Tag Archives: Great Depression

Hitler’s Economics, by LLewellyn H. Rockwell Jr.

Socialists disown Hitler although Socialist is in the Nazi name (Nationalsozialistische Deutsche Arbeiterpartei (National Socialist German Workers’ Party). Keynesians disown Hitler although many of his economic policies are straight from Keynes’ playbook. From Llewellyn H. Rockwell Jr. at mises.org:

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[Originally published August 02, 2003.]

For today’s generation, Hitler is the most hated man in history, and his regime the archetype of political evil. This view does not extend to his economic policies, however. Far from it. They are embraced by governments all around the world. The Glenview State Bank of Chicago, for example, recently praised Hitler’s economics in its monthly newsletter. In doing so, the bank discovered the hazards of praising Keynesian policies in the wrong context.

The issue of the newsletter (July 2003) is not online, but the content can be discerned via the letter of protest from the Anti-Defamation League. “Regardless of the economic arguments” the letter said, “Hitler’s economic policies cannot be divorced from his great policies of virulent anti-Semitism, racism and genocide.… Analyzing his actions through any other lens severely misses the point.”

The same could be said about all forms of central planning. It is wrong to attempt to examine the economic policies of any leviathan state apart from the political violence that characterizes all central planning, whether in Germany, the Soviet Union, or the United States. The controversy highlights the ways in which the connection between violence and central planning is still not understood, not even by the ADL. The tendency of economists to admire Hitler’s economic program is a case in point.

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The Depression Playbook, by Jeff Thomas

The economic and financial situation before the Great Depression is not comparable to the current economic and financial situation today. The world is far more indebted today, which means the impending catastrophe will be far worse. From Jeff Thomas at internationalman.com:

A crash is coming, and it may be terrific…The vicious circle will get in full swing and the result will be a serious business depression. There may be a stampede for selling which will exceed anything that the Stock Exchange has ever witnessed…Wise are those investors who now get out of debt.

Roger Babson, September, 1929

In the run-up to the 1929 crash, which heralded in the Great Depression, many pundits claimed that the new highs in the market signified that the business cycle had been “repealed.”

Stocks had never enjoyed such a bull market before, and this led many to believe that “the sky’s the limit.” All over the US, people put all the money they could find into stocks. Then, wanting to buy more, they bought on margin. Then, wanting still more, they borrowed privately to buy on margin—a double-dip into debt.

In essence, this meant that a large portion of the extreme bull market was the result of stock investments that were made with money that didn’t exist—a mere “promise” to somehow pay, with nothing to back that promise up.

This, of course, is the very essence of a bubble. And, sooner or later, bubbles pop.

After the crash, the pundits that had driven the market ever-upward were all but speechless, saying only, “No one could have predicted this.”

However, it was predicted by those who understood market bubbles. Roger Babson, in particular, made the statement above to the Annual Business Conference in Massachusetts on 5th September, 1929. At that time, he was vilified by Wall Street for making such an obviously false proclamation, yet, after the crash, he was again vilified for having brought on the crash with his statement.

Neither was true and no lesson was learned by those who created the crash. Yet, it was the logical conclusion to the buildup of events. In fact, there could have been no other outcome… and the same is true today.

The $20 trillion debt that the US government has created is far beyond anything the world has ever seen and, in fact, it exceeds the total of all other countries combined.

To continue reading: The Depression Playbook

Over The Last 10 Years The U.S. Economy Has Grown At EXACTLY The Same Rate As It Did During The 1930s, by Michael Snyder

They called the 1930s the Great Depression. Who knows what they’ll call the last 10 years, but it’s managed to only match the Great Depression’s economic growth rate. That’s according to the government’s dubious statistics. From Michael Snyder at theeconomiccollapseblog.com:

Even though I write about our ongoing long-term economic collapse every day, I didn’t realize that things were this bad.  In this article, I am going to show you that the average rate of growth for the U.S. economy over the past 10 years is exactly equal to the average rate that the U.S. economy grew during the 1930s.  Perhaps this fact shouldn’t be that surprising, because we already knew that Barack Obama was the only president in the entire history of the United States not to have a single year when the economy grew by at least 3 percent.  Of course the mainstream media continues to push the perception that the U.S. economy is in “recovery mode”, but the truth is that this current era has far more in common with the Great Depression than it does with times of great economic prosperity.

Earlier today I came across an article about President Trump’s new budget from Fox News, and in this article the author makes a startling claim…

The hard fact is that the past decade’s $10 trillion in deficit spending has produced the worst economic growth as measured by Gross Domestic Product in our nation’s history.  You read that right, in the past decade our nation’s economy grew slower than even during the Great Depression. This stagnant, new normal, low-growth economy is leaving millions of working age people behind who have given up even trying to participate, and has led to a malaise where many doubt that the American dream is attainable.

When I first read that, I thought that this claim could not possibly be true.  But I was curious, and so I looked up the numbers for myself.

What I found was absolutely astounding.

The following are U.S. GDP growth rates for every year during the 1930s

1930: -8.5%
1931: -6.4%
1932: -12.9%
1933: -1.3%
1934: 10.8%
1935: 8.9%
1936: 12.9%
1937: 5.1%
1938: -3.3%
1939: 8.0%

When you average all of those years together, you get an average rate of economic growth of 1.33 percent.

That is really bad, but it is the kind of number that one would expect from “the Great Depression”.

So then I looked up the numbers for the last ten years

2007: 1.8%
2008: -0.3%
2009: -2.8%
2010: 2.5%
2011: 1.6%
2012: 2.2%
2013: 1.7%
2014: 2.4%
2015: 2.6%
2016: 1.6%

When you average these years together, you get an average rate of economic growth of 1.33 percent.

To continue reading: Over The Last 10 Years The U.S. Economy Has Grown At EXACTLY The Same Rate As It Did During The 1930s

Comparing the 1930s and Today, Parts 1 and 2, Doug Casey

Those who think the coming depression will be an exact repeat of the Great Depression are likely to be quite surprised. From Doug Casey at caseyresearch.com (Part 1):

You’ve heard the axiom “History repeats itself.” It does, but never in exactly the same way. To apply the lessons of the past, we must understand the differences of the present.

During the American Revolution, the British came prepared to fight a successful war—but against a European army. Their formations, which gave them devastating firepower, and their red coats, which emphasized their numbers, proved the exact opposite of the tactics needed to fight a guerrilla war.

Before World War I, generals still saw the cavalry as the flower of their armies. Of course, the horse soldiers proved worse than useless in the trenches.

Before World War II, in anticipation of a German attack, the French built the “impenetrable” Maginot Line. History repeated itself and the attack came, but not in the way they expected. Their preparations were useless because the Germans didn’t attempt to penetrate it; they simply went around it, and France was defeated.

The generals don’t prepare for the last war out of perversity or stupidity, but rather because past experience is all they have to go by. Most of them simply don’t know how to interpret that experience. They are correct in preparing for another war but wrong in relying upon what worked in the last one.

Investors, unfortunately, seem to make the same mistakes in marshaling their resources as do the generals. If the last 30 years have been prosperous, they base their actions on more prosperity. Talk of a depression isn’t real to them because things are, in fact, so different from the 1930s. To most people, a depression means ’30s-style conditions, and since they don’t see that, they can’t imagine a depression. That’s because they know what the last depression was like, but they don’t know what one is. It’s hard to visualize something you don’t understand.

To continue reading: Comparing the 1930s and Today, Part 1

And the link to: Comparing the 1930s and Today, Part 2

 

She Said That? 2/21/16

Coming soon for a return engagement: The Great Depression. From Amity Shlaes (born 1960), American author, newspaper and magazine columnist, and currently the chair of the board of trustees of the Calvin Coolidge Presidential Foundation, The Forgotten Man: A New History of the Great Depression (2007):

The big question about the American depression is not whether war with Germany and Japan ended it. It is why the Depression lasted until that war. From 1929 to 1940, from Hoover to Roosevelt, government intervention helped to make the Depression Great.

Let There Be Deflation—-It Works! by Bill Bonner

The bright side of contraction and deflation, from Bill Bonner, at davidstockmanscontracorner.com:

The Coming Resolution

We’ve been exploring how the credit bubble resolves itself. Inflation? Deflation? Are we locked in to a long, long period of stagnation, slump and economic sclerosis?

Yesterday, we shared our research department’s forecast for the short term: Based on simple regression-to-the-mean logic, it suggests that the “most likely” course for US stocks over the next three months is a loss of more than 6%.

Today, we give you our long-term forecast.

Little by Little or One Savage Blow

“This is the most negative ever,” says our chief number cruncher Stephen Jones. It shows a loss of 9.8% every year for the next 10 years. In other words, our mean-regressing-, debt- and demography-adapted model also seems to be pointing to a long depression.

But an average loss of 9.8% per year over 10 years can happen in a number of different ways. Little by little. Or in one savage blow.

A foreshadow of the long depression crossed the planet like a total eclipse of the sun twice in the last 100 years.

The first time was America’s Great Depression. You know that story. Stocks crashed. Businesses went broke. People lost their jobs. Banks failed. Events were following the typical depression script, which probably would have bottomed out and recovered within a couple of years – as happened in the Depression of 1921.

But then, the federal government stepped in. It froze prices, including the price of labor. It cut off trade. It blocked liquidations. It arrested the progress of the correction.

Murray Rothbard analyzed the policies of the Hoover and Roosevelt administrations in his 1963 classic, America’s Great Depression. He showed how government, trying to stop the Depression, actually prevented it from doing its work.

The short, quick deflationary shock – which should have slashed bad debt, bad businesses and bad investments – turned into a long, agonizing slump. The Depression, which should have been over by 1933, continued until the 1940s and was only ended then by the biggest public works spending program in history – World War II.

This, by the way, did not actually make people better off economically, but it “put people to work” and largely disguised the drop in living standards which that war and the Depression had caused.

http://davidstockmanscontracorner.com/let-there-be-deflation-it-works/

To continue reading: Let There Be Deflation—It Works!

Blogger Ben’s Basically Full Of It, by David Stockman

About 95 percent of what passes as economic wisdom is useless garbage, but the remaining 5 percent, mostly the basics, comprise an extremely powerful analytic toolbox. As this piece from David Stockman makes clear, Benjamin Bernanke’s “economics” fall in the 95 percent, and Stockman’s fall in the 5 percent. From David Stockman, at davidstockmanscontracorner.com:

Ben Bernanke’s skin is as thin, apparently, as is his comprehension of honest economics. The emphasis is on the “honest” part because he is a fount of the kind of Keynesian drivel that passes for economics in the financially deformed world that the Bernank did so much to bring about.

Just recall that he first joined the Fed way back on 2002 after an academic career of scribbling historically superficial and blatantly misleading monographs about the 1930s. These were essentially zeroxed from Milton Friedman’s monumental error about the cause of the Great Depression. In a word, Friedman and Bernanke pilloried the Fed for not going on a bond buying spree during 1930-1932 and thereby stopping the shrinkage of money and credit.

In fact, excess reserves in the banking system soared by 12X during those four years, interest rates were at rock bottom and the US economy was saturated with idle cash. So there was no financial stringency——not the remotest aspect of a great monetary policy error.

Instead, what actually happened was that the US banking system was massively insolvent after a 12-year credit boom fueled by the Fed’s printing presses. This first great credit bubble arose initially from the Fed’s maneuvers to fund the massive war production surge of 1915-1919 and then from its fostering of a vast domestic and international credit bubble during the Roaring Twenties.

Alas, none of the Fed governors during the 1930-1932 credit contraction had graced the lecture halls of Princeton. But to nearly a man they knew you can’t push on a string, and that a healthy economy requires that busted loans and soured speculations must be purged from the financial system in order for sustainable growth to resume.

http://davidstockmanscontracorner.com/blogger-bens-basically-full-of-it/

To keep reading: Blogger Ben’s Basically Full Of It