TCS Daily


How Depressing Was the Depression?

By Arnold Kling - June 1, 2007 12:00 AM

[In 1937] Just after Christmas, Harold Ickes gave a radio speech assailing America's wealthy, charging that sixty families who ran the nation were on strike against the rest of the country...Those families, Ickes said, were demanding that government give the country back the "suicidal license" it had had in 1929.
-- Amity Shlaes, The Forgotten Man

I would have thought that 1929 should have looked pretty good to people living in the depths of the Depression. But one of the many interesting lessons of Amity Shlaes' new history of the Great Depression and Franklin Roosevelt's New Deal is that many Americans, both inside and outside the Roosevelt Administration, thought of prosperity as an aberration. Instead, they saw hard times as the new norm.

The Forgotten Man (TFM for short) is not a polemic. It is not an argument for a particular theory or economic interpretation of the Depression. Instead, the author steps back and lets the story tell itself. She has sifted through memoirs and contemporaneous accounts in order to carry the reader back into the mindset of the 1930's. She focuses on a diverse selection of protagonists from that period, including opponents of Roosevelt like Andrew Mellon and Wendell Wilkie as well as members of Roosevelt's "brain trust" like Paul Douglas and Rexford Tugwell. Note that in the context of that time, "trust" meant the same thing as cartel (as in anti-trust laws). Roosevelt was claiming that with his advisers he had cornered the market on brains. If so, then after reading TFM, my sense is that there was not much value in this particular monopoly.

I came away with three major conclusions.

1. For better or worse, much of the country saw the Depression as something akin to a natural disaster, and people accordingly lowered their expectations for their standard of living.

2. Economic ignorance among policymakers was much worse than I had realized. I was steeped in the myth that the reason the Depression was so bad was that only Keynes had the answer, and he had to overcome the resistance of "the classical economists," such as Irving Fisher. But the differences between Fisher and Keynes seem small when compared to the differences between the policymakers and both economists. In physics, it would be like watching an academic debate over the meaning of quantum mechanics while policymakers are unable to grasp the simple concept of gravity.

3. The struggle over economic policy in the 1930's was really an episode in the long, historical conflict between business participants in the market and anti-business academics. Roosevelt gave free rein to the professors, until the start of the Second World War led him to realize that he would need the tycoons to help mobilize to defeat Hitler. I suspect that one reason that Roosevelt and the New Deal come off so well in the conventional wisdom is that history books are written by professors, not by entrepreneurs.

This essay will focus on the first point, with subsequent essays to address the other two. I should stress that these are my own views, and that TFM is much less prone to making generalizations and drawing conclusions. Readers with a variety of backgrounds and predispositions can appreciate the book and learn their own lessons.

The Timeline

Each chapter of TFM begins with the date, the unemployment rate, and the value of the Dow Jones Industrial Average. Here is the entire timeline.

Date

Jobless Rate

Dow

January 1927

3.3 pct

155

July 1927

3.3 pct

168

October 1929

5 pct

343

September 1931

17.4 pct

140

October 1933

22.9 pct

93

November 1933

23.2 pct

90

January 1934

21.2 pct

100

November 1934

23.2 pct

93

July 1935

21.3 pct

119

December 1936

15.3 pct

182

January 1937

15.1 pct

179

August 1937

13.5 pct

187

January 1938

17.4 pct

121

January 1940

14.6 pct

151

(Note: at the time, the unemployment rate was not calculated by the government. Shlaes is using estimates made subsequently. The 3.3 percent figure for 1927 is an estimated average for the entire year, not for particular months. The peak of the Dow in 1929 was 381. Also, in the mid-to-late 1930's, consumer prices were about 20 percent below their pre-Depression levels. So one might want to adjust downward the Dow in January 1927 by 20 percent--to 124--to compare it to Depression-era levels in deflation-adjusted terms.)

What the data on unemployment and stock prices show is that economic performance was dismal right through the beginning of the second World War. Whatever the New Deal accomplished, it did not restore prosperity to the levels of the late 1920's.

A False Prosperity?

Stocks were not necessarily overpriced in 1929, in the sense that had one bought the Dow at the peak and held it until today, one would have earned a nice rate of return. However, stock prices were more than double what they were two years earlier or two years hence, so one may concede that in 1929 there was a bubble.

What many people seemed to think in the 1930's, however, is that the lower unemployment rate and higher standard of living in the previous decade also represented something artificial.

TFM gives us Franklin Roosevelt at the Democratic National Convention where he was first nominated for President in 1932.

The country, he believed, had grown too fast: "beyond our natural and normal growth." The problem was that there had been "an era of selfishness." There existed "throughout the nation men and women, forgotten in the political philosophy of the last years." These people "look to us for guidance and for more equitable distribution of national wealth." This language sounded new--it was that of the pilgrims and the progressives. Roosevelt also assigned blame to Hoover for the inflation that they both wrongly believed was doing the damage...

This vision was a darker one than had prevailed in the 1920s. Where Americans...had believed in a future of plenty, Roosevelt believed in a future of scarcity.

TFM describes Roosevelt at his second inaugural, in 1937.

The country had developed a new understanding of life in the Depression. "This new understanding," Roosevelt said, "undermines the old admiration of worldly success as such."

Of all the members of the elite described in TFM, only Andrew Mellon shows optimism. Shlaes writes,

Mellon commented that "present conditions, however distressing, especially in terms of human suffering, reflect on a passing phase in our history." In the context of American progress, Mellon said, the Depression was a "bad quarter of an hour." The summary shocked not so much because it seemed so wrong, though it did...But the larger audacity in the statement was that it dared to question the premise of the New Deal--that the crisis was somehow permanent.

It was Mellon, not Roosevelt, who was out of step with the country. Describing the situation just prior to the 1936 election, TFM says,

Whereas in the old America of the 1920s the sight of so many jobless men had provoked shock and alarm, now people accepted it, telling themselves that at least things were better than before...Recovery was supplanting prosperity as the most reasonable goal.

A Political Machine

TFM shows that Roosevelt's vaunted brain trust was divided as well as misguided. Some shared an outlook that one might trace back to Jefferson and Jackson, of hostility toward Wall Street finance and concentrated economic power. They wanted to break up large businesses and create a level playing field for the common man.

Others, however, were ready to embrace bigness. This group held that a modern economy was characterized by great economies of scale. They viewed laissez-faire capitalism as "horse-and-buggy economics." They saw a future of collectivization and central planning. For this group, Italy and the Soviet Union represented successful role models.

Roosevelt turned to his populist advisers for campaign rhetoric and for tax proposals that would punish wealthy individuals and large corporations. But most of the New Deal, including the alphabet-soup agencies like the NRA and the TVA, reflected the influence of the collectivist-planners.

Overall, TFM gives the impression that Roosevelt did not much care one way or the other about the economics of his program. If he was not certain which of his advisers had the right ideas for restoring prosperity, that is understandable--none of them did.

Instead, Shlaes argues, Roosevelt used his keen political sense to select the policies that would build allegiance from farmers, organized labor, and other special interest groups. He created on a national level a version of the urban political machine.

The Popular Non-Revolution

One way that latter-day supporters of Roosevelt rationalize his policies is to say that they provided an alternative to the fascist and Communist uprisings that plagued Europe. Brad DeLong made such an argument to open our blog duel, and as I said in response, my father, who lived through the Depression, also shares that viewpoint.

TFM, however, paints a picture of an American public resistant to the call of violent revolution. Instead, it describes a number of instances of Americans acting in Toquevillian fashion, forming associations to solve problems, such as barter clubs when there was a shortage of money. Shlaes writes,

Odette Keun, a European journalist, came over to study the TVA and the American labor movement. After a long visit she made a conclusion that shocked both her, and probably her readers: "Labor in America is conservative. It is one of the most flabbergasting discoveries I have made." This conservatism...also was "due to the temper of the American workingman himself...the workingman en bloc is still no revolutionist. He still has not the fanatical hatred of the capitalist. He still has no essential feeling that the system is essentially unjust, infamous, execrable, and must be wiped off the face of the earth."

My sense is that Shlaes believes that it was American exceptionalism, not the New Deal, that kept the fires of revolution from leaping the oceans to our shores. When times get tough, Americans tend to look to one another, not to populist demagogues, for salvation.

A Natural Disaster

I would argue that another reason for the failure of most Americans to adopt revolutionary fervor was their interpretation of the Depression as a sort of natural disaster, comparable to a flood or a large fire. When a natural disaster or a war causes destruction, average living standards inevitably must fall, and much of the focus is on how the sacrifice can be shared equitably. Roosevelt treated the Depression in this fashion.

Like Roosevelt, many Americans seemed to think that the prosperity of the 1920's was false, and the Depression was just something they had to live with. To many people, Roosevelt sounded better than Hoover. But they did not blame the government or the American system for hard times. They just absorbed the blow, and coped as best they could.

Some were helped by various relief efforts of the New Deal. Many were not. The title, The Forgotten Man, refers to the non-beneficiaries, who as taxpayers and shareholders paid a price for the New Dealers' glory.

The good news is that the American people did not turn to violent revolution. The sad news is that they did not grasp the fact that America's productive capacity was completely intact, and that there should have been more food, more industrial output, and more people working.

From a contemporary perspective, I am saddened and appalled by this naive acceptance of economic catastrophe. Reading TFM made me want to go back in time, grab people by the collar, shake them, and say, "Hard times are not natural. Prosperity is what is natural." But few people were thinking that in the 1930's.

Arnold Kling is author of Learning Economics.


Categories:

303 Comments

depression
The author says he was surprised to find out how stupid economic policy makers were at that time. But it was know by others; the austrian-economists correctly predected the american depression. It was precisely because those so-called policy makers had the power to make policy in the first place that caused it. Then they thought that there just weren't enough of them so hired guys like the canadian socialist economist J, K. Gailbraith to set up wage and price controls, and more command economy during the war. Now people are saying the same about stuff like energy policy; let's have more policy makers and more laws and restrictions and distortions of the economy.

Federal Reserve
Good article, but he left out the role of the Federal Reserve in dumping the economy and keeping it down ("making the dollar sound")until '39 as per Friedman's "Monetary History of the US"

It was bad but . . .
The Depression was hardest on the new money rich - like the recent dot com bust. It didn't hurt the old money, the old stinking rich families.

Prior to the depression the unemployment rate was low but maybe 80% of the population were working poor. A comparison would be an entire population of people making Wal-Mart wages.

Prior to WW2 the middle class was mostly doctors, lawyers, and small business owners, maybe 15%. The middle class had live in servants. Half the people who came through Ellis Island became servants and the other half worked in sweat shops in lower Manhattan.

Post WW2 economic conditions in the USofA have been freak conditions that will not return in anyone's life time. We are reverting the the world norm of mostly working poor and a very small middle class.

It was bad but . . .
Mr. Wald--

Perhaps you could share the reasons for your gloomy conclusion. These "freak conditions" have been going on for more than sixty years now.

David Drake

visions of yesteryear
I guess the fact that the middle class is growing by leaps and bounds, and the fact that the poor are getting richer by the year is irrelevant to your world view of the rich doing their best to screw everyone else?

More re Federal Reserve
The previous post on the Federal Reserve was apposite, but brief.

I think it is fair to say that the tenor of numerous articles in Federal Reserve publications over the last several decades is one of shock and dismay at the inept monetary policies of the Fed in the 1930s that: (a) stalled recovery in the mid-30s and (b) instead deepened and prolonged the terrible economic conditions.

In fact, it is fair to say that the prolongation of the high unemployment numbers through 1940 was due almost entirely to the Fed's whimsical analyses and its wrong-headed responses to those analyses. It constitutes a tragedy for America that it happened. (There were monetary machinations going on in Europe that also contributed.)

The political give-and-take that Shlaes apparently concentrates on in her book, while interesting, essentially was a sideshow. The main event was happening on Constitution Avenue (The Fed's magnificent building was erected in the 30s; before then, it had space at Treasury.) We have the unhappy legacy of the New Deal to contend with because the checkered history of the period was written by socialists and communists who pitted the Roosevelts (Eleanor and Franklin) against the evil capitalists, ignoring what actually happened.

And this, essentially, is still what's taught in our nation's schools and colleges. Shlaes seems to have risen to the bait and produced a work that unfortunately will convince no one already confident of his/her version history.

Names and titles , please
> with because the checkered history of the period was written by socialists and communists who pitted the Roosevelts (Eleanor and Franklin) against the evil capitalists, ignoring what actually happened.

Who, exactly are the socialists and communists who created and embedded this false history. What books are you talking about? How do these ignore what happened?

Basic misundertanding
This misses the point:

>Mellon commented that "present conditions, however distressing, especially in terms of human suffering, reflect on a passing phase in our history." In the context of American progress, Mellon said, the Depression was a "bad quarter of an hour." The summary shocked not so much because it seemed so wrong, though it did...But the larger audacity in the statement was that it dared to question the premise of the New Deal--that the crisis was somehow permanent.

The premise of the New Deal was not the crisis was permanent - it was teh reverse. The premise was government could do something about the crisis other than just sitting around waiting for better times to turn up.

For Mellon, sitting on top of what would now be billions of dollars in assets, no reason whatsoever not to wait around for years, as had been done through the whole Hoover administration:: he wasn't starving in a shack or selling apples.

Thank Goodness We Got It Right
I feel a sense of relief and optimism that our economists can look back on the era and shake their heads at how badly their contemporaries screwed it up. It's a sign of progress.
Doctors look back on medieval medical practices which caused infection and mercury poisoning with the same feeling of dismay, as do physicists looking back on the awful incidents of preventable radiation poisoning among their most brilliant colleagues at the turn of the last century.
If you know anything about conditions during the depression the phrase, "We don't really know what went wrong, but we sure hope it doesn't happen again," should terrify you. On the other hand the modern attitude of, "Boy, did we botch that one, how could we be so stupid?" gives me hope.
I suppose since we still have "progressives" who look back to an era of command economies with fervent longing we still have something to worry about, but don't let fear of collectivism blind you to the silver lining in all this 20/20 hindsight: knowing what went wrong gives us much better odds at not letting it happen again.

Atlas Shrugged
How long before those of us who produce get tired of supporting those who do not?

What happens if Atlas Shruggs?

And what was that premise premised on?
I mean, on what premise does the premise "that government could do something about the crisis other than just sitting around waiting for better times to turn up" rest?

By the way, Hoover did DO "something". Only, he "helped" the "businesses" (instead of "helping" the "common folk", as FDR did) and turned what was essentially an American depression into a world wide one.

" knowing what went wrong gives us much better odds at not letting it happen again."
Yet politicians and other socialists continue to push socialism in plain view of its failures in Russian and even its current manifestations in Zimbabwe and Venezuela.

What's worse is people are buying it.

""We must stop thinking of the individual and start thinking about what is best for society."

[Hillary Clinton, 1993] "

http://boortz.com/nuze/200705/05302007.html

The Banking System

I'm a bit surprised that throughout this fascinating discussion no one has yet wondered how we came to have such a fragmented and vulnerable banking system that the concept of deposit insurance became necessary. Ironically it seems reasonable to me that a more centralized system with a smaller number of larger banks might have been able to diverisfy its loan portfolios enough to at least ameliorate the damage, of course, ruinous Fed policy would not have made that easier but who knows?

common sense
and economic theory. What's so counterintuitive?

"common", meaning socialist , sense
Common sense and evidence shows that whenever a government program starts, it is practically immortal.

The telephone tax to fund the Spanish American war was recently repealed.

FDR was a socialist. The Supreme Court at the time new it, which is why FDR tried to stack the court in his favor.

Did you mean 'communist' sense?

You mean,
It is common (sense) and economically sound (theory) to let the GOVAGs rob Peter to pay Paul, is it?

The Middling Sort
The Middle Class is defined as being a group of working people who live well enough above the poor that they don't have to worry about starvation, housing, or even going without most of their desires except perhaps temporarily while they save up to get what they want, but who at once don't have enough money to immediately do whatever they want, whenever they want, or take off from working at any time, or always buy the most expensive of things without thinking about it, or have the sheer economic and political clout as can the wealthy.

The middle class is rooted in that group of very industrious--but often extremely culturally ignorant--people that the aristocrats of England called "the middling sort". The French aristocrats called them the nouveau riche, or "newly wealthy". Those among the middle class who were the wealthiest were often called "merchant princes", and some of these eventually became members of the wealthy class.

I don't know what the cutoff point would be in today's dollars between who is upper middle class and who is wealthy, but I do know that today there are plenty of people in the middle class who are millionaires in terms of net worth.

Many among the poor are not going to remain poor. It's never been "easier" for a poor person to relatively quickly turn his fortunes around and enter the middle class than it is now. There are those who are poor right now only because they have experienced a series of unfortunate incidences--hey, when it rains, it pours--and there are others still who have taken risks that temporarily crashed their boats (risk taking tends to show an entrepreneurial spirit, so in the long run it tends to be a positive trait).

Sad to say, most people who are more or less permanently poor (excluding those who have unusual medical conditions) really deserve their hardships. Don't blame the wealthy--there are a hell of a lot of well-off people in this world who would be poor if it weren't for the wealthy employing them and creating a powerful economy in which the (real) prices of most things (like computers) over time tend to drop instead of rise.

We've been through your utterly peculiar rightwing crank definition of 'socialist.'
If you want to discuss the issues, I suggest you deal with them rather than simply shouting 'communist!' 'socialist!'

I mean,,,
government programs funded by progressive taxation can play a positive economic role, even though ultrarightwing libertarian cranks whine and posture.

Where is the evidence?
"government programs funded by progressive taxation can play a positive economic role,"

Prove it.

Missing causes
There are similarities between the recent era, internet bubble and the 1920s. During the internet bubble we saw articles in national dailies and even some business magazines about how one could make money without their business ever making profit. The difference between now and then is timing.

From around 1900 until the mid-1920s Florida had very few major hurricane cross the penisula. Land prices were booming because of the influence of Flagler, et al and the want to be rich. One could buy stocks on margin for as little as 5% down. In the early 1920s many people bought land in Florida with loans from the bank. The value of the property within a couple of years exceeded the bank loan. They then used that equity to borrow money to buy stocks on margin.

So when on major hurrican after another struck the Florida penisula, land price collapsed. Suddenly people owed more than the borrowed to by the land much less the second to buy stocks on margin. The market collapsed shortly after a late September storm.

With none of the checks and balances we have had since the market went into free fall. The old rich for the most part knew how to hold on for the ride, those on the "margin" lossed everything.

The biggest joke of the Depression is that FDR's administration brought us out of it. Without WWII it would have never happened under FDR's reign.

You disagree?
Thank you for sharing. I'm not going to reinvent this wheel.

You can't prove it?
It should be so easy if you are correct.

How do you know,
BEFORE you commit on a new program designed by some GOVAGs, that it will have (NET) positive economic role? Do you care to argue that ALL programs designed by GOVAGs have only positive impact?

By the way, don't you lecture others not to use "labels"? Why are you using your own?

By another way, why are you silent on Hoover "doing something" about the depression? Do you care to argue that he did NOTHING to combat depression?


No need to reinvent if it exists,
just show us this magical wheel.

You can't explain a wheel to someone who thinks the word 'circle' means 'three-sided shape"
And that's really where it is with you & your imaginary world.

I suggest you read an econ 101 textbook
Instead of making everything up.

If you're going to use extremist crank language like GOVAG ...
... to describe ordinary programs used everywhere in the developed democratic world, you're living in a fantasy world, and there's nothing to argue: you know it all and won't listen.

>o you care to argue that ALL [government] programs .. have only positive impact?

Not at all. Your argument seems to be than none ever do.

>y the way, don't you lecture others not to use "labels"? Why are you using your own?

You mean 'government' instead of "GIOVAGs?" You mean 'tax' instead of 'extortion?' Mine are not labels. Your are.

Regarding Hoover- I didn't say he did nothing. What he did, though, sure didn't help.

IF there's nothing to argue,
Why do you keep replying?

Here are some of the labels you used; (1) Utterly peculiar rightwing crank, (2) ultrarightwing (sic) libertarian cranks, (3) extremist crank language like GOVAG,

GOVAG is a word I coined to identify a member of a group that does a particular job. More like the words DOCTOR, LAWYER, POLICE et al. And I gave a definition of it.

You wrote “For Mellon, sitting on top of what would now be billions of dollars in assets, no reason whatsoever not to wait around for years, as had been done through the whole Hoover administration” What does that, mean if not that you think that Hoover did nothing to combat the depression?

And as usual, you are avoiding the main question.

How do you know BEFORE you commit on a new program designed by some GOVAGs, that it will have (NET) positive economic role?

Can't define liberty...
to someone who can't imagine a world without government.

Banks in 1932
"In a time of depression and financial crisis, banks will be reluctant to lend or invest, (a) to avoid endangering the confidence of their customers; and (b) to avoid the risk of lending to or investing in ventures that might default. The artificial cheap money policy in 1932 greatly lowered interest rates all-around, and therefore further discouraged the banks from making loans or investments. just when risk was increasing, the incentive to bear risk—the prospective interest-return—was being lowered by governmental manipulation. And, as we noted above, we must not overlook the frightening effect of the wave of bank failures on bank policies. During the 1920s, a typical year might find 700 banks failing, with deposits totaling $170 million. In 1930, 1350 banks failed, with deposits of $837 million; in 1931, 2,293 banks collapsed, with deposits of $1,690 million; and in 1932, 1,453 banks failed, having $706 million in deposits. This enormous increase in bank failures was enough to give any bank pause—particularly when the bankers knew in their hearts that no bank (outside of the nonexisting ideal 100 percent bank) can ever withstand a determined run. Consequently, the banks permitted their commercial loans to run down without increasing their investments."

"It is characteristic of depressions that, because of the inherently fraudulent nature of the commercial banking system, any real attempt by the public to redeem its own property from the banks must cause panic among banks and government alike."


http://www.mises.org/rothbard/agd/chapter11.asp

Depression caused by government
"The guilt for the Great Depression must, at long last, be lifted from the shoulders of the free-market economy, and placed where it properly belongs: at the doors of politicians, bureaucrats, and the mass of "enlightened" economists. And in any other depression, past or future, the story will be the same."

http://www.mises.org/rothbard/agd/chapter12.asp

Contradiction in sound bites
"The premise of the New Deal was not the crisis was permanent - it was teh reverse. The premise was government could do something about the crisis other than just sitting around waiting for better times to turn up."

If this is so, why "New Deal" instead of "Reorganization" or "Work Out"? "New Deal" advertises a radical modification of the terms of the previous social contract, while "Reorganization" or "Work Out" requires applying existing assets to existing obligations in the most rational and capital preserving manner.

Your best response is that FDR was a politician and thus a salesman who had to find the most attractive if non-descriptive catch phrase to sell the masses his legitimacy to power as well as his use thereof. My response is that if one looks at the New Deal's specifics, it indeed affected a radical modification of the terms of the previous social contract, but regardless, if one forgives politicians for lying, one needn't look closely at what they do.

American Exceptionalism
Disregarding Shlaes' beliefs, my sense is that the following passage is not true:

"My sense is that Shlaes believes that it was American exceptionalism, not the New Deal, that kept the fires of revolution from leaping the oceans to our shores. When times get tough, Americans tend to look to one another, not to populist demagogues, for salvation."

To indict capitalism generally is to indict the good times it produces as well as the bad. Given that the good times capitalism produced in America far outweighed the bad times it had produced, such an indictment was not possible.

This was not so in Europe, where capitalism was successfully portrayed to the masses as a continuation of feudalism. Since the masses had suffered a millennium of bad times, they illogically believed such nonsense (a classic example of confirmation bias). Thus, having never witnessed the utopia capitalism promised, Europeans readily opted for socialism's eventual dystopia, not knowing that dystopia is every temporal utopia's guaranteed outcome.

America rejected rebellion from capitalism to socialism because it had already rebelled against feudalism and thrived under capitalism, thereby inoculating itself against the insidious notion that feudalism and capitalism are essentially the same thing. If this is "American Exceptionalism" in the present context, then Shlaes believes correctly. Otherwise, Shlaes throws a cod net to catch herring.

Someone who thinks liberty doesn't exist for societies without government
is totally unclear on the concept of both government and liberty. But please point us to a place where people live in liberty without government, so we can consider moving there.

No need to coin words when perfectly accurate ones exist.
>What does that, mean if not that you think that Hoover did nothing to combat the depression?

It means whatever he did did not succeed.

>How do you know BEFORE you commit on a new program designed by some GOVAGs, that it will have (NET) positive economic role?

You don't know for sure, because it's impossible to predict the future for sure. You gather information, discuss it, take precautions and change course if it doesn't work. Like any other human action.

Rephrasing: I can imagine a world without government very well
It's a place where no-one has any liberty when someone bigger with a gun wants something.

So let's get this straight: it's always 'government''s fault when something goes wrong
And it's always the 'free market' that gets credit when something goes right. Sure. What a snug little world. No need to think at all; just apply the labels.

GOVAGs actions ARE NOT
like any other human action. For one, their actions are backed by the threat of force. For another, the scope of their (at least the Federal GOVAGs') actions is the entire country and large swaths of people (except those that were PERMITTED by the GOVAGs) can opt out of such programs. Consequently, if a specific program doesn't work, many more lives may be affected irrevocably.

So, what should guide which actions the GOVAGs can take and which they can not? That is the question you are refusing to answer.

Again, this is the sentence you wrote; “For Mellon, sitting on top of what would now be billions of dollars in assets, no reason whatsoever not to wait around for years, as had been done through the whole Hoover administration”"

Where does it say that Hoover did anything?

And nothing about the labels you used?

Hoover tried socialism: "It means whatever he did did not succeed."
"Hoover had two choices open to him: to reduce expenditures, and thereby relieve the economy of some of the aggravated burden of government, or to increase that burden further by raising taxes. He chose the latter course. In his swan song as Secretary of Treasury, Andrew Mellon advocated, in December, 1931, drastic increases of taxes, including personal income taxes, estate taxes, sales taxes, and postal rates. Obedient to the lines charted by Mellon and Hoover, Congress passed, in the Revenue Act of 1932, one of the greatest increases in taxation ever enacted in the United States in peacetime."

"Yet, if New Deal socialism was the logic of Hoover's policy, he cautiously extended the logic only so far. He warned at St. Paul of the strange and radical ideas prevalent in the Democratic Party: the schemes for currency tinkering, the pension bill, the commodity dollar, the pork-barrel bill, the plans for veterans' bonuses and over $2 billion of greenback issue, make-work schemes, and an agitation for a vast $9 billion-a-year public works program. It was also to Hoover's credit that he resisted the pressure of Henry Harriman, who urged Hoover to adopt the Swope Plan for economic fascism during his campaign, a plan which was soon to bear fruit in the National Recovery Administration (NRA)."

http://www.mises.org/rothbard/agd/chapter12.asp

Less government (taxes) more money?
Pretty simple.

Cut taxes (less government) and the economy grows.

Yep
"The devastating inefficiency of tax increases was addressed by Harvard's senior and most distinguished public finance economist, Martin Feldstein, in "The Effect of Taxes on Efficiency and Growth" (NBER Working Paper No. 12201, May 2006).

Based in part on empirical studies carried out over a period of years, Feldstein concluded that when the government undertakes to raise $1 of tax revenue by an across-the-board rate increase, it will, after taking into account the economy's predictable adverse reaction, end up with only an additional 57 cents to spend. To get a full $1 to spend, the government must kick the nominal tax increase up to $1.75, which further exacerbates the damage to the economy and, therefore, to incomes and living standards.

The Mankiw and Feldstein studies lead to the conclusion that, at the margin, each additional $1 of tax obtained by the federal government costs the private economy $2 to $5. Of that amount, $1 is the tax — money that taxpayers give up and the government gets. The remainder is a "dead-weight" loss. Nobody gets it. It is wages, salaries and other income that the economy would have produced but, because of the tax increase, does not.

The proponents of high taxes and big government like to pretend that the economic burden of the dead-weight loss falls solely on the rich, but it does not. The economic loss falls mainly on low- and middle-income earners in the form of salary increases not obtained and jobs not obtained (or lost), and this burden applies irrespective of whether the victims do or do not pay income taxes.

Furthermore, the regressive nature of the adverse economic fallout from high taxes cannot be avoided by concentrating those taxes on ostensibly rich capitalists. As Mankiw and others correctly point out, concentrating taxes on capital exacerbates the damage to the economy."

http://www.heritage.org/Press/Commentary/ed022407a.cfm

Freedom from government
"
Freedom from Government - 91.6%

Total government expenditures in Hong Kong, including consumption and transfer payments, are low. In the most recent year, government spending equaled 18.3 percent of GDP, and the government received 1.9 percent of its total revenues from state-owned enterprises and government ownership of property.
"

Freedom from Government - 86.2%

Total government expenditures, including consumption and transfer payments, are low. In the most recent year, government spending equaled 14.6 percent of GDP, and the government received 26.4 percent of its revenues from state-owned enterprises and government ownership of property.


"USA
Freedom from Government - 67.5%

Total government expenditures in the U.S., including consumption and transfer payments, are high. In the most recent year, government spending equaled 36.4 percent of GDP, and the government received 4.8 percent of its revenues from state-owned enterprises and government ownership of property."


Freedom from Government - 32.0%

Total government expenditures in France, including consumption and transfer payments, are very high. In the most recent year, government spending equaled 53.7 percent of GDP, and the government received 3.9 percent of its total revenues from state-owned enterprises and government ownership of property."

http://www.heritage.org/research/features/index/country.cfm?id=France

Sure, government actions are backed by force
Which means there have to be safeguards and rules. Duh.

>So, what should guide which actions the GOVAGs can take and which they can not? That is the question you are refusing to answer.

In the U.S., the document you want to look at is the Constitution and Supreme Court decisions. But you knew that.

> as had been done through the whole Hoover administration”"

Ok,here was Mellon (secretary of the treasury)advice:

"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.... [That] will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people."

Hoover rejected this; instead said 'prosperity is around the corner.' Congress passed a counterproductive tarif bill. Do you have a point?

>And nothing about the labels you used?

my descriptions. Not part of my analysis.

Sure, government actions are backed by force
Which means there have to be safeguards and rules. Duh.

>So, what should guide which actions the GOVAGs can take and which they can not? That is the question you are refusing to answer.

In the U.S., the document you want to look at is the Constitution and Supreme Court decisions. But you knew that.

> as had been done through the whole Hoover administration”"

Ok,here was Mellon (secretary of the treasury)advice:

"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.... [That] will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people."

Hoover rejected this; instead said 'prosperity is around the corner.' Congress passed a counterproductive tarif bill. Do you have a point?

>And nothing about the labels you used?

my descriptions. Not part of my analysis.

Sure, Hoover was a socialist. Like everyone you disagree with
Thanks for the documentation of the stupid policy. Stupid it was, socialist it wasn't.

If the old deal wasn't working...
change things. If something's broke, fix it. Why is this such a big deal?

The true role of government: secure and protect rights of free persons
"The role of government in a truly liberal order is to secure and protect the rights of free persons so they may go about their peaceful business. Government becomes especially dangerous to liberty when it exceeds those limited duties. It by necessity diminishes and finally threatens the existence of liberty when it replaces associations and activities of free persons with its own monopoly control and exercises its regulatory or redistributive power through the threat or use of force."

"Fried has bought into the statist premise that coercion must replace consent if enough people don’t act in decent and moral ways toward others. But there is no moral conduct when the individual has no choice in the matter other than to obey those who hold the threat of force against him. Nor can we be sure that the best means have been found to further those goals of “social” concern when the government taxes and distributes portions of people’s incomes rather allowing those individuals the freedom to make their own decisions and commitments."

What Fried and many others are trying to do is devise ways of making freedom compatible with the welfare state. Accept a certain minimum of such “social work” by the government, resign yourself to paying some part of your income to finance them, and then be content with the “liberty” to use what’s left in our pockets. The task, in Fried’s view, is somehow to limit what government does in these areas so it doesn’t become too tyrannical and overbearing."

http://www.fee.org/publications/the-freeman/article.asp?aid=7899

So, where in the US Constitution it says
that GOVAGs can create so many (alphabet soup) organizations to dictate the economic life of the citizens?

One more time, this is the sentence you wrote; “For Mellon, sitting on top of what would now be billions of dollars in assets, no reason whatsoever not to wait around for years, as had been done through the whole Hoover administration”

It clearly means that you thought that Hoover did nothing, as Mellon, who was sitting on piles of wealth and who can afford to wait for better times, advised.

But in the very next post you claimed that you didn't say any such thing about Hoover. That is what I was pointing out.

Isn't Libertarian a label? If you are free to throw around Labels, why not others?

the Fed and the M3 money supply
Anybody notice that the fed no longer even bothers to publish the rise in the M3. Guess they like to keep it secret because it would be too humiliating to see how much they're printing money, their phoney fiat currency. No wonder the dollar is dropping like a brick. They just say that it's not important for normal people, who have no need for such details.

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