AEIdeas

The public policy blog of the American Enterprise Institute

Subscribe to the blog

Discussion: (6 comments)

  1. The Crash of ’29 was caused by the Federal Reserve almost doubling the money supply, making everybody think it was Christmas so they spent, spent, spent, which drove stocks so high that people risked RISKY INVESTMENTS tied to Margin Calls. Well, when the Banksters figured it was time, the made the margin calls, which required the selling of stocks, and the Elites would not buy the stocks and nobody was buying, so they plummeted. Then when at rock bottom, the Wall Street predators/banksters/elites bought stocks back for pennies on the dollar, exacerbating the difference between Rulers and peasants.

  2. Todd Mason

    The Fed did not recognize in 2008 how far real estate could fall. It had much company in that regard. http://money.usnews.com/money/blogs/capital-commerce/2008/06/09/why-the-economy-is-better-than-you-think
    But to say that the Fed did it is like blaming Mrs. O’Leary’s cow — true perhaps but not the reason we remember the Chicago Fire.

    Friedman himself abandoned M2 as a reliable indicator. How fast money turns over is as important as how much is out there. Velocity introduces the fiscal, specifically the embattled state of household balance sheets, and perhaps soon the psychological, or why I hoard dollars.

  3. The Fed was the greatest culprit behind what Friedman and Schwartz called the Great Contraction just as Fed errors in 2008 created the Lesser Contraction, or Great Recession. But I am afraid readers will more likely draw the incomplete conclusion that the problems plaguing the US economy today are strictly fiscal and psychological rather than also monetary. Certainty most of Washington seems unaware of this.

    Somehow Friedman and Schwartz forgot to account for the massive increase in credit that the Fed was responsible for in the latter part of the the 1920s. The Fed created a massive bubble that burst. The solution was not inflating as Jimmy suggests but doing what Harding did when he inherited a collapsing economy; cut taxes and cut spending. Let the markets liquidate the bad investments and let those that are capable of deploying resources most effectively take over the failed investments as those that were not efficient are allowed to fail.

  4. Todd Mason

    Somehow Vangel misses the easy pickings in the post WWI budget cuts by Harding and the focus of those savings (defense.) Happily Harding was no longer among us when WWII raised the issue of readiness.

    1. Somehow Vangel misses the easy pickings in the post WWI budget cuts by Harding and the focus of those savings (defense.) Happily Harding was no longer among us when WWII raised the issue of readiness.

      There are easy pickings now. The US spends more than the next 40 countries combined and its taxpayers pay for the defence of Japan, Germany, Korea, and a great deal of the EU. Why should they? Who is your big enemy that will invade the country? And why would they spend $1.5 trillion on a new plane that does not perform as well as the one that it replaces? Why spend $2 billion on a bomber that does not fly very well and is vulnerable to attack? Why have military related activities consume around $1 trillion a year, which is about $0.70 out of every dollar of tax revenue from individual taxpayers?

      No, what the country needs is a man who has the convictions and courage of Harding. A man who does what is right and what should be done rather than what is popular and will get him reelected.

  5. History seems to show in the US economy that most booms end badly.Maybe due to the fact the booms are built on weak or false prosperity.Debt,over extended credit,spending beyond ones wealth can only take an economy so far before the bill comes due.

Comments are closed.

Sort By:

Refine Content:

Scholar

Additional Keywords:

Refine Results

or to save searches.

Open
Refine Content