Why the Great Depression of 2008 was not like the Great Depression of the 1930’s

On the 1930’s, no one yet understood just how much quantitative easing and welfare was necessary to keep most Americans from feeling the pinch of, and, consequently, not realizing the reality of the Depression.  This time around, we have a much better mechanism in place for spending money we don’t have.  Also, fewer people care that they don’t work and are much more receptive to handouts without any sense of destitution. Finally, we have a congress that lacks the courage to look people in the eye and tell them that times are tough but that the government’s job isn’t to fix everyone’s problems.

An honest study of the Great Depression reveals that economic malaise continued for 14 years, or, just about as long as FDR bamboozled the people into backing his New Deal policies over any kind of free market.  The War forced FDR to loosen his grip and the result was that tight-fisted corporate leaders saw a potential for profit in the war effort under the loosened restraints.

Fast forward to 2014, where we are in the sixth year of Depression, and Obama is now trying to increase taxes on investment, the very thing that is sure to keep corporations from expanding and spurring the economy.  In the mean time he borrows ever more money, so much so that we soon will not even be able to service the interest with our entire GDP.  Despite gas prices plummeting, a definite economy stimulator, and despite the rush of American innovation, we are handcuffed by the administration’s insistence upon following FDR’s failed policies.

The last president to really turn things around in this country, to pay down enormous (for the time) debts and turn huge deficits into huge surpluses, was Calvin Coolidge.  Spurned by history as being too “silent”, by which is meant lacking in flash and pizzazz, too stodgy and old-fashioned — not progressive, in other words, he was exactly what the country needed after the draconian and free-spending years of Wilson.  Unfortunately, his successor returned to progressive ways, listened to the Fed, and undid a lot of what Coolidge accomplished.  In coming to power, FDR promised to change from Hoover’s policies and then continued in them and, in the New Deal, exploded them.

In W. Bush and Obama, we have a complete repeat of history.  Only this time it is worse.  We feel it less because it is being paid down the road more.  This time, don’t expect 14 years of misery.  Expect maybe 25 or 30.  This hole we are in is ten times what is was in 1930.   It will take more than one Calvin Coolidge to get us out of this one.  And, on the horizon, who is there among our Republican hopefuls who is going to have that much backbone?  Someone is going to have to start us on the road to austerity that allows us to finally break out of our massive debt hole.  But any talk of that is political suicide.

When I speak of austerity, most people will misunderstand.  I am not saying that tax-paying citizens must sacrifice their all for the state.  I am saying that anyone who lives off government must be cut off and, as the economy gains traction, be turned into tax-paying citizens.  This is why the Next Coolidge cannot surface.  The ignorant masses, who don’t realize that they must stop abusing the gravy train or it will collapse altogether, are inclined to riot rather than face the truth and start embracing the change that must come.

Thank God gas prices are down.  But it’s probably only a matter of time before regulations will once more push them back up again.  Because, more important that getting the economy moving, is the propping of the petro-dollar.  The illusion of wealth trumps real wealth every time.


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Filed under Economics/ Book Reviews, Law and Politics

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