An Incompetent Federal Reserve Board Caused the Great Depression and the New Deal that Gave Congress’ Power to New Executive Branch Regulatory Agencies, by Paul Craig Roberts

The New Deal helped transform the U.S. government from mostly benign to the monstrous blob we know and hate today. From Paul Craig Roberts at

An Incompetent Federal Reserve Board Caused the Great Depression and the New Deal that Gave Congress’ Power to New Executive Branch Regulatory Agencies. The 1930s saw the Great Depression used to vitiate legislative power and put it into the hands of executive branch agencies.  It was a major step in destroying the accountability of government.

The Fed’s “Depression” and the Birth of the New Deal

Market failure reconsidered

Paul Craig Roberts, Wm. E. Simon Chair in Political Economy, Center for Strategic and International Studies,  Senior Research Fellow, Hoover Institution, Stanford University, and Chairman, Institute for Political Economy

Lawrence M. Stratton, Research Fellow, Institute for Political Economy

Published in 2001 by the Hoover Institution, Stanford University, in Policy Review (No. 108)

According to new deal historians, capitalism failed in the 1930s. What, then, is it doing flourishing in the United States, Britain, and Europe and taking root in Latin America and China, where it was never previously present? For the past 20 years there has been a large and growing incompatibility between the verdicts of historians and the performance of capitalism.

In 1981 the United States reduced tax rates and reined in money growth. For two decades the economy has experienced an economic boom characterized by large income gains, high employment, and negligible inflation. In the U.K. similar reforms introduced by Margaret Thatcher have produced similar results. Heavily socialized countries such as France, Italy, and Spain have abandoned public ownership and privatized their economies. Political regimes in Eastern Europe and the Soviet Union, where a planning model had operated, failed both economically and politically and collapsed. Capitalism has appeared in Latin America and has taken hold of the Mexican, Chilean, and Argentinean economies. Even China’s rulers have found it necessary to risk their political power by endorsing markets and private property in order to participate in the global economy.

Big government (in terms of its presence in the economy) is everywhere in retreat. A Democratic president, Bill Clinton, declared that “the era of big government is over.” Yet the history books and much analysis of public policy during the 1930s remain unadjusted and still proclaim the failure of capitalism. The disconnect between historians and reality grows with each passing day, because historians cannot explain the Great Depression except in terms of capitalism’s failure.

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