Monday, October 6, 2008

Government causes depressions not lack thereof

Other than this blog, I try to not discuss politics. However, sometimes people say things that are so insane they warrant a response.

Like while I was talking with a friend of mine named Bob this past weekend at hunting camp. He was trying to convince me that the Great Depression happened due to lack of government intervention and that FDR was needed to end it.

I had to correct him. The Great Depression did not happen because of not enough government intervention, it happened because of TOO MUCH government intervention. If the government had left the markets fend for themselves, it probably would have been a short depression.

"Oh, come on," Bob mocked me. "You're full of it."

"Listen," I said. "There were several depressions in the 1800s and all of them were less than three years in length. And while some experts wanted the President to intervene, they all refused. Because of that, these depressions were short lived."

"Oh, come on, he mocked me. "You're full of it."

"Nope. Hoover decided to help the poor by raising taxes. What this did was take more money out of the pockets of people who already didn't have any. So a recession turned into a depression. Then FDR came into office, and he took even more money out of people's pockets.

"So, while so many people thought FDR was helping, he was actually making things worse. He was a good talker. He was a good talker the way Obama is a good talker."

My friend laughed at me.

"The Great Depression did not end because of FDR, it did not end because of WWII. In fact, the depression didn't end until after WWII was over."

"You're full of it."

"No. If the depression was over during the war, why were people forced to ration. Rationing isn't something you tell people to do when a depression is over."

He looked at me with his lips puckered. By this time the rest of the guys at camp are circling around us eager to chime in.

"So this current financial crisis was not caused by president Bush," I added. "We are not going to let teachers and the media tell this lie. The reason this financial crisis occurred was because of too much government intervention.

My other friend Rich chimed in, "It started out as a noble idea during the Carter and Clinton administrations. They wanted to make sure every person could get into a home. So, when Fannie Mae and Freddie Mac were forced to buy out loans to people they knew couldn't afford it, this skyrocketed the number of houses sold. This, in turn, caused the value of homes to artificially skyrocket.

I said, "Bush Warned about this. McCain warned about this. Liberal democrats like Chris Dodd (who benefited the most from this financially and politically) refused to admit there was a problem. And now it's men like Dodd -- who caused this problem in the first place -- who we are letting solve this crisis.

Rich said, "The only reason Bush wants to do this liberal $700 trillion bailout program is because he knows the media will once again convince America that he is the blame for this crisis, and he has to be seen as doing something."

"But," Bob said, "We had to bail out Wall Street. We couldn't allow all these businesses to go under."

Rich said, "During the Clinton recession of 2000," I said, "Nobody said anything about helping all those 300 plus banks then that went out of business. How does anybody learn if we keep bailing out failing businesses. If you fail at running a business, why should we reward you?"

Bob said, "We can't let the economy crash."

Rich said, "The economy has survived far worse than this. It is a resilient economy, the most resilient ever. While liberals see the economy as sucky, conservatives tend to have a more optimistic outlook on it. Hence McCain saying, 'the fundamentals of the economy are sound.'

I said, "The fundamentals of the economy are sound and will continue to be sound SO LONG AS THE GOVERNMENT DOESN'T DO SOMETHING STUPID TO SCREW IT UP."

Political discussions at camp are all in good fun for me at least. One of my friends, Rich, thinks it is a battle of good versus evil. I understand his POV, but I'd never go there.

Unlike my other conservative friends, I'm not a partisan and am willing to compromise, so long as compromise doesn't mean giving up on my principles.

While this discussion was all in good fun, a part of me is irritated that one of my friends is brainwashed. Some day, somehow, something I say he's going to mull over and over in his mind, and some day the light will go on.

That's why it's important to never give up. Yet, to have fun in the process. Because if you get mad, you lose.


S.W. Anderson said...

FYI, New Deal Democrats never claimed the markets wouldn't right themselves eventually.

Of course the stock market and the greater economy would come back eventually. But in the meantime, how many people would have to live in Hoovervilles? How many parents would go to bed hungry because they couldn't afford enough food for themselves and their children, and wouldn't send their children to bed hungry?

How many jobless men left their families to go seek work on the road, not because they were sure of finding work, but because then their wives could seek handouts from charities? Because in those days, it was considered dishonorable and humiliating for a man to seek charity, but it was OK for a woman without a man to do that.

The problem with the free market is that it is an unthinking, uncaring mechanism. I neither knows nor cares how many people can't feed their families or how many people lose their home, their business, their job, their retirement savings or whatever. The free market just is what it is and it does what it does.

Sometimes what it does is hurt millions of people badly. The free market, left to go its own way, always goes from boom to bust. In busts, lots of innocent people get hurt.

That's why government oversight, regulation and, at times, intervention are needed.

It makes no more sense for people to leave their fate, their economic security, to a blind, uncaring and sometimes brutal mechanism than to a tyrant with the same characteristics.

It's sad that so many people still fail to understand this. A big enough bust, however, has the power to make believers out of many of them.

S.W. Anderson said...

"Hoover decided to help the poor by raising taxes. What this did was take more money out of the pockets of people who already didn't have any. So a recession turned into a depression. Then FDR came into office, and he took even more money out of people's pockets."

What Hoover actually did was cut the federal budget, because so many people were out of work and so many businesses were failing he knew revenues were about to tank. That was conventional conservative Republican orthodoxy, and it made matters much worse.

What Roosevelt actually did was to embark on a course of deficit spending, to get the economy moving again. Results weren't always even, and the overall effect took longer than hoped for, but Roosevelt's measures were helpful.

They called it the Great Depression for a reason. It was a calamitous deflation, a bigger, worse and different kind of collapse than the busts and panics of 40 and 50 years earlier. Likening it to a recession is simply absurd.

I encourage you read some history. We're all entitled to our own opinions, but not to our own facts.

Freadom said...

You should read economics 101. All depressions start out as recessions. Actions and innactions of the President can and do effect how deep the recession goes, or if it turns into a recession.

It's understandable that many people will refuse to believe the truth about the Great Depression because that same left wing story has been inculcated into the minds of so many for many years.

Thank God the other side now has a voice and a way to get the truth out.

Freadom said...

I never said that all FDR did was bad, but his government interventions did nothing to end the depression. He gets credit for it nonetheless. The depression didn't end until the end until a later administration.

S.W. Anderson said...

"You should read economics 101."

FWIW, I read/took Microeconomics, Macroeconomics and International Economics.

Your claim FDR's interventions did nothing to end the Depression are simply wrong, but I'm frankly not surprised you consider it the supposedly hidden truth millions of brainwashed people refuse to accept.

You can still find people in the South who talk about the days of slavery in romantic terms of benign, even kindly, slaveowners and happy black folks who loved working in the cotton fields in return for food and shelter, without having to be responsible for anything else. Just carefree, happy people those slaves.

And the amazing thing is that the people who will tell you that really believe it's true.

I took care not to claim the New Deal solved, fixed or ended the Depression. Indeed, most New Deal legislation was actually aimed at reform rather than repair. It is well established, though, that many New Deal measures helped many people through the Depression; helped get the economy moving toward recovery; helped create infrastructure and provide services that accelerated and evened out the recovery when it got under way. Those aren't small or insignificant achievements, especially when you consider that architects of the New Deal were breaking new ground, experimenting and refining what they did as they went along.

Again, I encourage you to read the history of this country from the post WWI period to the post WWII period, especially the 1920's and 1930's.