Quote:
Originally posted by Buff@Aug 11 2003, 12:49 PM
Colin:
The "Roaring 20s" were a false boom created by expanded money stock and artificially low interest rates.
The Great Depression was the bust that always accompanies a false boom.
It's really that simple.
I don't care what Keynesian economists say about what the government should do. They are wrong. They have always been wrong. Von Mises predicted the Great Depression, Keynes' policy advice helped it last 25 years.
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I agree that the money supply was expanded too quickly during the 1920s. Nothing is ever that simple.
There were many other errors including the FED increasing the lending rate and and I think in particular the government forcing a balanced budget by raising income taxes and cutting government spending. Both shrunk the GDP further and exacerbated the problem.
Also as soon as the recession began the FED contracted the money supply.
Obviously there are different versions of what happened and what caused it but it seems to me that doing the opposite of what occured would have been best. Expand the money supply, decrease taxes, increase spending. Only when the government increased spending in 1934 did recovery really get going.
Keynes. The depression peaked in 1932/33. His General Theory was published in 1936. I don't see why you say the depression lasted 25 years. GDP doubled from 1933 until 1940. Personal consumption doubled from 1933 to 1942.