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Posts Tagged ‘Great Depression’

The Politically Incorrect Guide to the Great Depression & the New Deal

Posted by M. C. on February 25, 2021

Based on the Regnery Publishing book “The Politically Incorrect Guide to the Great Depression & the New Deal.” Get the book at: https://www.regnery.com/9781596980969…​ Use promo code PIG50 to receive 50% off any PIG book when you buy “The Politically Incorrect Guide to the Great Depression & the New Deal.” In the second episode of “The Politically Incorrect Guide” Tom Woods & Michael Malice demolish widespread myths about the Great Depression and the New Deal. Tom & Michael explain how the New Deal worsened the very problems it aimed to solve, that capitalism didn’t cause the Great Depression (the Federal Reserve did), and that World War II prolonged rather than ended the Great Depression. The first season of “The Politically Incorrect Guide” includes ten episodes and will release throughout 2021. Each covers the undiscussed facts and stories about history, culture, and social movements, purged from today’s mainstream education system. Tom Woods penned the very first book in the series, “The Politically Incorrect Guide to American History,” which was a New York Times bestseller.

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David Stockman: Janet Yellen’s Return and the Financial Storm Ahead

Posted by M. C. on January 2, 2021

By the time Yellen became Fed Chairman in February 2014, however, there was no plausible excuse for keeping Bernanke’s bloated Fed balance sheet in place or continuing to keep interest rates at the zero bound. If there was ever a chance to normalize Bernanke’s misbegotten Depression-fighting policy, it was during the 48 months of Yellen’s term.

Needless to say, Yellen’s Fed did no such thing. After 45 years of devotion to the 1960s Keynesian bathtub theory of full employment economics, Yellen kept real interest rates buried in negative territory during the entirety of her term, and not just marginally.

https://www.newsmax.com/Finance/DavidStockman/janet-yellen-fed-economy-invest/2016/02/15/id/714444/

The operative words here are “European countries” and “add accommodation.” Yet even a brief reflection on those items demonstrates that Janet is a delusional Simpleton.

https://internationalman.com/articles/david-stockman-on-janet-yellens-return-and-the-financial-storm-ahead/

by David Stockman

Janet Yellen is back.

Naturally, the follies of Keynesian central banking come to mind.

In many ways, Yellen’s tenure as Fed chairman was far worse than Ben Bernanke’s. At least Bernanke’s money-printing madness was undergirded by his credentials as a misguided scholar of the Great Depression and the mistaken conclusion that the Wall Street meltdown of September 2008 was the prelude to another such occurrence.

The Great Depression of the 1930s was caused by way too much Fed-fostered foreign borrowing on Wall Street during the roaring twenties. It stimulated an unsustainable boom in US exports—soaring domestic CapEx in order to expand production capacity and a stock bubble–fueled consumer-spending boom in cars, radios and appliances. Therefore, when the Wall Street bubble burst in October 1929, foreign borrowing dried up, US exports and CapEx crashed and spending on consumer durables plummeted.

This was the cause of the massive contraction in 1930–1933, which took the GDP down from $95 billion to $58 billion in dollars of the day. By contrast, it had nothing to do with Milton Friedman’s crashing M-1 (money supply), which was a consequence of unavoidable and necessary bad debt liquidation by the banking system. Nor did it stem from any lack of credit availability to solvent borrowers, as demonstrated by market interest rates that remained ultralow (under 2%) throughout the downturn.

The depression of 1930–1933 wasn’t owing to the stinginess of the Fed, which actually expanded its balance sheet by 72% between August 1929 and early 1933.

Consequently, Bernanke’s maneuver of flooding the zone with fiat credit during 2009–2013 was a mistaken page from Milton Friedman’s counterfactual playbook, which was wrong the day it was written in the early 1960s and even more wrong when Bernanke cut and pasted it into his PhD thesis at MIT in 1979.

By the time Yellen became Fed Chairman in February 2014, however, there was no plausible excuse for keeping Bernanke’s bloated Fed balance sheet in place or continuing to keep interest rates at the zero bound. If there was ever a chance to normalize Bernanke’s misbegotten Depression-fighting policy, it was during the 48 months of Yellen’s term.

Needless to say, Yellen’s Fed did no such thing. After 45 years of devotion to the 1960s Keynesian bathtub theory of full employment economics, Yellen kept real interest rates buried in negative territory during the entirety of her term, and not just marginally.

The 16% Trimmed Mean CPI increased by an average of 1.90% per annum during that four-year period, while the Fed’s target interest rate averaged just 0.40%.

During the sweet spot of the longest business cycle expansion in history—from month #55 to month #103—when the economy should have been left to expand on its own without “stimulus” from the central banking branch of the state, Yellen kept real money market rates pinned at an unprecedented -150 basis points.

The justification for such economic insanity was the claim that the US economy was not at its full-employment level as measured by the dubious U-3 unemployment rate and that the job of the central bank was to keep injecting “demand” into the economy until the bathtub was full to the brim and 100% of “potential GDP” was attained.

But here’s the thing. Potential GDP and full-employment labor markets are Keynesian malarkey.

In a world in which domestic labor competes with China’s price for goods, India’s price for internet-based services and Mexico’s price for manufactured goods assembly, full employment cannot be measured by the headcount metrics of the BLS, nor can it be achieved by injecting massive amounts of fiat credit into the bank accounts of Wall Street dealers.

In fact, with total outstanding credit now at $81 trillion, or 382% of GDP, the Fed’s liquidity injections never really leave the canyons of Wall Street. The result is increased speculation on Wall Street and accelerating inflation of financial asset prices.

After all, money markets do not finance the working capital or fixed asset investments of business, nor do they fund consumer borrowing for automobiles and durables. Instead, short-term money markets are where Wall Street dealers finance their inventory and where speculators fund their positions in the options markets—or via margin and repo credit against stocks and bonds held outright.

Consequently, negative real interest rates are the mother’s milk of financial speculation and the resulting asset price bubbles.

Yellen’s policies constituted an epic monetary error that has fueled bond- and stock -market bubbles that are off the charts, thereby sending erroneous price signals to Wall Street gamblers, corporate C-suites and spendthrift politicians alike.

The yawning gap below between the purple line, signifying (the running inflation rate) and the brown line (the money market rate) connotes the massive subsidy Yellen’s Fed conferred on speculators and day traders.

Real Cost of Money Market Borrowings, 2014–2018: 16% Trimmed Mean CPI Less Fed Funds Rate

In short, Yellen sowed the wind of monetary excess, and now we are reaping the whirlwind of a gargantuan Wall Street bubble that is a clear and present danger to the economic future—because it will crash, and the resulting financial and economic damage will be biblical.

Ironically, Janet Yellen may be sitting in the captain’s chair when the most violent and destructive financial storm in history finally comes ashore. It would serve her right.

Editor’s Note: The coming economic and political crisis is going to be much worse, much longer, and very different than what we’ve seen in the past.

That’s exactly why New York Times bestselling author Doug Casey and his team just released an urgent new report titled Doug Casey’s Top 7 Predictions for the Raging 2020s.

Click here to download the free PDF now.

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Great Myths of the Great Depression – Foundation for Economic Education

Posted by M. C. on October 25, 2020

https://fee.org/resources/great-myths-of-the-great-depression/

Lawrence W. Reed
Lawrence W. Reed

Many volumes have been written about the Great Depression and its impact on the lives of millions of Americans. Historians, economists, and politicians have all combed the wreckage searching for the “black box” that will reveal the cause of this legendary tragedy. Sadly, all too many of them decide to abandon their search, finding it easier perhaps to circulate a host of false and harmful conclusions about the events that caused the Great Depression seven decades ago.

How bad was the Great Depression? Over the four years from 1929 to 1933, production at the nation’s factories, mines, and utilities fell by more than half. People’s real disposable incomes dropped 28 percent. Stock prices collapsed to one-tenth of their pre-crash height. The number of unemployed Americans rose from 1.6 million in 1929 to 12.8 million in 1933. One of every four workers was out of a job at the Depression’s nadir, and ugly rumors of revolt simmered for the first time since the Civil War.

Old myths never die; they just keep showing up in college economics and political science textbooks. Students today are frequently taught that unfettered free enterprise collapsed of its own weight in 1929, paving the way for a decade-long economic depression full of hardship and misery. President Herbert Hoover is presented as an advocate of “hands-off,” or laissez-faire, economic policy, while his successor, Franklin Roosevelt, is the economic savior whose policies brought us recovery. This popular account of the Depression belongs in a book of fairy tales and not in a serious discussion of economic history, as a review of the facts demonstrates.

To properly understand the events of the time, it is appropriate to view the Great Depression as not one, but four consecutive depressions rolled into one. Professor Hans Sennholz has labeled these four “phases” as follows: the business cycle; the disintegration of the world economy; the New Deal; and the Wagner Act.[1]

The first phase explains why the crash of 1929 happened in the first place; the other three show how government intervention kept the economy in a stupor for over a decade.

The Great Depression was not the country’s first depression, though it proved to be the longest. The common thread woven through the several earlier debacles was disastrous manipulation of the money supply by government. For various reasons, government policies were adopted that ballooned the quantity of money and credit. A boom resulted, followed later by a painful day of reckoning. None of America’s depressions prior to 1929, however, lasted more than four years and most of them were over in two. The Great Depression lasted for a dozen years because the government compounded its monetary errors with a series of harmful interventions.

Most monetary economists, particularly those of the “Austrian school,” have observed the close relationship between money supply and economic activity. When government inflates the money and credit supply, interest rates at first fall. Businesses invest this “easy money” in new production projects and a boom takes place in capital goods. As the boom matures, business costs rise, interest rates readjust upward, and profits are squeezed. The easy-money effects thus wear off and the monetary authorities, fearing price inflation, slow the growth of or even contract the money supply. In either case, the manipulation is enough to knock out the shaky supports from underneath the economic house of cards.

One of the most thorough and meticulously documented accounts of the Fed’s inflationary actions prior to 1929 is America’s Great Depression by the late Murray Rothbard. Using a broad measure that includes currency, demand and time deposits, and other ingredients, Rothbard estimated that the Federal Reserve expanded the money supply by more than 60 percent from mid-1921 to mid-1929.[2] The flood of easy money drove interest rates down, pushed the stock market to dizzy heights, and gave birth to the “Roaring Twenties.”

By early 1929, the Federal Reserve was taking the punch away from the party. It choked off the money supply, raised interest rates, and for the next three years presided over a money supply that shrank by 30 percent. This deflation following the inflation wrenched the economy from tremendous boom to colossal bust.

The “smart” money—the Bernard Baruchs and the Joseph Kennedys who watched things like money supply—saw that the party was coming to an end before most other Americans did. Baruch actually began selling stocks and buying bonds and gold as early as 1928; Kennedy did likewise, commenting, “only a fool holds out for the top dollar.”[3]

When the masses of investors eventually sensed the change in Fed policy, the stampede was underway. The stock market, after nearly two months of moderate decline, plunged on “Black Thursday”—October 24, 1929—as the pessimistic view of large and knowledgeable investors spread.

The stock market crash was only a symptom—not the cause—of the Great Depression: the market rose and fell in near synchronization with what the Fed was doing.

If this crash had been like previous ones, the subsequent hard times might have ended in a year or two. But unprecedented political bungling instead prolonged the misery for twelve long years.

Unemployment in 1930 averaged a mildly recessionary 8.9 percent, up from 3.2 percent in 1929. It shot up rapidly until peaking out at more than 25 percent in 1933. Until March 1933, these were the years of President Herbert Hoover—the man that anti-capitalists depict as a champion of noninterventionist, laissez-faire economics.

Did Hoover really subscribe to a “hands off the economy,” free-market philosophy? His opponent in the 1932 election, Franklin Roosevelt, didn’t think so. During the campaign, Roosevelt blasted Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions of people on the dole. He accused the president of “reckless and extravagant” spending, of thinking “that we ought to center control of everything in Washington as rapidly as possible,” and of presiding over “the greatest spending administration in peacetime in all of history.” Roosevelt’s running mate, John Nance Garner, charged that Hoover was “leading the country down the path of socialism.”[4] Contrary to the modern myth about Hoover, Roosevelt and Garner were absolutely right.

The crowning folly of the Hoover administration was the Smoot-Hawley Tariff, passed in June 1930. It came on top of the Fordney-McCumber Tariff of 1922, which had already put American agriculture in a tailspin during the preceding decade. The most protectionist legislation in U.S. history, Smoot-Hawley virtually closed the borders to foreign goods and ignited a vicious international trade war. Professor Barry Poulson notes that not only were 887 tariffs sharply increased, but the act broadened the list of dutiable commodities to 3,218 items as well.[5]

Officials in the administration and in Congress believed that raising trade barriers would force Americans to buy more goods made at home, which would solve the nagging unemployment problem. They ignored an important principle of international commerce: trade is ultimately a two-way street; if foreigners cannot sell their goods here, then they cannot earn the dollars they need to buy here.

Foreign companies and their workers were flattened by Smoot-Hawley’s steep tariff rates, and foreign governments soon retaliated with trade barriers of their own. With their ability to sell in the American market severely hampered, they curtailed their purchases of American goods. American agriculture was particularly hard hit. With a stroke of the presidential pen, farmers in this country lost nearly a third of their markets. Farm prices plummeted and tens of thousands of farmers went bankrupt. With the collapse of agriculture, rural banks failed in record numbers, dragging down hundreds of thousands of their customers.

Hoover dramatically increased government spending for subsidy and relief schemes. In the space of one year alone, from 1930 to 1931, the federal government’s share of GNP increased by about one-third.

Hoover’s agricultural bureaucracy doled out hundreds of millions of dollars to wheat and cotton farmers even as the new tariffs wiped out their markets. His Reconstruction Finance Corporation ladled out billions more in business subsidies. Commenting decades later on Hoover’s administration, Rexford Guy Tugwell, one of the architects of Franklin Roosevelt’s policies of the 1930s, explained, “We didn’t admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started.”[6]

To compound the folly of high tariffs and huge subsidies, Congress then passed and Hoover signed the Revenue Act of 1932. It doubled the income tax for most Americans; the top bracket more than doubled, going from 24 percent to 63 percent. Exemptions were lowered; the earned income credit was abolished; corporate and estate taxes were raised; new gift, gasoline, and auto taxes were imposed; and postal rates were sharply hiked.

Can any serious scholar observe the Hoover administration’s massive economic intervention and, with a straight face, pronounce the inevitably deleterious effects as the fault of free markets?

Franklin Delano Roosevelt won the 1932 presidential election in a landslide, collecting 472 electoral votes to just 59 for the incumbent Herbert Hoover. The platform of the Democratic Party whose ticket Roosevelt headed declared, “We believe that a party platform is a covenant with the people to be faithfully kept by the party entrusted with power.” It called for a 25 percent reduction in federal spending, a balanced federal budget, a sound gold currency “to be preserved at all hazards,” the removal of government from areas that belonged more appropriately to private enterprise, and an end to the “extravagance” of Hoover’s farm programs. This is what candidate Roosevelt promised, but it bears no resemblance to what President Roosevelt actually delivered.

In the first year of the New Deal, Roosevelt proposed spending $10 billion while revenues were only $3 billion. Between 1933 and 1936, government expenditures rose by more than 83 percent. Federal debt skyrocketed by 73 percent.

Roosevelt secured passage of the Agricultural Adjustment Act (AAA), which levied a new tax on agricultural processors and used the revenue to supervise the wholesale destruction of valuable crops and cattle. Federal agents oversaw the ugly spectacle of perfectly good fields of cotton, wheat, and corn being plowed under. Healthy cattle, sheep, and pigs by the millions were slaughtered and buried in mass graves.

Even if the AAA had helped farmers by curtailing supplies and raising prices, it could have done so only by hurting millions of others who had to pay those prices or make do with less to eat.

Perhaps the most radical aspect of the New Deal was the National Industrial Recovery Act (NIRA), passed in June 1933, which set up the National Recovery Administration (NRA). Under the NIRA, most manufacturing industries were suddenly forced into government-mandated cartels. Codes that regulated prices and terms of sale briefly transformed much of the American economy into a fascist-style arrangement, while the NRA was financed by new taxes on the very industries it controlled. Some economists have estimated that the NRA boosted the cost of doing business by an average of 40 percent—not something a depressed economy needed for recovery.

Like Hoover before him, Roosevelt signed into law steep income tax rate increases for the high brackets and introduced a 5 percent withholding tax on corporate dividends. In fact, tax hikes became a favorite policy of the president’s for the next ten years, culminating in a top income tax rate of 94 percent during the last year of World War II. His alphabet agency commissars spent the public’s tax money like it was so much bilge.

For example, Roosevelt’s public relief programs hired actors to give free shows and librarians to catalogue archives. The New Deal even paid researchers to study the history of the safety pin, hired 100 Washington workers to patrol the streets with balloons to frighten starlings away from public buildings, and put men on the public payroll to chase tumbleweeds on windy days.

Roosevelt created the Civil Works Administration in November 1933 and ended it in March 1934, though the unfinished projects were transferred to the Federal Emergency Relief Administration. Roosevelt had assured Congress in his State of the Union message that any new such program would be abolished within a year. “The federal government,” said the President, “must and shall quit this business of relief. I am not willing that the vitality of our people be further stopped by the giving of cash, of market baskets, of a few bits of weekly work cutting grass, raking leaves, or picking up papers in the public parks.”

But in 1935 the Works Progress Administration came along. It is known today as the very government program that gave rise to the new term, “boondoggle,” because it “produced” a lot more than the 77,000 bridges and 116,000 buildings to which its advocates loved to point as evidence of its efficacy.[7] The stupefying roster of wasteful spending generated by these jobs programs represented a diversion of valuable resources to politically motivated and economically counterproductive purposes.

The American economy was soon relieved of the burden of some of the New Deal’s excesses when the Supreme Court outlawed the NRA in 1935 and the AAA in 1936, earning Roosevelt’s eternal wrath and derision. Recognizing much of what Roosevelt did as unconstitutional, the “nine old men” of the Court also threw out other, more minor acts and programs which hindered recovery.

Freed from the worst of the New Deal, the economy showed some signs of life. Unemployment dropped to 18 percent in 1935, 14 percent in 1936, and even lower in 1937. But by 1938, it was back up to 20 percent as the economy slumped again. The stock market crashed nearly 50 percent between August 1937 and March 1938. The “economic stimulus” of Franklin Roosevelt’s New Deal had achieved a real “first”: a depression within a depression!

The stage was set for the 1937–38 collapse with the passage of the National Labor Relations Act in 1935—better known as the Wagner Act and organized labor’s “Magna Carta.” To quote Hans Sennholz again:

This law revolutionized American labor relations. It took labor disputes out of the courts of law and brought them under a newly created Federal agency, the National Labor Relations Board, which became prosecutor, judge, and jury, all in one. Labor union sympathizers on the Board further perverted this law, which already afforded legal immunities and privileges to labor unions. The U.S. thereby abandoned a great achievement of Western civilization, equality under the law.[8]

Armed with these sweeping new powers, labor unions went on a militant organizing frenzy. Threats, boycotts, strikes, seizures of plants, and widespread violence pushed productivity down sharply and unemployment up dramatically. Membership in the nation’s labor unions soared; by 1941 there were two and a half times as many Americans in unions as in 1935.

From the White House on the heels of the Wagner Act came a thunderous barrage of insults against business. Businessmen, Roosevelt fumed, were obstacles on the road to recovery. New strictures on the stock market were imposed. A tax on corporate retained earnings, called the “undistributed profits tax,” was levied. “These soak-the-rich efforts,” writes economist Robert Higgs, “left little doubt that the president and his administration intended to push through Congress everything they could to extract wealth from the high-income earners responsible for making the bulk of the nation’s decisions about private investment.”[9]

Higgs draws a close connection between the level of private investment and the course of the American economy in the 1930s. The relentless assaults of the Roosevelt administration—in both word and deed—against business, property, and free enterprise guaranteed that the capital needed to jumpstart the economy was either taxed away or forced into hiding. When Roosevelt took America to war in 1941, he eased up on his antibusiness agenda, but a great deal of the nation’s capital was diverted into the war effort instead of into plant expansion or consumer goods. Not until both Roosevelt and the war were gone did investors feel confident enough to “set in motion the postwar investment boom that powered the economy’s return to sustained prosperity.”[10]

On the eve of America’s entry into World War II and twelve years after the stock market crash of Black Thursday, ten million Americans were jobless. Roosevelt had pledged in 1932 to end the crisis, but it persisted two presidential terms and countless interventions later.

Along with the horror of World War II came a revival of trade with America’s allies. The war’s destruction of people and resources did not help the U.S. economy, but this renewed trade did. More important, the Truman administration that followed Roosevelt was decidedly less eager to berate and bludgeon private investors, and as a result, those investors came back into the economy to fuel a powerful postwar boom.

The genesis of the Great Depression lay in the inflationary monetary policies of the U.S. government in the 1920s. It was prolonged and exacerbated by a litany of political missteps: trade-crushing tariffs, incentive-sapping taxes, mind-numbing controls on production and competition, senseless destruction of crops and cattle, and coercive labor laws, to recount just a few. It was not the free market that produced twelve years of agony; rather, it was political bungling on a scale as grand as there ever was.


Notes

  1. Hans F. Sennholz, “The Great Depression,” The Freeman, April 1975, p. 205.
  2. Murray Rothbard, America’s Great Depression (Kansas City: Sheed and Ward, Inc., 1975), p. 89.
  3. Lindley H. Clark, Jr., “After the Fall,” Wall Street Journal, October 26, 1979, p. 18.
  4. “FDR’s Disputed Legacy,” Time, February 1, 1982, p. 23.
  5. Barry W. Poulson, Economic History of the United States (New York: Macmillan Publishing Co., Inc., 1981), p. 508.
  6. Paul Johnson, A History of the American People (New York: HarperCollins Publishers, 1997), p. 741.
  7. Martin Morse Wooster, “Bring Back the WPA? It Also Had A Seamy Side,” Wall Street Journal, September 3, 1986, p. A26.
  8. Sennholz, pp. 212–13.
  9. Robert Higgs, “Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed After the War,” The Independent Review, Spring 1997, p. 573.
  10. Ibid., p. 564.
Lawrence W. Reed
Lawrence W. Reed

Lawrence W. Reed is FEE’s President Emeritus, Humphreys Family Senior Fellow, and Ron Manners Global Ambassador for Liberty, having served for nearly 11 years as FEE’s president (2008-2019). He is author of the 2020 book, Was Jesus a Socialist? as well as Real Heroes: Incredible True Stories of Courage, Character, and Conviction and Excuse Me, Professor: Challenging the Myths of Progressivism. Follow on LinkedIn and Twitter and Like his public figure page on Facebook. His website is www.lawrencewreed.com.

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Trump Can Ensure a V-shaped Economic Recovery by Heeding Lessons of 1921 – LewRockwell

Posted by M. C. on July 31, 2020

Happily, during the 1921 depression, the government of president Warren G. Harding did not intervene with monetary stimulus, and the entire episode was over not in a matter of weeks (the V) or years (a fattish U), but months (a narrow U).

https://www.lewrockwell.com/2020/07/walter-e-block/donald-trump-can-ensure-a-v-shaped-economic-recovery-by-heeding-lessons-of-1921/

By

South China Morning Post

A “U” or a “V”? That is the question – whether the economic recovery from the Covid-19 shutdown will be a long drawn-out process, a wide, flattish “U”, or a sharp, upward-bound one, a “V”.

To best wrestle with this question, let us look back a bit at some economic history regarding recessions and depressions, focusing on the US. Is this of interest to those following the course of the Chinese economy? Of course. When the US sneezes, China catches a cold. And, of course, the opposite is true as well.

Right now, the political relationship between these two countries has soured. But this will not, hopefully, always be true. In any case, economic law still operates, no matter what are the diplomatic relationships between nations.

The depression in 1921 was short-lived – maybe not a V, but at least a very narrow U. It was created by prior governmental monetary mismanagement, which led investors, as if by Adam Smith’s “invisible hand” to engage in more long-term capital goods investments than the voluntary saving investment decisions of the populace would warrant, based on their time preference between present and future consumption.

Happily, during the 1921 depression, the government of president Warren G. Harding did not intervene with monetary stimulus, and the entire episode was over not in a matter of weeks (the V) or years (a fattish U), but months (a narrow U).

The Great Depression, which stretched from 1929-1941 (a morbidly obese U) stemmed from identical causes. Here, I am subscribing to the Austrian analysis of Ludvig von Mises and Friedrich Hayek, not the Milton Friedman monetarist explanation of a lowered stock of money in the 1930s.

But presidents Herbert Hoover and Franklin D. Roosevelt “fixed” this by propping up heavy industries whose extent was overblown by the previous artificially lowered interest rates, in an early “too big to fail” paroxysm. The Smoot-Hawley tariff  added insult to injury, and put the kibosh on any early recovery.

The blunder of 2008 also stemmed from unwise governmental policy. In 1992, the geniuses at the Boston Federal Reserve implied that the banking system was racist, since banks were more likely to reject mortgage applications by blacks and Hispanics compared to whites.

Rather, in my view, their favourite colour was green: the ranking in terms of credit reliability and collateral determined lending practices.

But the US Department of Housing and Urban Development contributed to the eventual crisis by diverting mortgages; billions of dollars were improperly diverted into the housing market. Only when bankruptcies were finally allowed did we escape from that debacle. Call that a fattish, but not an obese, U.

This brings us to present considerations. As an Austro-libertarian, I see government failure as the cause of virtually all depressions, and we are certainly in one now. However, I am forced to admit an exception to this general rule. The depression of 2020 is a product of some very vicious little virus critters, not the state apparatus.

I now predict the sharpest of Vs, but if and only if, all other things being equal, the Trump administration cleaves to market principles. First, and perhaps most important, stop paying people more to stay home from work than the salaries they can garner from their employers.

It is beyond me why US President Donald Trump ever agreed to any such a scheme in the first place.

Does he not want to win the election  in November? Does he not realise that a fast recovery, a V, will help him inordinately in that regard? Does he not realise that if people do not get back to work, there will be no recovery at all?

Second, do not commit the same error as the Smoot-Hawley tariff. Trump should beware this error, because he has a natural protectionist instinct in his intellectual armamentarium. He should mightily resist it.

Third, do not give in to our friends on the left who wish to boost the federal minimum wage level to US$15, or to raise it at all. This is an unemployment creator par excellence, particularly for unskilled workers.

Does Trump not realise that a large part of his success in battening down the unemployment rate for the black community, and particularly for younger, less skilled, African Americans, stems from his holding the line on this matter? The Coronavirus Aid, Relief, and Economic Security programme already has provisions in this direction and they should be strongly resisted.

Fourth, in no particular order, Trump should use all his good offices to stop the maniacal US Federal Reserve from furiously pumping money into the economy. These are the seeds for the next business cycle downturn, and risk another bout of inflation, which we certainly do not need to compound our economic difficulties.

So, Mr President, embrace the free enterprise system, attain a V, a very narrow and sharp one, and the prognostication for November will be significantly boosted.

Dr. Block [send him mail] is a professor of economics at Loyola University New Orleans, and a senior fellow of the Ludwig von Mises Institute. He is the author of Defending the Undefendable, The Case for Discrimination, Labor Economics From A Free Market Perspective, Building Blocks for Liberty, Differing Worldviews in Higher Education, and The Privatization of Roads and Highways. His latest book is Yes to Ron Paul and Liberty.

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For First Time Since The Great Depression, Americans Must Wait In Line For The Most Basic Essential Items | Zero Hedge

Posted by M. C. on July 11, 2020

But other Americans continue to grow more and more skittish about the practice, leading to another vein of increased tension across the nation. Francisco Salazar of East Meadow, New York, concluded: “Earlier in the pandemic, they were checking people for masks, cleaning the carts, giving sanitizer — they’re no longer doing any of it. I feel paranoid. I don’t want to be on these long lines.”

https://www.zerohedge.com/personal-finance/first-time-great-depression-americans-must-wait-line-most-basic-essential-items

The scene can be somewhat dystopian and third world when you look at it: as a result of the pandemic and the new way that our economy is forced to do business, Americans all over the country are waiting in line – even for the most basic of essentials.

For example, Bloomberg points out that food banks in Vermont have to deal with “miles long” lines of cars and at Covid testing sites in Florida, people have to show up with full tanks of gas because of how long they have to wait.

People applying for unemployment have similar horror stories – as we have detailed – trying to pile onto an overwhelmed website to collect benefits and left with no one to call when the system doesn’t function properly. The physical waits in unemployment lines are similarly distressing.

Kara Eaton, a 27-year-old industrial welder from Eufaula, Oklahoma, said: “We have to hope that the person next to us in line will hold our place while we use the bathroom — Subway usually doesn’t mind if we use theirs.”

Rachelle Basaraba of Oregon said: “Having to be patient and wait your turn — I don’t know if that’s necessarily the American way.” She says that a “herd mentality” and respect for rules bring order to waiting in line in Denmark, where her company is based. She called this a “a positive thing,” though was unsure about how it would catch on the U.S.

This time in America is the first since the Great Depression to make Americans wait in line for limited resources.

J. Jeffrey Inman, a marketing professor and associate dean at the University of Pittsburgh’s Katz Graduate School of Business, said: “The U.S. is getting a dose of the scarcity economy, and we don’t like it. The U.S. has gotten spoiled where we’ve always had a plentiful, efficient supply chain. Now we’re seeing what can happen once it gets disrupted.”

But capitalism is trying to swoop in and solve the problem. For example, a company called Lavi Industries, that usually makes post-and-rope systems for Homeland Security, is now involved in making plastic sneeze guards and portable stations for lines to make the waiting for bearable. They are also working on their “virtual queueing technology,” which is a smart phone technology that can summon customers out of line from afar.

Perry Kuklin, Lavi’s marketing director, put it simply: “People hate to wait. If you make it more pleasant, make it more efficient, you as a business can not only profit from it, but you create a better passenger experience or theater experience.”

Richard Larson, a Massachusetts Institute of Technology professor and expert on queuing theory, says the issue is just temporary: “My parents had to wait in a bank queue line between 10 a.m. and 3 p.m. and now ATMs are everywhere. We have umpteen more gas station pumps you can stop at. A lot of traditional pesky queuing is gone.”

Some Americans are trying to make the best of the situation. “It was time to stop and notice, to look around and watch, to not be on my phone. I tried just to be there,” said Dena Babb of Torrance, California, about trying to be mindful while enjoying waiting in line.

But other Americans continue to grow more and more skittish about the practice, leading to another vein of increased tension across the nation. Francisco Salazar of East Meadow, New York, concluded: “Earlier in the pandemic, they were checking people for masks, cleaning the carts, giving sanitizer — they’re no longer doing any of it. I feel paranoid. I don’t want to be on these long lines.”

 

Be seeing you

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The 75 IQ Version of American History – LewRockwell

Posted by M. C. on January 12, 2019

https://www.lewrockwell.com/2019/01/thomas-woods/the-75-iq-version-of-american-history-strikes-again/

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Tom Woods Show

From The Tom Woods Letter:

There’s still lots of talk about that 70% top marginal tax rate, and why it’s supposed to be a great idea.

Heck, they say, we had rates even higher before, and everything was fine!

Ahem.

I emailed you last week about that, and then I devoted episode #1314 of the Tom Woods Show — subscribe for free at TomWoods.com/iTunes — to further detail on the subject.

The (very quick) answer is that thanks to deductions and outright evasion, those high rates were essentially not paid.

Here’s how someone in my private group described the simpleton manner in which the topic is being discussed: Read the rest of this entry »

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Green Socialism – LewRockwell

Posted by M. C. on January 5, 2019

Sandy sounds like a poorly-educated-but-well-indoctrinated young communist with a ninth-grade mentality.  She proudly labels herself a “democratic socialist” but as Ludwig von Mises explained, there really is no difference between communism and socialism: they are both attacks on private property and economic freedom.  She seems clueless about just about everything she talks about in public, whether it is the Constitution, especially the economy, the structure of government, history, etc.

https://www.lewrockwell.com/2019/01/thomas-dilorenzo/green-socialism-is-still-socialism/

By 

Upon taking control of the U.S. House of Representatives the first thing America’s Marxist Party did was to propose a Soviet-style, communistic destruction of American capitalism labeled a “Green New Deal.”  The Party chose as its spokesperson for this totalitarian venture a young woman named Sandy Ocasio who grew up in one of the wealthiest enclaves in America, Westchester County, New York, but who decided to lie about this to get into politics by calling herself “Alex from the Bronx.”  Sandy sounds like a poorly-educated-but-well-indoctrinated young communist with a ninth-grade mentality.  She proudly labels herself a “democratic socialist” but as Ludwig von Mises explained, there really is no difference between communism and socialism: they are both attacks on private property and economic freedom.  She seems clueless about just about everything she talks about in public, whether it is the Constitution, especially the economy, the structure of government, history, etc.  This is the person the American Marxist Party has chosen as its front person in its proposal to destroy American capitalism, prosperity, and the American dream forever—and to give itself totalitarian control over virtually all aspects of American life.

The first thing to understand about the proposed “Green New Deal” is that the first New Deal not only failed to end the Great Depression but made it more severe and longer-lasting… Read the rest of this entry »

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