We have been told many times in the past 6 months, that this is the worst financial crisis since the Great Depression.
As the popular story goes, the market crash of 1929 , was the result of a failure in our free market system. We were saved from total devistation and massive unemployment, by the gallant dramatic intervention of President Franklin D, Roosevelt , and the creative innovations of his New Deal policies,.
This fairy tale has been repeated for decades, lauding Roosevelts bold moves, and the rescue provided by his Democratic Party.
In the light of the current economic crisis,this is an Urban Legend which must be examined.
After the market crashed in October 1929, economic activity slowed down as would be expected . A crashing Dow Jones is an obvious ,in your face ,sign of economic distress.
A speculative bubble had burst, and a recession was being announced.
In a recent article by Thomas Sowell he quotes unemployment statistics from a Vedder and Gallaway book, “Out of Work”. This enables us to follow unemployment statistics for the early years of the Great Depression.
The numbers are very telling. In November 1929 the unemployment rate was 5 percent. By December of that year unemployment had spiked to 9 percent.
Between December 1929 and June 1930, unemployment had dipped to 6.3 percent . A good healthy recession was developing, but not the Depression which was to come.
What turned the Recession into a Depression?
In June 1930, Congress passed the Smoot- Hawley tariff act, in an attempt to protect American jobs, by restricting imports.
Within 5 months,the unemployment rate had jumped to over 10 percent.
This initial tampering with the economy was followed by a series of escalating, increasingly desperate
stimulus packages, eventually turning into FDR’s New Deal.
Public Works projects, the TVA, and a torrent of additional spending stimuli, transferred wealth from the private sector to the public sector, with the Government becoming our largest employer.
All of this redistribution and publick works stimuli resulted in an unemployment rate above 20 percent for for more than 3 years beginning in February 1932.
Throwing money at a recession by providing publick works jobs does not work.
Classic Big Government spending, even in massive record amounts did not work in the 1930’s.
A similar attempt to control recession by stimulating inflation during the 1970’s engendered a decade long Stagflation.
President Elect Obama’s stated intention of providing a MASSIVE stimulus package to save the economy, sounds uncomfortably similar to FDR when he came into power.
Blaming all of this new spending upon his predecesors failings, parallels previous political expediency.
Overlooking the real cause of the problem, and choosing to ignore the lessons of history are short sighted and dangerous .
The Stock Market Crash of 1929 did not cause the suffering and unemployment of the next 7 or 8 years. Roosevelts tinkering with the economy and the massive Government intervention was what depressed the economy.
Take money out of the private sector and redistribute it to the population through stimulus employment, takes a pie that is already shrinking and gives it out to hungry people, but now there is no more pie, and the company that baked the pie has been taxed out of business.
Let Them Eat Cake!!!
Next: Recession, Stagflation, Depression, what great choices.
A bailout that doesn’t cost the taxpayer a single penny. Bailout! The Game