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1929 And Its Aftermath - A Contra-Keynesian View Of What Really Happened
Submitted by Murray N. Rothbard via The Mises Institute,
[First published in Inquiry, November 12, 1979.]
A half-century ago, America — and then the world — was rocked by a mighty stock-market crash that soon turned into the steepest and longest-lasting depression of all time.
It was not only the sharpness and depth of the depression that stunned the world and changed the face of modern history: it was the length, the chronic economic morass persisting throughout the 1930s, that caused intellectuals and the general public to despair of the market economy and the capitalist system.
Previous depressions, no matter how sharp, generally lasted no more than a year or two. But now, for over a decade, poverty, unemployment, and hopelessness led millions to seek some new economic system that would cure the depression and avoid a repetition of it.
Political solutions and panaceas differed. For some it was Marxian socialism — for others, one or another form of fascism. In the United States the accepted solution was a Keynesian mixed-economy or welfare-warfare state. Harvard was the focus of Keynesian economics in the United States, and Seymour Harris, a prominent Keynesian teaching there, titled one of his many books Saving American Capitalism. That title encapsulated the spirit of the New Deal reformers of the ’30s and ’40s. By the massive use of state power and government spending, capitalism was going to be saved from the challenges of communism and fascism.
One common guiding assumption characterized the Keynesians, socialists, and fascists of the 1930s: that laissez-faire, free-market capitalism had been the touchstone of the US economy during the 1920s, and that this old-fashioned form of capitalism had manifestly failed us by generating, or at least allowing, the most catastrophic depression in history to strike at the United States and the entire Western world.
Well, weren’t the 1920s, with their burgeoning optimism, their speculation, their enshrinement of big business in politics, their Republican dominance, their individualism, their hedonistic cultural decadence, weren’t these years indeed the heyday of laissez-faire? Certainly the decade looked that way to most observers, and hence it was natural that the free market should take the blame for the consequences of unbridled capitalism in 1929 and after.
Unfortunately for the course of history, the common interpretation was dead wrong: there was very little laissez-faire capitalism in the 1920s. Indeed the opposite was true: significant parts of the economy were infused with proto–New Deal statism, a statism that plunged us into the Great Depression and prolonged this miasma for more than a decade.
In the first place, everyone forgot that the Republicans had never been the laissez-faire party. On the contrary, it was the Democrats who had always championed free markets and minimal government, while the Republicans had crusaded for a protective tariff that would shield domestic industry from efficient competition, for huge land grants and other subsidies to railroads, and for inflation and cheap credit to stimulate purchasing power and apparent prosperity.
It was the Republicans who championed paternalistic big government and the partnership of business and government while the Democrats sought free trade and free competition, denounced the tariff as the “mother of trusts,” and argued for the gold standard and the separation of government and banking as the only way to guard against inflation and the destruction of people’s savings. At least that was the policy of the Democrats before Bryan and Wilson at the start of the 20th century, when the party shifted to a position not very far from its ancient Republican rivals.
The Republicans never shifted, and their reign in the 1920s brought the federal government to its greatest intensity of peacetime spending and hiked the tariff to new, stratospheric levels. A minority of old-fashioned “Cleveland” Democrats continued to hammer away at Republican extravagance and big government during the Coolidge and Hoover eras. Those included Governor Albert Ritchie of Maryland, Senator James Reed of Missouri, and former Solicitor General James M. Beck, who wrote two characteristic books in this era: The Vanishing Rights of the States and Our Wonderland of Bureaucracy.
But most important in terms of the depression was the new statism that the Republicans, following on the Wilson administration, brought to the vital but arcane field of money and banking. How many Americans know or care anything about banking? Yet it was in this neglected but crucial area that the seeds of 1929 were sown and cultivated by the American government.
The United States was the last major country to enjoy, or be saddled with, a central bank. All the major European countries had adopted central banks during the 18th and 19th centuries, which enabled governments to control and dominate commercial banks, to bail out banking firms whenever they got into trouble, and to inflate money and credit in ways controlled and regulated by the government. Only the United States, as a result of Democratic agitation during the Jacksonian era, had had the courage to extend the doctrine of classical liberalism to the banking system, thereby separating government from money and banking.
Having deposed the central bank in the 1830s, the United States enjoyed a freely competitive banking system — and hence a relatively “hard” and noninflated money — until the Civil War. During that catastrophe, the Republicans used their one-party dominance to push through their interventionist economic program. It included a protective tariff and land grants to railroads, as well as inflationary paper money and a “national banking system” that in effect crippled state-chartered banks and paved the way for the later central bank.
The United States adopted its central bank, the Federal Reserve System, in 1913, backed by a consensus of Democrats and Republicans. This virtual nationalization of the banking system was unopposed by the big banks; in fact, Wall Street and the other large banks had actively sought such a central system for many years. The result was the cartelization of banking under federal control, with the government standing ready to bail out banks in trouble, and also ready to inflate money and credit to whatever extent the banks felt was necessary.
Without a functioning Federal Reserve System available to inflate the money supply, the United States could not have financed its participation in World War I: that war was fueled by heavy government deficits and by the creation of new money to pay for swollen federal expenditures.
One point is undisputed: the autocratic ruler of the Federal Reserve System, from its inception in 1914 to his death in 1928, was Benjamin Strong, a New York banker who had been named governor of the Federal Reserve Bank of New York. Strong consistently and repeatedly used his power to force an inflationary increase of money and bank credit in the American economy, thereby driving prices higher than they would have been and stimulating disastrous booms in the stock and real-estate markets. In 1927, Strong gaily told a French central banker that he was going to give “a little coup de whiskey to the stock market.” What was the point? Why did Strong pursue a policy that now can seem only heedless, dangerous, and recklessly extravagant?
Once the government has assumed absolute control of the money-creating machinery in society, it benefits — as would any other group — by using that power. Anyone would benefit, at least in the short run, by printing or creating new money for his own use or for the use of his economic or political allies.
Strong had several motives for supporting an inflationary boom in the 1920s. One was to stimulate foreign loans and foreign exports. The Republican party was committed to a policy of partnership of government and industry, and to subsidizing domestic and export firms. A protective tariff aided inefficient domestic producers by keeping out foreign competition. But if foreigners were shut out of our markets, how in the world were they going to buy our exports? The Republican administration thought it had solved this dilemma by stimulating American loans to foreigners so that they could buy our products.
A fine solution in the short run, but how were these loans to be kept up, and, more important, how were they to be repaid? The banking community was also confronted with the curious and ultimately self-defeating policy of preventing foreigners from selling us their products, and then lending them the money to keep buying ours. Benjamin Strong’s inflationary policy meant repeated doses of cheap credit to stimulate this foreign lending. It should also be noted that this policy subsidized American investment banks in making foreign loans.
Among the exports stimulated by cheap credit and foreign loans were farm products. American agriculture, overstimulated by the swollen demands of warring European nations during World War I, was a chronically sick industry during the 1920s. It had awakened after the resumption of peace to find that farm prices had fallen and that European demand was down. Rather than adjusting to postwar realities, however, American farmers preferred to organize and agitate to force taxpayers and consumers to keep them in the style to which they had become accustomed during the palmy “parity” years of the war. One way for the federal government to bow to this political pressure was to stimulate foreign loans and hence to encourage foreign purchases of American farm products.
The “farm bloc,” it should be noted, included not only farmers; more indirect and considerably less rustic interests were also busily at work. The postwar farm bloc gained strong support from George N. Peek and General Hugh S. Johnson; both, later prominent in the New Deal, were heads of the Moline Plow Company, a major manufacturer of farm machinery that stood to benefit handsomely from government subsidies to farmers. When Herbert Hoover, in one of his first acts as president — considerably before the crash — established the Federal Farm Board to raise farm prices, he installed as head of the FFB Alexander Legge, chairman of International Harvester, the nation’s leading producer of farm machinery. Such was the Republican devotion to “laissez faire.”
But a more indirect and ultimately more important motivation for Benjamin Strong’s inflationary credit policies in the 1920s was his view that it was vitally important to “help England,” even at American expense. Thus, in the spring of 1928, his assistant noted Strong’s displeasure at the American public’s outcry against the “speculative excesses” of the stock market.
The public didn’t realize, Strong thought, that “we were now paying the penalty for the decision which was reached early in 1924 to help the rest of the world back to a sound financial and monetary basis.” An unexceptionable statement, provided that we clear up some euphemisms. For the “decision” was taken by Strong in camera, without the knowledge or participation of the American people; the decision was to inflate money and credit, and it was done not to help the “rest of the world” but to help sustain Britain’s unsound and inflationary policies.
Before the World War, all the major nations were on the gold standard, which meant that the various currencies — the dollar, pound, mark, franc, etc. — were redeemable in fixed weights of gold. This gold requirement ensured that governments were strictly limited in the amount of scrip they could print and pour into circulation, whether by spending to finance government deficits or by lending to favored economic or political groups. Consequently, inflation had been kept in check throughout the 19th century when this system was in force.
But world war ruptured all that, just as it destroyed so many other aspects of the classical-liberal polity. The major warring powers spent heavily on the war effort, creating new money in bushel baskets to pay the expense. Inflation was consequently rampant during and after World War I and, since there were far more pounds, marks, and francs in circulation than could possibly be redeemed in gold, the warring countries were forced to go off the gold standard and to fall back on paper currencies — all, that is, except for the United States, which was embroiled in the war for a relatively short time and could therefore afford to remain on the gold standard.
After the war, the nations faced a world currency breakdown with rampant inflation and chaotically falling exchange rates. What was to be done? There was a general consensus on the need to go back to gold, and thereby to eliminate inflation and frantically fluctuating exchange rates. But how to go back? That is, what should be the relations between gold and the various currencies?
Specifically, Britain had been the world’s financial center for a century before the war, and the British pound and the dollar had been fixed all that time in terms of gold so that the pound would always be worth $4.86. But during and after the war the pound had been inflated relatively far more than the dollar, and thus had fallen to about $3.50 on the foreign-exchange market. But Britain was adamant about returning the pound, not to the realistic level of $3.50, but rather to the old prewar par of $4.86.
Why the stubborn insistence on going back to gold at the obsolete prewar par? Part of the reason was a stubborn and mindless concentration on saving face and British honor, on showing that the old lion was just as strong and tough as before the war. Partly, it was a shrewd realization by British bankers that if the pound were devalued from prewar levels England would lose its financial preeminence, perhaps to the United States, which had been able to retain its gold status.
So, under the spell of its bankers, England made the fateful decision to go back to gold at $4.86. But this meant that Britain’s exports were now made artificially expensive and its imports cheaper, and since England lived by selling coal, textiles, and other products, while importing food, the resulting chronic depression in its export industries had serious consequences for the British economy. Unemployment remained high in Britain, especially in its export industries, throughout the boom of the 1920s.
To make this leap backward to $4.86 viable, Britain would have had to deflate its economy so as to bring about lower prices and wages and make its exports once again inexpensive abroad. But it wasn’t willing to deflate since that would have meant a bitter confrontation with Britain’s now-powerful unions. Ever since the imposition of an extensive unemployment-insurance system, wages in Britain were no longer flexible downward as they had been before the war. In fact, rather than deflate, the British government wanted the freedom to keep inflating, in order to raise prices, do an end run around union wage rates, and ensure cheap credit for business.
The British authorities had boxed themselves in: They insisted on several axioms. One was to go back to gold at the old prewar par of $4.86. This would have made deflation necessary, except that a second axiom was that the British continue to pursue a cheap credit, inflationary policy rather than deflation. How to square the circle? What the British tried was political pressure and arm-twisting on other countries, to try to induce or force them to inflate too. If other countries would also inflate, the pound would remain stable in relation to other currencies; Britain would not keep losing gold to other nations, which endangered its own jerry-built monetary structure.
On the defeated and small new countries of Europe, Britain’s pressure was notably successful. Using their dominance in the League of Nations and especially in its Financial Committee, the British forced country after country not only to return to gold, but to do so at overvalued rates, thereby endangering those nations’ exports and stimulating imports from Britain. And the British also flummoxed these countries into adopting a new form of gold “exchange” standard, in which they kept their reserves not in gold, as before, but in sterling balances in London.
In this way, the British could continue to inflate; and pounds, instead of being redeemed in gold, were used by other countries as reserves on which to pyramid their own paper inflation. The only stubborn resistance to the new order came from France, which had a hard-money policy into the late 1920s. It was French resistance to the new British monetary order that was ultimately fatal to the house of cards the British attempted to construct in the 1920s.
The United States was a different situation altogether. Britain could not coerce the United States into inflating in order to save the misbegotten pound, but it could cajole and persuade. In particular, it had a staunch ally in Benjamin Strong, who could always be relied on to be a willing servitor of British interests. By repeatedly agreeing to inflate the dollar at British urging, Benjamin Strong won the plaudits of the British financial press as the best friend of Great Britain since Ambassador Walter Hines Page, who had played a key role in inducing the United States to enter the war on the British side.
Why did Strong do it? We know that he formed a close friendship with British financial autocrat Montagu Norman, longtime head of the Bank of England. Norman would make secret visits to the United States, checking in at a Saratoga Springs resort under an assumed name, and Strong would join him there for the weekend, also incognito, there to agree on yet another inflationary coup de whiskey to the market.
Surely this Strong–Norman tie was crucial, but what was its basic nature? Some writers have improbably speculated on a homosexual liaison to explain the otherwise mysterious subservience of Strong to Norman’s wishes. But there was another, and more concrete and provable, tie that bound these two financial autocrats together.
That tie involved the Morgan banking interests. Benjamin Strong had lived his life in the Morgan ambit. Before being named head of the Federal Reserve, Strong had risen to head of the Bankers Trust Company, a creature of the Morgan bank. When asked to be head of the Fed, he was persuaded to take the job by two of his best friends, Henry P. Davison and Dwight Morrow, both partners of J.P. Morgan & Co.
The Federal Reserve System arrived at a good time for the Morgans. It was needed to finance America’s participation in World War I, a participation strongly supported by the Morgans, who played a major role in bringing the Wilson administration into the war. The Morgans, heavily invested in rail securities, had been caught short by the boom in industrial stocks that emerged at the turn of the century. Consequently, much of their position in investment-banking was being eroded by Kuhn, Loeb & Co., which had been faster off the mark on investment in industrial securities.
World War I meant economic boom or collapse for the Morgans. The House of Morgan was the fiscal agent for the Bank of England: it had the underwriting concession for all sales of British and French bonds in the United States during the war, and it helped finance US arms and munitions sales to Britain and France. The House of Morgan had a very heavy investment in an Anglo-French victory and a German-Austrian defeat. Kuhn, Loeb, on the other hand, was pro-German, and therefore was tied more to the fate of the Central Powers.
The cement binding Strong and Norman was the Morgan connection. Not only was the House of Morgan intimately wrapped up in British finance, but Norman himself — as well as his grandfather — in earlier days had worked in New York for the powerful investment banking firm of Brown Brothers, and hence had developed close personal ties with the New York banking community. For Benjamin Strong, helping Britain meant helping the House of Morgan to shore up the internally contradictory monetary structure it had constructed for the postwar world.
The result was inflationary credit, a speculative boom that could not last, and the Great Crash whose 50th anniversary we observe this year. After Strong’s death in late 1928, the new Federal Reserve authorities, while confused on many issues, were no longer consistent servitors of Britain and the Morgans. The deliberate and consistent policy of inflation came to an end, and a corrective depression soon arrived.
There are two mysteries about the Great Depression, mysteries having two separate and distinct solutions. One is, why the crash? Why the sudden crash and depression in the midst of boom and seemingly permanent prosperity? We have seen the answer: inflationary credit expansion propelled by the Federal Reserve System in the service of various motives, including helping Britain and the House of Morgan.
But there is another vital and very different problem. Given the crash, why did the recovery take so long? Usually, when a crash or financial panic strikes, the economic and financial depression, be it slight or severe, is over in a few months or a year or two at the most. After that, economic recovery will have arrived. The crucial difference between earlier depressions and that of 1929 was that the 1929 crash became chronic and seemed permanent.
What is seldom realized is that depressions, despite their evident hardship on so many, perform an important corrective function. They serve to eliminate the distortions introduced into the economy by an inflationary boom. When the boom is over, the many distortions that have entered the system become clear: prices and wage rates have been driven too high, and much unsound investment has taken place, particularly in capital-goods industries.
The recession or depression serves to lower the swollen prices and to liquidate the unsound and uneconomic investments; it directs resources into those areas and industries that will most-effectively serve consumer demands — and were not allowed to do so during the artificial boom. Workers previously misdirected into uneconomic production, unstable at best, will, as the economy corrects itself, end up in more secure and productive employment.
The recession must be allowed to perform its work of liquidation and restoration as quickly as possible, so that the economy can be allowed to recover from boom and depression and get back to a healthy footing. Before 1929, this hands-off policy was precisely what all US governments had followed, and hence depressions, however sharp, would disappear after a year or so.
But when the Great Crash hit, America had recently elected a new kind of president. Until the past decade, historians have regarded Herbert Clark Hoover as the last of the laissez-faire presidents. Instead, he was the first New Dealer.
Hoover had his bipartisan aura, and was devoted to corporatist cartelization under the aegis of big government; indeed, he originated the New Deal farm-price-support program. His New Deal specifically centered on his program for fighting depressions. Before he assumed office, Hoover determined that should a depression strike during his term of office, he would use the massive powers of the federal government to combat it. No more would the government, as in the past, pursue a hands-off policy.
As Hoover himself recalled the crash and its aftermath,
The primary question at once arose as to whether the President and the federal government should undertake to investigate and remedy the evils. … No President before had ever believed that there was a governmental responsibility in such cases. … Presidents steadfastly had maintained that the federal government was apart from such eruptions … therefore, we had to pioneer a new field.
In his acceptance speech for the presidential renomination in 1932, Herbert Hoover summed it up:
We might have done nothing. … Instead, we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action. … No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times.
The massive Hoover program was, indeed, a characteristically New Deal one: vigorous action to keep up wage rates and prices, to expand public works and government deficits, to lend money to failing businesses to try to keep them afloat, and to inflate the supply of money and credit to try to stimulate purchasing power and recovery. Herbert Hoover during the 1920s had pioneered the proto-Keynesian idea that high wages are necessary to assure sufficient purchasing power and a healthy economy. The notion led him to artificially raising wages — and consequently to aggravating the unemployment problem — during the depression.
As soon as the stock market crashed, Hoover called in all the leading industrialists in the country for a series of White House conferences in which he successfully bludgeoned the industrialists, under the threat of coercive government action, into propping up wage rates — and hence causing massive unemployment — while prices were falling sharply. After Hoover’s term, Franklin D. Roosevelt simply continued and expanded Hoover’s policies across the board, adding considerably more coercion along the way. Between them, the two New Deal presidents managed the unprecedented feat of making the depression last a decade, until we were lifted out of it by our entry into World War II.
If Benjamin Strong got us into a depression and Herbert Hoover and Franklin D. Roosevelt kept us in it, what was the role in all this of the nation’s economists, watchdogs of our economic health? Unsurprisingly, most economists, during the depression and ever since, have been much more part of the problem than of the solution. During the 1920s, establishment economists, led by Professor Irving Fisher of Yale, hailed the 20s as the start of a “New Era,” one in which the new Federal Reserve System would ensure permanently stable prices, avoiding either booms or busts.
Unfortunately, the Fisherites, in their quest for stability, failed to realize that the trend of the free and unhampered market is always toward lower prices as productivity rises and mass markets develop for particular products. Keeping the price level stable in an era of rising productivity, as in the 1920s, requires a massive artificial expansion of money and credit. Focusing only on wholesale prices, Strong and the economists of the 1920s were willing to engender artificial booms in real estate and stocks, as well as malinvestments in capital goods, so long as the wholesale price level remained constant.
As a result, Irving Fisher and the leading economists of the 1920s failed to recognize that a dangerous inflationary boom was taking place. When the crash came, Fisher and his disciples of the Chicago School again pinned the blame on the wrong culprit. Instead of realizing that the depression process should be left alone to work itself out as rapidly as possible, Fisher and his colleagues laid the blame on the deflation after the crash and demanded a reinflation (or “reflation”) back to 1929 levels.
In this way, even before Keynes, the leading economists of the day managed to miss the problem of inflation and cheap credit and to demand policies that only prolonged the depression and made it worse. After all, Keynesianism did not spring forth full-blown with the publication of Keynes’s General Theory in 1936.
We are still pursuing the policies of the 1920s that led to eventual disaster. The Federal Reserve is still inflating the money supply and inflates it even further with the merest hint that a recession is in the offing. The Fed is still trying to fuel a perpetual boom while avoiding a correction on the one hand or a great deal of inflation on the other.
In a sense, things have gotten worse. For while the hard-money economists of the 1920s and 1930s wished to retain and tighten up the gold standard, the “hard-money” monetarists of today scorn gold, are happy to rely on paper currency, and feel that they are boldly courageous for proposing not to stop the inflation of money altogether, but to limit the expansion to a supposedly fixed amount.
Those who ignore the lessons of history are doomed to repeat it — except that now, with gold abandoned and each nation able to print currency ad lib, we are likely to wind up, not with a repeat of 1929, but with something far worse: the holocaust of runaway inflation that ravaged Germany in 1923 and many other countries during World War II. To avoid such a catastrophe we must have the resolve and the will to cease the inflationary expansion of credit, and to force the Federal Reserve System to stop purchasing assets, and thereby to stop its continued generation of chronic, accelerating inflation.
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Oh no its Bartertown
Kennedy vs. Krugman...not all Harvardites think alike. Kennedy passed the largest tax cut ever.
https://www.aei.org/publication/president-kennedy-responds-to-paul-krugman/
i stopped at aei, jew propaganda inc.- is Richard Perle still a "scholar" there? enough said,
fuck you
A half century ago was 1965 .... nm ... thats using math of todays market ...
Using common core, I believe the answer to be correct. And I would be in the right in publicly shaming you for hurting the authors feeling.
No worries. Everyone gets a trophy.
"One was to stimulate foreign loans and foreign exports. The Republican party was committed to a policy of partnership of government and industry, and to subsidizing domestic and export firms."
Well thats a pretty huge freaking difference between then and now. I actually heard a financial goon on the radio last night explaining that we did not have to worry about China, because China only represented .7% (i.e. less than 1%) of our export market. He was bragging about this...just think about how sad that actually is.
In the 20's America made "stuff" the world wanted...I'm a lot more worried this time around...
The bottom line, the nuclear weapons in the destruction of the Petro Yuan have been fully deployed and utilized, and Chinas burgeoning middle class has been utterly destroyed by their stock market crash. The inevitable Chinese housing collapse will follow and it will be time to go Pearl S Buck on their asses. Dont be surprised for a military revolt in China in the next 18 months to take them away from Capitalism, nationalize industry again.....
Anyone remember when the Japs were taking over the world? Well they got fixed too.... Now they are on their second lost generation as a result.
The Germans are the ones with the biggest surprise in the mail, when the pigs completely explode
If the brits cut ties to the euro and enforce their borders they might have a shot.....
Article was written in 1979. Please step away from the keyboard.
The S&P has increased 19 times since 1979. US Treasury debt is up by 22 X's from $827Billion. The average US pay was $16,841, 2010 inflation adjusted.
https://www.census.gov/hhes/www/income/data/historical/state/state1.htm
Gold's up nearly 3 X's, too, from $400/oz.
l
They have no reading comprehension, arithmetic skills, or inkling of who Murray Rothbard was.
The swooshing they hear overhead was the sound of intelligent ideas going right over their heads.
1929 was 86 years ago. Would have been a lot better writing to say "Nearly a century ago..." rather than "A half century ago...".
First published in 1979.
I'll not keep hammering on you about it like many like to do here.
The Roaring Twenties were great for Wall Street, not so great out on the farm. Apparently, we have learned nothing. Or maybe they are simply masters at avoiding the noose.
How real Americans fix their problems
https://mises.org/library/forgotten-depression-1920
Warren Harding did right by America in 1920
"little, if any, public mention is ever made of the depression of 1920–1921. And no wonder — that historical experience deflates the ambitions of those who promise us political solutions to the real imbalances at the heart of economic busts."
Read about it. And then tell the Ivy League pissants presuming their educated ivory tower solutions upon the rest of working America where to shove it.
35 years was a long time to wait, Murray... oh the fun I coulda had, now I'm just a decrepit old geezer with some silver bars, and a gold tooth.
/sarc
the truth?! YOU CAN'T HANDLE THE TRUTH!
probably some of most wise spoken or written words, ever.
Money must backed by something (gold, wheat, oil, whatever, or a mixture). Otherwise, the banksters will always play their rape game.
And we must all carry our own losses. No rent-seeking !
dejvu all over again, thats all
Update> Futures "not off the lows"... as Thom Lee might say: Ho Ree Fuk!
baring fed intervention I can see tomorrow being very very ugly
Great Myths of the Great Depression
https://www.youtube.com/watch?v=Ta2m3D9Ig0g
Gold back down, panic bring back 1929 gold standard talks.
This time it should be nearly the same. The engineer Ben Bernanke is an expert on the Great Depression.
He's going through a great struggle himself trying to secure a mortgage. Hard doing that on a $250K a gig salary
math is hard
history is boring
Those who ignore the lessons of history are doomed to repeat it — except that now, with gold abandoned and each nation able to print currency ad lib, we are likely to wind up, not with a repeat of 1929, but with something far worse: the holocaust of runaway inflation that ravaged Germany in 1923 and many other countries during World War II.
I think it will be good for us.
Martin armstrong just wrote we went thru support this bitch Gould go to 5000
He wrote that we went through support today on the CLOSE, AND if WHEN we CLOSE the month of August (next Monday) the DOW is 111 points lower than the CLOSE today, THEN get ready to sound your favorite diving alarm...
If we were to crash to 5000 later this week (not that it's remotely likely) - he didn't call it.
Now back to my (new) normal bearish self...
If Gold hits 5000 soon then the dollar will be worthless as will every other monetary system in the world. If Gold hits a $trillion/OZ Gold will also be worthless. Today Gold is around $1140 USD. USD has a load of value right now which makes Gold at 1140 a good deal.
My opinion only, I have some gold but do not sell it.
The Long Depression after the 1874 crash was longer.
Not to mention the very brief depression from 2008 that is still ongoing, and fixing to get much worse.
This one isn't over yet. The second round of deflation is just beginning.
The fatal flaw in the thinking of economists ... is that Recessions and Depressions are BAD things. Economists have been trained to think about these events in the same way as when the doctor tells you that you have a terminal illness. But in reality, these events simply represent CHANGE ... or actually an upheaval because the System cannot change.
A Depression happens when the economy is completely out-of-alignment with the forces that sustain it. Typically this occurs when misguided economic policies are followed for many years ... these policies never kept up with the changes in the world. Why? Because of GREED - the desire to keep extracting profits from the system ... profits that were no longer justified.
The current global system certainly is headed towards a worldwide Depression, caused by the collapse of the Derivatives Markets. The Recession of 2008, and the Recession of 2015 (Now!) are simply "earthquake shocks" that precede the main event.
The fatal flaw in the thinking of economists...
They are the High Priests of Financial Fraud. They work for the banksters and lying is their job. Inflationary theft of the economy's production is their game.
It all depends on what economists youre talking about.
If youre talking about those who get tenure at a university, cushy government or corporate jobs, positions with the Fed, and such - - well then you'd be correct.
Would they be 'economists' or propagandists for the status quo ?
The author of the article had none of the above. He was a real economist & historian.
Why would the bankers want to quit purchasing assets, after all they can create money for nothing. This way they actually not only end up with all the money, but with all property and the populations enslaved forever.
A "half century" ago was 1965.
A "half century" ago was 1965.
I was going to point out the same thing. It makes one wonder about the accuracy of the rest of the "facts" in this piece. It sure could have been shorter and more to the point, that's for sure.
You Might have missed at the start of the artIdle where it states That it was Originally published in 1979.
How do you couple of idiots dress yourselves in a morning?
As other people have pointed out to you, it clearly states at the top of the article it was first printed in 1979.
If you cant even read past the headlines there are no shortage of trashy tabloids that would be far more up your street
First published in Inquiry, November 12, 1979.]
I guess you missed the first sentence
"... capitalism was going to be saved from the challenges of communism and fascism."
Saved from communism, perhaps. It took the fascists some time, but they are clearly winning.
:"The result was the cartelization of banking under federal control"
Um, No. The result was the cartelization of banking under PRIVATE control.
Furthermore, the Fed Reserve runs the government, not the other way around.
"... for a protective tariff that would shield domestic industry from efficient competition"
so the asian slave labor of today is efficient competition. Thanks!
except that now, with gold abandoned
You can smell these Mises Monks a mile away.
The stock market crash in the 20's was caused by fake trusts being set up to pretend to hold assets which were leveraged for stock trading. The crash was so massive because of the rampant fraud, once claims were being made on phantom assets things really hit the fan.
It is ironic that Bernanke's PhD Thesis was about said crash and how to prevent the people from discovering this kind of financial fraud and crashing the system that is exploiting them.
I am always amused when people would ask economic questions completely unrelated to his true agenda and Bernanke gives his self satisfied sociopathic smirk at the fools believing in a false narrative.
And at least two of these funds were setup by Goldman Sachs! Where they got their start... :)
It works until it doesn't and the easiest thing to lose is CONFIDENCE....Say you come home early from work one day [you've been married 25 years] and you find your wife ecstatically moaning and screaming in bed with 3 guys, well, confidence evaporates in a nanosecond and the marriage probably isn't working so hot from this point on...
Republicans, Democrats, they all like to spend others people money, until there is no more money.
The "heart" of the financial monster that the Federal Government has created is The Federal Reserve.
Cut out the "heart" and you kill the "financial monster".
Dup
Let's start by convincing the states to hold a Convention of States and amending the Federal government out of existence. The Federal Reserve would be collateral damage.
The thing about 1929 is that those connected, or "chosen," escaped relatively unscathed. Those not so connected, or "chosen," did not.
The point being that the banksters and the streeters engineered the crash they knew was coming, and made sure they profited, and made several beholden to them for later "favors" as well.
That is what they are up to currently with the dollar. The dollar is up on "exit," and when the crash comes, only those well enough connected, or "chosen," will survive.
Zion is a scheme, not an ethnicity.
But then AK, AR, Glock and I are survivors.
so,
we are told unemployment is caused
by workers being paid "too much"?
Not by wealth concentrated at the top?
Not by financial sector largesse and parasitism?
Not by ruinous trade policies?
Not by malinvestment in militarism?
Not by underinvestment in social and physical infrastructure?
The billionaire's stock dividends are a "natural" entitlement,
the workers' wages are "artificial".
Previous Depressions were only a few years long? After the Panic of 1837 the depression was 7 years long lasting into the mid '40s. This occurred after Jackson's destruction of Biddle's Second Bank of the United States and was perhaps more serious than the Great Depression. Then there is the long long period 1873-1979 where people were agitating for inflation with a Greenback party and measures to bring back the Siliver standard.
Another inaccuracy here is the idea the the Fed and Strong himself pursued an inflationary policy. One of the major problems during this period is the US was pursuing a policy of sterilization of the gold inflows resulting from our maintaining a large balance of payments surplus. There are other factors of course like Winston Churchill as the Chancellor of the Exchequer brought England back to the gold standard leading to the disaster that ensued. England was bled by US monitary policy. To sterilize the Fed did open market purchases to remove the tendancy of the gold inflow to result in higher prices, which would tend to make US good more expensive and hence reduce the gold infow. That was supposed to be how the gold standard worked, until it was gamed by the US.
Most recently it has been China that has acutally sold dollar sterilization bonds to keep their inflation in check and keep the money flowing into the country without raising prices and causing Chinese goods to get more expensive. That way they can milk us even dryer. I guess what goes around comes around.
You left out the panic of 1857 which started in England And gave us the the war of northern aggression .
...the underlying cause of Central Bank intervention is very simple:
NO BANKERS JUMPING OUT OF WINDOWS.
The current quantities and price doesn't support gold. Gold would astronomically high. It's why they won't use it.
Rothbard is still the most readable writer on such topics that there has ever been.
While an interesting walk down memory lane the article commits the classic mistake.
There were no good intentions in any of this. This was not error, but rather fraud and theft. It was/is a game that got rolling soon after the Garden of Eden, when Cain suckered Able into trading promissory notes on future hunts for Able's sheep. In fact the con worked so well that Cain gave up hunting altogether trading his script with all the other shepherds until he ended up owning all the flocks. This is where we get the phrase fleecing the Mark. Mark was Able's and Cain's youngest brother. When Able finally came to Cain and demanded real venison for his script Cain realized the gig was up, and Cain slew Able.
And I am going to bed gentlemen... so much for your night time story...
"The United States adopted its central bank, the Federal Reserve System, in 1913, backed by a consensus of Democrats and Republicans. This virtual nationalization of the banking system"
Boo to ZH for allowing this revisionist history. The Fed is privately owned by the Wall Street banks. Being so wildly wrong on this stark fact discredits your entire argument and calls your intelligence into question.
Get educated, clown.
The Democrats gave us the Federal Reserve, not the Republicans. The Democrats controlled both houses of Congress in 1913. 70% of House Republicans voted against the Federal Reserve Act, while all but three Democrats supported it. In the Senate, every Democrat supported the bill, while all but six Republicans oppossed it. In 1935 the Democrats were at it again passing the Banking Act which strengthened the Federal Reserve.
It discredits your article when you print fiction like "backed by a consensus of Democrats and Republicans."
http://www.bostonfed.org/about/pubs/begin.pdf
United States Senate elections, 1910
Party Republican Democratic
Last election 60 seats 32 seats
Seats won 48 44
Seat change -12 +12
https://en.wikipedia.org/wiki/United_States_Senate_elections,_1910
United States Senate elections, 1912 and 1913
Party Democratic Republican Progressive
Last election 44 seats 48 seats 0 seats
Seats before 46 48 2
Seats won 51 44 1
https://en.wikipedia.org/wiki/United_States_Senate_elections,_1912_and_1913
47 seats needed for a majority