morning rally, noted that some stocks of Black
Thursday, the nations Clarence Birdseye, an early rise, some fall.
newspapers reported that the developer of packaged frozen
7. Mackinac Center for Public Policy | Great Myths of the Great
Depression 5foods, had sold his business for$30 million and put all
his moneyinto stocks. He was wiped out.William C. Durant, founderof
General Motors, lost morethan $40 million in the stockmarket and
wound up a virtualpauper. (GM itself stayed in theblack throughout
the Depressionunder the cost-cutting leadershipof Alfred P. Sloan.)
President Herbert Hoover is mistakenly presented in standard
history texts as a laissez- PhaSe II: faire president, but he
signed into law so many costly and foolish bills that one of
Franklin Disintegration of the Roosevelts top aides later said that
practically the whole New Deal was extrapolated from programs that
Hoover started. World EconomyThough modern myth claims that
free-market philosophy? His 1930. It came on top of thethe free
market self-destructed opponent in the 1932 election,
Fordney-McCumber Tariff ofin 1929, government policy was Franklin
Ro ose velt , didnt 1922, which had already putthe debacles
principal culprit. If think so. During the campaign, American
agriculture in a tailspinthis crash had been like previous
Roosevelt blasted Hoover for during the preceding decade. Theones,
the hard times would have spending and taxing too much, most
protectionist legislationended in two or three years at boosting
the national debt, in U.S. history, Smoot-Hawleythe most, and
likely sooner than choking off trade, and putting virtually closed
the bordersthat. But unprecedented political millions on the dole.
He accused to foreign goods and ignitedbungling instead prolonged
the the pre sident of re ckle ss a vicious international
trademisery for over 10 years. and extravagant spending, war.
Professor Barry Poulson of thinking that we ought to describes the
scope of the act:Unemployment in 1930 averaged center control of
everythinga mildly recessionary 8.9 percent, in Washington as
rapidly as The act raised the rates onup from 3.2 percent in 1929.
It possible, and of presiding the entire range of dutiableshot up
rapidly until peaking out over the greatest spending commodities;
for example,at more than 25 percent in 1933. administration in
peacetime the average rate increasedUntil March of 1933, these were
in all of history. Roosevelts from 20 percent to 34 percentthe
years of President Herbert running mate, John Nance on agricultural
products;Hoover a man often depicted as Garner, charged that Hoover
from 36 percent to 47a champion of noninterventionist, was leading
the country down percent on wines, spirits,laissez-faire economics.
the path of socialism.8 Contrary and beverages; from 50 to 60 to
the conventional view about percent on wool and woolen Hoover,
Roosevelt and Garner manufactures. In all, 887ThE gReatest spendinG
were absolutely right. tariffs were sharply increased
administration in and the act broadened the list all of history The
crowning folly of the Hoover of dutiable commodities toDid Hoover
really subscribe administration was the Smoot- 3,218 items. A
crucial partto a hands-off-the-economy, Hawley Tariff, passed in
June of the Smoot-Hawley Tariff
8. Mackinac Center for Public Policy | Great Myths of the Great
Depression 6 was that many tariffs were for nearly a third of their
markets. a specific amount of money Farm prices plummeted and tens
rather than a percentage of of thousands of farmers went the price.
As prices fell by bankrupt. A bushel of wheat that half or more
during the Great sold for $1 in 1929 was selling for Depression,
the effective a mere 30 cents by 1932. rate of these specific
tariffs double d, incre a sing the With the collapse of
agriculture, protection afforded under rural banks failed in record
the act.9 numbers , dragging down hundreds of thousands of
theirSmoot-Hawley was as broad as it customers. Nine thousand
bankswas deep, affecting a multitude closed their doors in the
Unitedof products. Before its passage, States between 1930 and
1933. Americans voted for Franklin Rooseveltclocks had faced a
tariff of 45 The stock market, which had in 1932 expecting him to
adhere to thepercent; the act raised that to Democratic Party
platform, which called for regained much of the ground55 percent,
plus as much as less government spending and regulation. it had
lost since the previousanother $4.50 per clock. Tariffs October,
tumbled 20 points onon corn and butter were roughly solve the
nagging unemployment the day Hoover signed Smoot-doubled. Even
sauerkraut was problem. But they ignored Hawley into law, and fell
almosttariffed for the first time. Among an imp or tant pr inciple
of without respite for the nextthe few remaining tariff-free
international commerce: Trade two years. (The markets high,goods,
strangely enough, were is ultimately a two-way street; as measured
by the Dow Jonesleeches and skeletons (perhaps if foreigners cannot
sell their Industrial Average, was set onas a political sop to the
American goods here, then they cannot Sept. 3, 1929, at 381. It hit
itsMedical Association, as one wag earn the dollars they need to
1929 low of 198 on Nov. 13, thenwryly remarked). buy here. Or, to
put it another rebounded to 294 by April 1930. way, government
cannot shut off It declined again as the tariff billTariffs on
linseed oil, tungsten, imports without simultaneously made its way
toward Hooversand casein hammered the U.S. shutting off exports.
desk in June and did not bottompaint, steel and paper industries,
out until it reached a mere 41 tworespectively. More than 800 items
years later. It would be a quarter-used in automobile production
You Tax Me, I Tax You century before the Dow wouldwere taxed by
Smoot-Hawley. Foreign companies and their climb to 381 again.)Most
of the 60,000 people workers were f lattene d byemployed in U.S.
plants making Smoot-Hawleys steep tariff rates The shrinkage in
world tradecheap clothing out of imported and foreign governments
soon brought on by the tariff warswool rags went home jobless
retaliated with trade barriers helped set the stage for Worldafter
the tariff on wool rags rose of their own. With their ability WarII
a few years later. In 1929, theby 140 percent.10 to sell in the
American market rest of the world owed American severely hampered,
they curtailed citizens $30 billion. GermanysOfficials in the
administration their purchases of American Weimar Republic was
strugglingand in Congress believed that goods. American agriculture
to pay the enormous reparationsraising trade barriers would force
was particularly hard hit. With bill imposed by the
disastrousAmericans to buy more goods a stroke of the presidential
pen, Treaty of Versailles. When tariffsmade at home, which would
farmers in this country lost made it nearly impossible for
9. Mackinac Center for Public Policy | Great Myths of the Great
Depression 7foreign businessmen to sell their governments share of
GNPgoods in American markets, soared from 16.4 percent to 21.5the
burden of their debt s percent.12 Hoovers agriculturalbecame
massively heavier and bureaucracy doled out hundredsemboldened
demagogues like of millions of dollars to wheatAdolf Hitler. When
goods dont and cotton farmers even ascross frontiers, armies will,
warns the new tariffs wiped out theiran old but painfully true
maxim. markets. His Reconstruction Finance Corporation ladled out
billions more in business Free Markets or subsidies. Commenting
decades Free Lunches? later on Hoovers administration,Smoot-Hawley
by itself should Rexford Guy Tugwell, one of thelay to rest the
myth that Hoover architects of Franklin Rooseveltswas a free market
practitioner, policies of the 1930s, explained,but there is even
more to the We didnt admit it at the time, butstory of his
administrations practically the whole New Deal President Franklin
Roosevelt decriedinterventionist mistakes. Within was extrapolated
from programs as selfish economic royalists those businessmen who
opposed the burdensomea month of the stock market that Hoover
started.13 taxes and regulations of his New Deal.crash, he convened
conferencesof business leaders for the Though Hoover at first did
lower Compounding the error ofpurpose of jawboning them into taxes
for the poorest of Americans, high tariffs, huge subsidies
andkeeping wages artificially high Larry Schweikart and Michael
deflationary monetary policy,even though both profits and Allen in
their sweeping A Patriots Congress then passe d andprices were
falling. Consumer History of the United States: From Hoover signed
the Revenue Actprices plunged almost 25 percent Columbuss Great
Discovery to of 1932. The largest tax increasebetween 1929 and 1933
while the War on Terror stress that in peacetime history, it
doublednominal wages on average he offered no incentives to the the
income tax. The top bracketdecreased only 15 percent wealthy to
invest in new plants to actually more than doubled,translating into
a substantial stimulate hiring. He even taxed soaring from 24
percent toincrease in wages in real terms, bank checks, which
accelerated 63 percent. Exemptions werea major component of the
cost the decline in the availability of lowered; the earned
incomeof doing business. As economist money by penalizing people
for credit was abolished; corporateRichard Ebeling notes, The
writing checks.14 and estate taxes were raised;high-wage policy of
the Hoover new gift, gasoline and auto taxesadministration and the
trade In September 1931, with the were imposed; and postal
ratesunions ... succeeded only in money supply tumbling and were
sharply hiked.pricing workers out of the labor the economy reeling
from themarket, generating an increasing impact of Smoot-Hawley,
the Can any serious scholar observecircle of unemployment.11 Fed
imposed the biggest hike the Hoover administrations in its discount
rate in history. massive economic interventionHoover dramatically
increased Bank deposits fell 15 percent and, with a straight face,
pronounceg o v e r n m e nt s p e n d i n g f o r within four
months and sizable, the inevitably deleterious effectssubsidy and
relief schemes. In deflationary declines in the as the fault of
free markets?the space of one year alone, nations money supply
persisted Schweikart and Allen survey somefrom 1930 to 1931, the
federal through the first half of 1932. of the wreckage:
10. Mackinac Center for Public Policy | Great Myths of the
Great Depression 8 By 1933, the numbers the sort of difference for
which produced by this comedy the countr y had hoped. He of errors
were staggering: started off on the wrong foot national unemploy
ment when, in his inaugural address, rates reached 25 percent, but
he blamed the Depression on within some individual cities,
unscrupulous money changers. the statistics seemed beyond He said
nothing about the role comprehension. Cleveland of the Feds
mismanagement reported that 50 percent of its and little about the
follies of labor force was unemployed; To many Americans, the
National Recovery Congress that had contributed Toledo, 80 percent;
and some Administrations bureaucracy and mind- to the problem. As a
result of states even averaged over 40 numbing regulations became
known as the his efforts, the economy would National Run Around.
percent. Because of the dual- linger in depression for the edged
sword of declining budget, a sound gold currency to rest of the
decade. Adapting a revenues and increasing be preserved at all
hazards, the phrase from 19th century writer welfare demands, the
burden removal of government from areas Henry David Thoreau,
Roosevelt on the cities pushed many that belonged more
appropriately famously declared in his address municipalities to
the brink. to private enterprise and an end that, We have nothing
to fear Schools in New York shut to the extravagance of Hoovers but
fear itself. But as Dr. Hans down, and teachers in Chicago farm
programs. This is what Sennholz of Grove City College were owed
some $20 million. candidate Roosevelt promised, explains, it was
FDRs policies Private schools, in many but it bears no resemblance
to to come that Americans had cases, failed completely. One what
President Roosevelt actually genuine reason to fear: government
study found that delivered. by 1933 some fifteen hundred In his
first 100 days, he swung colleges had gone belly-up, Washington was
rife with both hard at the profit order. and book sales plummeted.
fear and optimism as Roosevelt Instead of clearing away the
Chicagos library system did was sworn in on March 4, 1933
prosperity barriers erected not purchase a single book in fear that
the economy might not by his predecessor, he built a year-long
period.15 recover and optimism that the new new ones of his own. He
and assertive president just might struck in every known way make a
difference. Humorist Will at the integrity of the U.S.Phase III:
The New Deal Rogers captured the popular feeling dollar through
quantitativeFranklin Delano Roosevelt won toward FDR as he
assembled the increases and qualitativethe 1932 presidential
election in a new administration: The whole deterioration. He
seized thelandslide, collecting 472 electoral country is with him,
just so he does peoples gold holdings andvotes to just 59 for the
incumbent something. If he burned down the subsequently devalued
theHerbert Hoover. The platform Capitol, we would all cheer and
say, dollar by 40 percent.17of the Democratic Party, whose well, we
at least got a fire startedticket Roosevelt headed, declared,
anyhow.16 Frustrated and angered thatWe believe that a party
platform Roosevelt had so quickly andis a covenant with the people
to thoroughly abandoned the Nothing to fearbe faithfully kept by
the party platform on which he wasentrusted with power. It called
for but fear itself elected, Director of the Bureaua 25 percent
reduction in federal Roosevelt did indeed make a of the Budget
Lewis W. Douglasspending, a balanced federal difference, though
probably not resigned after only one year on
11. Mackinac Center for Public Policy | Great Myths of the
Great Depression 9the job. At Harvard Universityin May 1935,
Douglas made itplain that America was facing amomentous choice:
Will we choose to subject ourselves this great country to the
despotism of bureaucracy, controlling our every act, destroying
what equality we have attained, reducing us eventually to the
condition of impoverished slaves of the state? Or will we This 1989
photo is of a bridge built from 1936-41 as part of a Works Progress
Administration (WPA) project in Coleman County, Texas. Many
Americans saw such projects as helpful, cling to the liberties for
which without considering their high cost and the corruption that
plagued the program. man has struggled for more than a thousand
years? It is banking holiday on March He points out that Almost all
important to understand the 6 (which did not completely the failed
banks were in states magnitude of the issue before end until nine
days later) is still with unit banking laws laws us. ... If we do
not elect to hailed as a decisive and necessary that prohibited
banks from have a tyrannical, oppressive action by Roosevelt
apologists. opening branches and thereby bureaucracy controlling
our Friedman and Schwartz, however, diversifying their portfolios
and lives, destroying progress, make it plain that this supposed
reducing their risks. Powell depressing the standard cure was worse
than the disease. writes: Although the United of living ... then
should it The Smoot-Hawley tariff and the States, with its unit
banking laws, not be the function of the Feds unconscionable
monetary had thousands of bank failures, Federal government under
mischief were primary culprits Canada, which permitted branch a
democracy to limit its in producing the conditions that banking,
didnt have a single activities to those which a gave Roosevelt his
excuse to failure ...20 Strangely, critics of democracy may
adequately temporarily deprive depositors capitalism who love to
blame the deal, such for example as of their money, and the bank
market for the Depression never national defense, maintaining
holiday did nothing to alter those mention that fact. law and
order, protecting fundamentals. More than 5,000 life and property,
preventing banks still in operation when Congress gave the
president the dishonesty, and ... guarding the holiday was declared
did power first to seize the private the public against ... vested
not reopen their doors when it gold holdings of American special
interests?18 ended, and of these, over 2,000 citizens and then to
fix the never did thereafter, report price of gold. One morning, as
Friedman and Schwartz.19 Roosevelt ate eggs in bed, heNew Dealing
from the and Secretary of the Treasury Bottom of the Deck Economist
Jim Powell of the Cato Henry Morgenthau decidedCrisis gripped the
banking Institute authored a splendid to change the ratio
betweensystem when the new president book on the Great Depression
gold and paper dollars. Afterassumed office on March 4, 1933. in
2003, titled FDRs Folly: How weighing his options,
RooseveltRoosevelts action to close the Roosevelt and His New Deal
settled on a 21 cent price hikebanks and declare a nationwide
Prolonged the Great Depression. because its a lucky number.
12. Mackinac Center for Public Policy | Great Myths of the
Great Depression 10In his diary, Morgenthau wrote, and imposing the
nations firstIf anybody ever knew how comprehensive minimum wagewe
really set the gold price law in 1938. While to this daythrough a
combination of lucky he gets a great deal of credit fornumbers, I
think they would these two measures from thebe frightened.21
Roosevelt also general public, many economistssingle-handedly
torpedoed the have a different perspective. TheLondon Economic
Conference minimum wage law prices many ofin 1933, which was
convened the inexperienced, the young, theat the request of other
major unskilled and the disadvantagednations to bring down tariff
rates out of the labor market. (Forand restore the gold standard.
example, the minimum wage provisions passed as part ofWashington
and its reckless Michigan Senator Arthur Vandenberg another act in
1933 threw ancentral bank had already made argued that a sound
economy could not be estimated 500,000 blacks outmincemeat of the
gold standard restored through FDRs punitive tax and of work).24
And current studies regulatory measures.by the early 1930s.
Roosevelts and estimates reveal that Socialrejection of it removed
most of Prohibition. The House approved Security has become such a
long-the remaining impediments to a repeal measure on Tuesday, the
term actuarial nightmare that itlimitless currency and credit
Senate passed it on Thursday and will either have to be privatized
orexpansion, for which the nation before the year was out, enough
the already high taxes needed towould pay a high price in later
states had ratified it so that the keep it afloat will have to be
raisedyears in the form of a depreciating 21st Amendment became
part of to the stratosphere.currency. Sen. Carter Glass put it the
Constitution. One observer,well when he warned Roosevelt commenting
on this remarkable Roosevelt secured passage ofin early 1933: Its
dishonor, sir. turn of events, noted that of two the Agricultural
AdjustmentThis great government, strong in men walking down the
street at Act, which levied a new taxgold, is breaking its promises
to the start of 1933 one with a on agricultural processors andpay
gold to widows and orphans gold coin in his pocket and the used the
revenue to superviseto whom it has sold government other with a
bottle of whiskey in the wholesale destr uctionbonds with a pledge
to pay gold his coat the man with the coin of valuable crops and
cattle.coin of the present standard of would be an upstanding
citizen Federal agents oversaw the uglyvalue. It is breaking its
promise to and the man with the whiskey spectacle of perfectly good
fieldsredeem its paper money in gold would be the outlaw. A year
later, of cotton, wheat and corn beingcoin of the present standard
of precisely the reverse was true. plowed under (the mules
hadvalue. Its dishonor, sir.22 to be convinced to trample the In
the first year of the New Deal, crops; they had been trained,
ofThough he seized the countrys Roosevelt proposed spending $10
course, to walk between the rows).gold, Roosevelt did return
billion while revenues were only Healthy cattle, sheep and pigs
werebooze to Americas bars and $3 billion. Between 1933 and 1936,
slaughtered and buried in massparlor rooms. On his second
government expenditures rose by graves. Secretary of
AgricultureSunday in the White House, he more than 83 percent.
Federal debt Henry Wallace personally gaveremarked at dinner, I
think this skyrocketed by 73 percent. the order to slaughter 6
millionwould be a good time for beer.23 baby pigs before they grew
toThat same night, he drafted a FDR talke d Congress into full
size. The administration alsomessage asking Congress to end
creating Social Security in 1935 paid farmers for the first
time
13. Mackinac Center for Public Policy | Great Myths of the
Great Depression 11for not working at all. Even ifthe AAA had
helped farmers bycurtailing supplies and raisingprices, it could
have done so onlyby hurting millions of others whohad to pay those
prices or make dowith less to eat.Blue Eagles, Red DucksPerhaps the
most radical aspectof the New Deal was the NationalIndustrial
Recovery Act, passedin June 1933, which created At the nadir of the
Great Depression, half of American industrial production was idle
as the economy reeled under the weight of endless and destructive
policies from both Republicansa massive new bureaucracy and
Democrats in Washington.called the National RecoveryAdministration.
Under the NRA, dropped 25 percent. Benjamin to the manufacture of
corsetsmost manufacturing industries M. Anderson writes, NRA was
and brassieres, covering morewere suddenly forced into not a
revival measure. It was an than 2 million employers
andgovernment-mandated cartels. antirevival measure. ... Through 22
million workers. 26 ThereCodes that regulated prices and the whole
of the NRA period were codes for the productionterms of sale
briefly transformed industrial production did not of hair tonic,
dog leashes, andmuch of the American economy rise as high as it had
been in July even musical comedies. A Newinto a fascist-style
arrangement, 1933, before NRA came in.25 Jersey tailor named Jacob
Magedwhile the NRA was financed by was arrested and sent to jail
fornew taxes on the very industries The man Roosevelt picked the
crime of pressing a suitit controlled. Some economists to direct
the NRA effort was of clothes for 35 cents ratherhave estimated
that the NRA General Hugh Iron Pants than the NRA-inspired
Tailorsboosted the cost of doing business Johnson, a profane,
red-faced Code of 40 cents.by an average of 40 percent not bully
and professed admirer ofsomething a depressed economy Italian
dictator Benito Mussolini. In The Roosevelt Myth historian ,needed
for recovery. Thundere d Johnson, May John T. Flynn described how
Almighty God have mercy on the NRAs partisans sometimesThe economic
impact of the NRA anyone who attempts to interfere conducted
business:was immediate and powerful. with the Blue Eagle (the
officialIn the five months leading up symbol of the NRA, which one
The NRA was discoveringto the acts passage, signs of senator
derisively referred to as it could not enforce it srecovery were
evident: factory the Soviet duck). Those who rules. Black markets
grewemployment and payrolls had refused to comply with the NRA up.
Only the most violentincreased by 23 and 35 percent, Johnson
personally threatened police methods could procurerespectively.
Then came the NRA, with public boycotts and a enforcement . In
Sidne yshortening hours of work, raising punch in the nose.
Hillmans garment industrywages arbitrarily and imposing the code
authority employedother new costs on enterprise. There were
ultimately more than enforcement police. TheyIn the six months
after the law 500 NRA codes, ranging from roamed through the
garmenttook effect, industrial production the production of
lightning rods district like storm troopers.
14. Mackinac Center for Public Policy | Great Myths of the
Great Depression 12 They could enter a mans his State of the Union
message factory, send him out, line up that any new such program
his employees, subject them would be abolished within a to minute
interrogation, take year. The federal government, over his books on
the instant. said the president, must and Night work was forbidden.
shall quit this business of relief. Flying squadrons of these I am
not willing that the vitality private coat-and-suit police of our
people be further stopped went through the district at by the
giving of cash, of market night, battering down doors T he S u pre
m e Co u rt c a m e u n d e r baskets, of a few bits of weekly
attack by President Roosevelt because it with axes looking for men
declared important parts of the New Deal work cutting grass ,
raking who were committing the unconstitutional. FDRs court-packing
leaves, or picking up papers crime of sewing together a scheme
contributed to the resumption of in the public parks. Harr y
economic depression in 1937. pair of pants at night. But Hopkins
was put in charge of without these harsh methods people need to be
regimented by the agency and later said, Ive many code authorities
said powerful overlords in order to got four million at work but
for there could be no compliance be saved.29 Gods sake, dont ask me
what because the public was not they are doing. The CWA came back
of it.27 Alphabet commissars spent to an end within a few months
the publics money like it was but was replaced with another so much
bilge. They were what te mp o r a r y rel i e f p ro g r a m The
Alphabet influential journalist and social that evolved into the
Works Commissars critic Albert Jay Nock had in Progress
Administration, orRoosevelt next signed into law mind when he
described the WPA , by 1935. It is knownsteep income tax increases
on the New Deal as a nation-wide, today as the very
governmenthigher brackets and introduced State-managed mobilization
of pro g ram that g ave r i s e toa 5 percent withholding tax inane
buffoonery and aimless the new term, boondoggle,on corporate
dividends. He commotion.30 because it produced a lotsecured another
tax increase in more than the 77,000 bridges1934. In fact, tax
hikes became R o o s e v e l t s C i v i l Wo r k s and 116,000
buildings to whicha favorite policy of Roosevelt for Administration
hired actors to its advocates loved to point asthe next 10 years,
culminating give free shows and librarians evidence of its
efficacy.31in a top income tax rate of 90 to catalog archives. It
evenpercent. Sen. Arthur Vandenberg paid researchers to study the
With good reason, critics oftenof Michigan, who opposed much
history of the safety pin, hired referred to the WPA as We Piddleof
the New Deal, lambasted 100 Washington workers to Around. In
Kentucky, WPARoosevelts massive tax increases. patrol the streets
with balloons workers catalogued 350 differentA sound economy would
not be to frighten starlings away from ways to cook spinach. The
agencyrestored, he said, by following public buildings, and put men
employed 6,000 actors thoughthe socialist notion that America on
the public payroll to chase the nations actors union claimedcould
lift the lower one-third tumbleweeds on windy days. only 4,500
members. Hundredsup by pulling the upper two- of WPA workers were
used tothirds down.28 Vandenberg also The CWA, when it was started
collect campaign contributionscondemned the congressional in the
fall of 1933, was supposed for Democratic Party
candidates.surrender to alphabet commissars to be a short-lived
jobs program. In Tennessee, WPA workerswho deeply believe the
American Roosevelt assured Congress in were fired if they refused
to
15. Mackinac Center for Public Policy | Great Myths of the
Great Depression 13donate 2 percent of their wages hires someone to
catalog theto the incumbent governor. By many ways of cooking
spinach, his1941, only 59 percent of the tax-supported paycheck
cannotWPA budget went to paying be counted as a net increaseworkers
anything at all; the rest to the economy because thewas sucked up
in administration wealth used to pay him wasand overhead. The
editors of simply diverted, not created.The New Republic asked, Has
Economists today must still battle[Roosevelt] the moral stature to
this magical thinking every timeadmit now that the WPA was more
government spending is Special powers granted to organizeda hasty
and grandiose political proposed as if money comes labor with the
passage of the Wagner Act contributed to a wave of militant strikes
and agesture, that it is a wretched not from productive citizens,
but depression within a depression in 1937.failure and should be
abolished?32 rather from the tooth fairy.The last of the WPAs
projects was a gang of half-educated peda-not eliminated until July
of 1943. gogues, nonconstitutional An astonishing lawyers,
starry-eyed upliftersRoosevelt has been lauded for rabble of
impudent and other such sorry wizards.his job-creating acts such as
nobodies His New Deal was a politicalthe CWA and the WPA. Many
Roosevelts haphazard economic racket, a series of stupendouspeople
think that they helped re- interventions garnered credit from bogus
miracles, with its con-lieve the Depression. What they people who
put high value on the stant appeals to class envyfail to realize is
that it was the appearance of being in charge and and hatred,
treating govern-rest of Roosevelts tinkering that doing something.
Meanwhile, the ment as a milch-cow withprolonged the Depression and
great majority of Americans were 125 million teats and markedwhich
largely prevented the job- patient. They wanted very much to by
frequent repudiations ofless from finding real jobs in the give
this charismatic polio victim categorical pledges.33first place.
The stupefying roster and former New York governor theof wasteful
spending generated benefit of the doubt. But Rooseveltby these jobs
programs repre- always had his critics, and they Signs of
Lifesented a diversion of valuable would grow more numerous as the
The American economy was soonresources to politically motivated
years groaned on. One of them was relieved of the burden of someand
economically counterpro- the inimitable Sage of Baltimore, of the
New Deals worst excessesductive purposes. H. L. Mencken, who
rhetorically when the Supreme Court outlawed threw everything but
the kitchen the NRA in 1935 and the AAA inA brief analogy will
illustrate sink at the president. Paul Johnson 1936, earning
Roosevelts eternalthis point. If a thief goes house sums up
Menckens stinging but wrath and derision. Recognizingto house
robbing everybody in often-humorous barbs this way: much of what
Roosevelt did asthe neighborhood, then heads unconstitutional, the
nine oldoff to a nearby shopping mall Mencken excelled himself men
of the Court also threwto spend his ill-gotten loot, it is in
attacking the triumphant out other, more minor actsnot assumed that
because his FDR, whose whiff of fraudu- and programs which
hinderedspending stimulated the stores at lent collectivism filled
him recovery.the mall he has thereby performed with genuine
disgust. He wasa national service or provided the Fuhrer, the
Quack, sur- Freed from the worst of the Newa general economic
benefit. rounded by an astonishing Deal, the economy showed
someLikewise, when the government rabble of impudent nobodies,
signs of life. Unemployment
16. Mackinac Center for Public Policy | Great Myths of the
Great Depression 14dropped to 18 percent in 1935, NRA and its labor
codes. It against business. Businessmen,14 percent in 1936, and
even aimed at crushing all employ- Roosevelt fumed, were
obstacleslower in 1937. But by 1938, er resistance to labor unions.
on the road to recovery. He blastedit was back up to nearly 20
Anything an employer might them as economic royalists andpercent as
the economy slumped do in self-defense became an said that
businessmen as a classagain. The stock market crashed unfair labor
practice punish- were stupid.36 He followed up thenearly 50 percent
between able by the Board. The law not insults with a rash of new
punitiveAugust 1937 and March 1938. only obliged employers to deal
measures. New strictures on theThe economic stimulus of and bargain
with the unions stock market were imposed. A taxFranklin Delano
Roosevelts New designated as the employees on corporate retained
earnings,Deal had achieved a real first: representative; later
Board de- called the undistributed profitsa depression within a
depression! cisions also made it unlawful tax, was levied. These
soak-the- to resist the demands of labor rich efforts, writes
economist union leaders.34 Robert Higgs, left little doubt Phase
IV: that the president and his The Wagner Act Armed with these
sweeping administration intended to pushThe stage was set for the
1937-38 new powers, labor unions went through Congress
everythingcollapse with the passage of the on a militant organizing
frenzy. they could to extract wealthNational Labor Relations Act
Threats , boycotts , strikes , from the high-income earnersin 1935
better known as the seizures of plants and widespread responsible
for making the bulkWagner Act and organized violence pushed
productivity of the nations decisions aboutlabors Magna Carta. To
quote down sharply and unemployment private investment.37Sennholz
again: up dramatically. Membership in the nations labor unions
soared: During a period of barely two This law re volutionized By
1941, there were two and a months during late 1937, the American
labor relations. It half times as many Americans market for steel a
key economic took labor disputes out of the in unions as had been
the case barometer plummeted from 83 courts of law and brought in
1935. Historian William E. percent of capacity to 35 percent. them
under a newly created Leuchtenburg, himself no friend When that
news emblazoned Federal agency, the National of free enterprise,
observed, headlines, Roosevelt took an Labor Relations Board, which
Property-minded citizens were ill-timed nine-day fishing trip.
became prosecutor, judge, and scared by the seizure of factories,
The New York Herald-Tribune jury, all in one. Labor union incensed
when strikers interfered implored him to get back to work
sympathizers on the Board with the mails, vexed by the to stem the
tide of the renewed further perverted this law, intimidation of
nonunionists, Depression. What was needed, which already afforded
legal and alarmed by flying squadrons said the newspapers editors,
was immunities and privileges to of workers who marched, or a
reversal of the Roosevelt policy labor unions. The U.S. thereby
threatened to march, from city of bitterness and hate, of setting
abandoned a great achievement to city.35 class against class and
punishing of Western civilization, equality all who disagreed with
him.38 under the law. An Unfriendly Climate Columnist Walter
Lippmann The Wagner Act, or National for Business wrote in March
1938 that with Labor Relations Act, was From the White House on the
almost no important exception passed in reaction to the heels of
the Wagner Act came every measure he [Roosevelt] has Supreme Courts
voidance of a thunderous barrage of insults been interested in for
the past
17. Mackinac Center for Public Policy | Great Myths of the
Great Depression 15five months has been to reduce on the nations
banks. Experience the war effort instead of into plantor discourage
the production of has shown time and again that a expansion or
consumer goods.wealth.39 roller-coaster monetary policy Not until
both Roosevelt and the is enough by itself to produce a war were
gone did investors feelAs pointed out earlier in this
roller-coaster economy. confident enough to set in motionessay,
Herbert Hoovers own the postwar investment boom thatversion of a
New Deal had hiked Still stinging from his earlier powered the
economys return tothe top marginal income tax rate Supreme Court
defeats, Roosevelt sustained prosperity.42from 24 to 63 percent in
1932. tried in 1937 to pack the SupremeBut he was a piker compared
to Court with a proposal to allow the This view gains support in
thesehis tax-happy successor. Under president to appoint an
additional comments from one of the countrysRoosevelt, the top rate
was raised justice to the Court for every leading investors of the
time,at first to 79 percent and then later sitting justice who had
reached the Lammot du Pont, offered in 1937:to 90 percent. Economic
historian age of 70 and did not retire. HadBurton Folsom notes that
in this proposal passed, Roosevelt Uncertainty rules the tax1941
Roosevelt even proposed a could have appointed six new situation,
the labor situation,whopping 99.5-percent marginal justices
favorable to his views, the monetary situation, andrate on all
incomes over $100,000. increasing the members of the practically
every legal conditionWhy not? he said when an Court from 9 to 15.
His plan failed under which industry mustadvisor questioned the
idea.40 in Congress, but the Court later operate. Are taxes to go
higher, began rubber-stamping his policies lower or stay where they
are?After that confiscatory proposal after a number of opposing
justices We dont know. Is labor to befailed, Roosevelt issued an
retired. Until Congress killed union or non-union? . . . Are
weexecutive order to tax all income the packing scheme, however, to
have inflation or deflation,over $25,000 at the astonishing
business fears that a Court more government spending orrate of 100
percent. He also sympathetic to Roosevelts goals less? ... Are new
restrictions topromoted the lowering of the would endorse more of
the old be placed on capital, new limitspersonal exemption to only
New Deal prevented investment on profits? ... It is impossible
to$600, a tactic that pushed most and confidence from reviving.
even guess at the answers.43American families into paying atleast
some income tax for the first Economic historian Robert Higgs Many
modern historians tendtime. Shortly thereafter, Congress draws a
close connection between to be reflexively anti-capitalistrescinded
the executive order, but the level of private investment and
distrustful of free markets;went along with the reduction of and
the course of the American they find Roosevelts exercise ofthe
personal exemption.41 economy in the 1930s. The power,
constitutional or not, to relentless assaults of the Roosevelt be
impressive and historicallyMeanwhile, the Federal Reserve
administration in both word and interesting . In sur veys, aagain
seesawed its monetary deed against business, property, majority
consistently rankpolicy in the mid-1930s, first and free enterprise
guaranteed FDR near the top of the list forup then down, then up
sharply that the capital needed to jump- presidential greatness, so
it isthrough Americas entry into start the economy was either taxed
likely they would disdain theWorld War II. Contributing to the away
or forced into hiding. When notion that the New Deal waseconomic
slide of 1937 was this FDR took America to war in 1941, responsible
for prolonging thefact: From the summer of 1936 he eased up on his
anti-business Great Depression. But when ato the spring of 1937,
the Fed agenda, but a great deal of the nationally representative
polldoubled reserve requirements nations capital was diverted into
by the American Institute of
18. Mackinac Center for Public Policy | Great Myths of the
Great Depression 16Public Opinion in the spring less government. He
instead gave policies included a litany ofof 1939 asked, Do you
think Americans more government, political missteps: central
bankthe attitude of the Roosevelt but he did so with fanfare and
mismanagement, trade-crushingadministration toward business
fireside chats that mesmerized tariffs, incentive-sapping taxes,is
delaying business recovery? the a desperate people. By the time
mind-numbing controls onAmerican people responded yes they began to
realize that his production and competition,by a margin of more
than 2-to-1. policies were harmful, World senseless destruction of
cropsThe business community felt even War II came, the people
rallied and cattle and coercive labormore strongly so.44 around
their commander-in- laws, to recount just a few. It chief, and
there was little desire was not the free market thatIn his private
diary, FDRs very to change the proverbial horse produced 12 years
of agony;own Treasury Secretary, Henry in the middle of the stream
by rather, it was political bunglingMorgenthau, seemed to agree. He
electing someone new. on a grand scale.wrote: We have tried
spendingmoney. We are spending more Along with the holocaust of
Those who can survey the eventsthan we have ever spent before World
War II came a revival of of the 1920s and 1930s andand it does not
work. ... We trade with Americas allies. The blame free-market
capitalismhave never made good on our wars destruction of people
and for the economic calamity havepromises. ... I say after eight
years resources did not help the U.S. their eyes, ears and minds
firmlyof this Administration we have economy, but this renewed
trade closed to the facts. Changingjust as much unemployment did. A
reinflation of the nations the wrong-headed thinking thatas when we
started ... and an money supply counteracted the constitutes much
of todaysenormous debt to boot!45 high costs of the New Deal, but
conventional wisdom about this brought with it a problem that
sordid historical episode is vitalAt the end of the decade and
plagues us to this day: a dollar to reviving faith in free
markets12 years after the stock market that buys less and less in
goods and preserving our liberties.crash of Black Thursday, 10 and
services year after year.million Americans were jobless. Most
importantly, the Truman The nation managed to surviveThe
unemployment rate was in administration that followed both Hoovers
activism andexcess of 17 percent. Roosevelt Roosevelt was decidedly
less eager Roosevelts New Deal quackery,had pledged in 1932 to end
to berate and bludgeon private and now the American heritagethe
crisis, but it persisted two investors and as a result, those of
freedom awaits a rediscoverypresidential terms and countless
investors re-entered the economy by a new generation of
citizens.interventions later. and fueled a powerful postwar This
time we have nothing to fear boom. The Great Depression but myths
and misconceptions. finally ended, but it should linger Whither
Free in our minds today as one of the - END - Enterprise? most
colossal and tragic failuresHow was it that FDR was elected of
government and public policyfour times if his policies were in
American history. Postscript:deepening and prolonging an Have We
Learned Oureconomic catastrophe? Ignorance Th e g e n e s i s o f
th e G re at Lessons?and a willingness to give the Depression lay
in the irresponsible Eighty years after the Greatpresident the
benefit of the doubt monetary and fiscal policies of Depression
began, the literatureexplain a lot. Roosevelt beat the U.S.
government in the late on this painful episode ofHoover in 1932
with promises of 1920s and early 1930s. These American history is
undergoing
19. Mackinac Center for Public Policy | Great Myths of the
Great Depression 17an encouraging metamorphosis. W h i l e A m e r
i c a n s m ay b e The taxpayer bailouts of agenciesThe
conventional assessment that unlearning some of what they such as
Fannie Mae and Freddieso dominated historical writings thought they
knew about the Mac, as well as a growing numberfor decades argued
that free Great Depression, thats not of private firms in the early
fall ofmarkets caused the debacle and the same as saying we have
2008, represent more folly with athat FDRs New Deal saved the
learned the important lessons monumental price tag. Not
onlycountry. Surely, there are plenty well enough to avoid making
the will we and future generations beof poorly-informed partisans,
same mistakes again. Indeed, paying those bills for decades,
theideologues and quacks that still today we are no closer to
fixing very process of throwing goodmake these superficial claims.
the primary cause of the business money after bad will pile
moralSerious historians and economists, cycle monetary mischief
hazard on top of moral hazard,however, have been busy chipping than
we were 80 years ago. fostering more bad decisionsaway at the
falsehoods. The essay and future bailouts. This is theyou have just
read cites many The financial crisis that gripped stuff that
undermines both freerecent works worth careful reading America in
2008 ought to be a enterprise and the soundnessin their entirety.
wake-up call. The fingerprints of the currency. Much more of
government meddling are inflation to pay these bills isAt the very
moment this latest all over it. From 2001 to 2005, more than a
little likely, sooneredition of Great Myths of the the Federal
Reserve revved up or later.Great Depression was about to the money
supply, expanding itgo to press, Simon & Schuster at a feverish
double-digit rate. Government, observed thepublished a splendid new
volume The dollar plunged in overseas renowned Austrian economistI
strongly recommend. Authored markets and commodity prices Ludwig
von Mises, is the onlyby the Foundation for Economic soared. With
the banks flush with institution that can take aEducations senior
historian and liquidity from the Fed, interest valuable commodity
like paper,Hillsdale College professor, Dr. rates plummeted and
risky and make it worthless by applyingBurton W. Folsom, the book
loans to borrowers of dubious ink. Mises was describing theis
provocatively titled New merit ballooned. Politicians curse of
inflation, the processDeal or Raw Deal? How threw more fuel on the
fire whereby government expandsFDRs Economic Legacy Has by
jawboning banks to lend a nations money supply andDamaged America.
Its one of hundreds of billions of dollars thereby erodes the value
of eachthe most illuminating works on for subprime mortgages.
monetary unit dollar, peso,the subject. It will help mightily
pound, franc or whatever. Itto correct the record and educate When
the bubble burst, some of often shows up in the form ofour fellow
citizens about what the very culprits who promoted rising prices,
which most peoplereally happened in the 1930s. the policies that
caused it confuse with the inflation itself. postured as our
rescuers while The distinction is an importantAnother great
addition to the endorsing new interventions, one because, as
economist Percyliterature, appearing in 2007, bigger government,
more inflation Greaves explained so eloquently,is The Forgotten
Man: A New of money and credit and massive Changing the definition
changesHistory of the Great Depression taxpayer bailouts of failing
firms. the responsibility.by Amity Shlaes. The fact that Many of
them are also calling forit has been a New York Times higher taxes
and tariffs, the very Define inflation as rising pricesbestseller
suggests there is a real nonsense that took a recession in and,
like the clueless Jimmyhunger for the truth about this 1930 and
made it a long and deep Carter of the 1970s, youll thinkperiod of
history. depression. that oil sheiks, credit cards
20. Mackinac Center for Public Policy | Great Myths of the
Great Depression 18and private businesses are the fostering booms
and busts. If its doomed Co