Changes

*As documented so well by free-market economists Ludwig von Mises, Friedrich Hayek, and Murray Rothbard, during the 1920s, the Federal Reserve Board, exercising its power to expand the money supply, caused an inflationary binge — an action which created a false aura of prosperity. When the political authorities — faced with this inflationary threat and restrained by the gold standard — finally ceased the monetary expansion near the end of the decade, the inevitable economic hangover was reflected in the 1929 stock market crash and in generally depressed economic conditions. In other words, contrary to the indoctrination which the American people have received from their political authorities, the Great Depression was not the failure of America's free-enterprise system — it was the failure of political manipulation of money and credit.  

*As documented so well by free-market economists Ludwig von Mises, Friedrich Hayek, and Murray Rothbard, during the 1920s, the Federal Reserve Board, exercising its power to expand the money supply, caused an inflationary binge — an action which created a false aura of prosperity. When the political authorities — faced with this inflationary threat and restrained by the gold standard — finally ceased the monetary expansion near the end of the decade, the inevitable economic hangover was reflected in the 1929 stock market crash and in generally depressed economic conditions. In other words, contrary to the indoctrination which the American people have received from their political authorities, the Great Depression was not the failure of America's free-enterprise system — it was the failure of political manipulation of money and credit.  

*Faced with the Great Depression — a depression which had been caused by government itself — Roosevelt's "solution" was to implement the socialist-fascist economic system under which Americans now suffer. Under the banner of "saving America's free-enterprise system," FDR was directly responsible for the abandonment of America's 150-year history of free enterprise. [http://www.fff.org/freedom/0891a.asp]

*Faced with the Great Depression — a depression which had been caused by government itself — Roosevelt's "solution" was to implement the socialist-fascist economic system under which Americans now suffer. Under the banner of "saving America's free-enterprise system," FDR was directly responsible for the abandonment of America's 150-year history of free enterprise. <ref>http://www.fff.org/freedom/0891a.asp</ref>

== Disaster in the Making ==

== Prelude to the Depression ==

The Great Depression has central place in twentieth century economic history. In its shadow, all other depressions are insignificant. Whether assessed by the relative shortfall of production from trend, by the duration of slack production, or by the product-depth times duration-of these two measures, the Great Depression is an order of magnitude larger than other depressions: it is off the scale. All other depressions and recessions are from an aggregate perspective (although not from the perspective of those left unemployed or bankrupt) little more than ripples on the tide of ongoing economic growth. The Great Depression cast the survival of the economic system, and the political order, into serious doubt.

The Great Depression has central place in twentieth century economic history. In its shadow, all other depressions are insignificant. Whether assessed by the relative shortfall of production from trend, by the duration of slack production, or by the product-depth times duration-of these two measures, the Great Depression is an order of magnitude larger than other depressions: it is off the scale. All other depressions and recessions are from an aggregate perspective (although not from the perspective of those left unemployed or bankrupt) little more than ripples on the tide of ongoing economic growth. The Great Depression cast the survival of the economic system, and the political order, into serious doubt.

As early as 1925, then-[[Secretary of Commerce]] Hoover had warned President Coolidge that stock market speculation was getting out of hand. Yet in his final [[State of the Union Address]], Coolidge saw no reason for alarm. "No Congress...ever assembled has met with a more pleasing prospect than that which appears at the present time"...said Coolidge early in 1929. "In the domestic field there is tranquility and contentment...and the highest record of prosperity in years."

As early as 1925, then-[[Secretary of Commerce]] Herbert Hoover had warned President Coolidge that stock market speculation was getting out of hand. Yet in his final [[State of the Union Address]], Coolidge saw no reason for alarm. "No Congress...ever assembled has met with a more pleasing prospect than that which appears at the present time"...said Coolidge early in 1929. "In the domestic field there is tranquility and contentment...and the highest record of prosperity in years."

[[Al Smith]]'s campaign manager, [[General Motors]] executive John J. Raskob, agreed. In an article entitled "Everybody Ought to be Rich" Raskob declared, "Prosperity is in the nature of an endless chain and we can break it only by refusing to see what it is." President-elect Hoover disagreed. Even before his inauguration he urged the [[Federal Reserve]] to halt "crazy and dangerous" gambling on [[Wall Street]] by increasing the discount rate the Fed charged banks for speculative loans. He asked magazines and newspapers to run stories warning of the dangers of rampant speculation.

[[Al Smith]]'s campaign manager, [[General Motors]] executive John J. Raskob, agreed. In an article entitled "Everybody Ought to be Rich" Raskob declared, "Prosperity is in the nature of an endless chain and we can break it only by refusing to see what it is." President-elect [[Herbert Hoover]] disagreed. Even before his inauguration he urged the [[Federal Reserve]] to halt "crazy and dangerous" gambling on [[Wall Street]] by increasing the discount rate the Fed charged banks for speculative loans. He asked magazines and newspapers to run stories warning of the dangers of rampant speculation.

Once in the office, the new president ordered a reluctant [[Andrew Mellon]], his holdover secretary of the treasury, to promote the purchase of bonds instead of stocks. He sent his friend Henry Robinson, a Los Angeles banker, to convey a cautionary message to the financiers of Wall Street--and received in return a long, scoffing memorandum from Thomas W. Lamont of [[J.P. Morgan]] and Company. When the [[Federal Reserve Board]] that August did take steps to check the flow of speculative credit, New York bankers defied Washington, the National City Bank alone promising $100 million in fresh loans. An angry Hoover let the president of the [[New York Stock Exchange]] know that he was thinking of regulatory steps to curb stock manipulation and other excesses. Yet he undercut his own threat by placing ultimate responsibility for such measures on New York State's new governor, [[Franklin D. Roosevelt]], who was already contemplating running against Hoover.

Once in the office, the new president ordered a reluctant [[Andrew Mellon]], his holdover secretary of the treasury, to promote the purchase of bonds instead of stocks. He sent his friend Henry Robinson, a Los Angeles banker, to convey a cautionary message to the financiers of Wall Street--and received in return a long, scoffing memorandum from Thomas W. Lamont of [[J.P. Morgan]] and Company. When the [[Federal Reserve Board]] that August did take steps to check the flow of speculative credit, New York bankers defied Washington, the National City Bank alone promising $100 million in fresh loans. An angry Hoover let the president of the [[New York Stock Exchange]] know that he was thinking of regulatory steps to curb stock manipulation and other excesses. Yet he undercut his own threat by placing ultimate responsibility for such measures on New York State's new governor, [[Franklin D. Roosevelt]], who was already contemplating running against Hoover.

By early September, 1929 the market was topping out, some eighty two points above its January plateau. In eighteen months, General Electric had tripled in value, reaching $396 per share. Other blue chips, fueled by more than $8 billion in brokers' loans, enjoyed similar rises. The last week of October, however, brought a terrible reckoning. On October 24 alone, radio stocks lost 40% of their paper value. [[Montgomery Ward]] surrendered thirty-three points. Big bankers tried and failed to stem the dizzying decline in [[U.S. Steel]], a bellwether stock.

By early September, 1929 the market was topping out, some eighty two points above its January plateau. In eighteen months, General Electric had tripled in value, reaching $396 per share. Other blue chips, fueled by more than $8 billion in brokers' loans, enjoyed similar rises. The last week of October, however, brought a terrible reckoning. On October 24 alone, radio stocks lost 40% of their paper value. [[Montgomery Ward]] surrendered thirty-three points. Big bankers tried and failed to stem the dizzying decline in [[U.S. Steel]], a bellwether stock.

== A Day of Reckoning ==

== The Stock Market Crash ==

On Black Tuesday, the twenty-ninth, the market collapsed. In the words of a gray haired Stock Exchange guard, "They roared like a lot of lions and tigers. They hollered and screamed, they clawed at one another collars. It was like a bunch of crazy men. Every once in a while, when Radio or Steel or Auburn would take another tumble, you'd see some poor devil collapse and fall to the floor."

On Black Tuesday, the twenty-ninth, the market collapsed. In the words of a gray haired Stock Exchange guard, "They roared like a lot of lions and tigers. They hollered and screamed, they clawed at one another collars. It was like a bunch of crazy men. Every once in a while, when Radio or Steel or Auburn would take another tumble, you'd see some poor devil collapse and fall to the floor."

Praise for Hoover's intervention was widespread. "No one in his place could have done more," concluded the ''"New York Times"'' in the spring of 1930, by which time the Little Bull Market had restored a measure of confidence on Wall Street. "Very few of his predecessors could have done as much." concluded the Times. On February 18 Hoover announced that the preliminary shock had passed, and that employment was again on the mend. In June, a delegation of bishops and bankers called at the White House to warn of spreading joblessness. Hoover reminded them of his successful conferences with business and labor, and the explosion of government activity and public works designed to alleviate suffering. "Gentlemen," he concluded, "you have come six weeks too late".  

Praise for Hoover's intervention was widespread. "No one in his place could have done more," concluded the ''"New York Times"'' in the spring of 1930, by which time the Little Bull Market had restored a measure of confidence on Wall Street. "Very few of his predecessors could have done as much." concluded the Times. On February 18 Hoover announced that the preliminary shock had passed, and that employment was again on the mend. In June, a delegation of bishops and bankers called at the White House to warn of spreading joblessness. Hoover reminded them of his successful conferences with business and labor, and the explosion of government activity and public works designed to alleviate suffering. "Gentlemen," he concluded, "you have come six weeks too late".  

== Even a Panic Is Not Altogether a Bad Thing... ==

== Government Response ==

The first instinct of governments and central banks faced with this gathering Depression began was to do nothing. Businessmen, economists, and politicians (memorably Secretary of the Treasury Mellon) expected the recession of 1929-1930 to be self-limiting. Earlier recessions had come to an end when the gap between actual and trend production was as large as in 1930. They expected workers with idle hands and capitalists with idle machines to try to undersell their still at-work peers. Prices would fall. When prices fell enough, entrepreneurs would gamble that even with slack demand production would be profitable at the new, lower wages. Production would then resume.

The first instinct of governments and central banks faced with this gathering Depression began was to do nothing. Businessmen, economists, and politicians (memorably Secretary of the Treasury Mellon) expected the recession of 1929-1930 to be self-limiting. Earlier recessions had come to an end when the gap between actual and trend production was as large as in 1930. They expected workers with idle hands and capitalists with idle machines to try to undersell their still at-work peers. Prices would fall. When prices fell enough, entrepreneurs would gamble that even with slack demand production would be profitable at the new, lower wages. Production would then resume.

However, the "liquidationist" view carried the day. Even governments that had unrestricted international freedom of action--like France and the United States with their massive gold reserves--tended not to pursue expansionary monetary and fiscal policies on the grounds that such would reduce investor "confidence" and hinder the process of liquidation, reallocation, and the resumption of private investment.

However, the "liquidationist" view carried the day. Even governments that had unrestricted international freedom of action--like France and the United States with their massive gold reserves--tended not to pursue expansionary monetary and fiscal policies on the grounds that such would reduce investor "confidence" and hinder the process of liquidation, reallocation, and the resumption of private investment.

== Boom or Bust ==

== Boom or Bust Cycles ==

For most of our history Americans have been resigned to the "boom and bust" school of economics. When the economy got overheated and speculation ran rampant, a crash was unavoidable. Under such circumstances the best government could do was to do nothing that might make a bad thing worse. "Panics" had occurred in the 1830's under President [[Martin Van Buren]], in the 1850s under [[James Buchanan]], during [[Ulysses S. Grant]]'s term in the 1870s and, most notably, under [[Grover Cleveland]] in the 1890s.

For most of our history Americans have been resigned to the "boom and bust" school of economics. When the economy got overheated and speculation ran rampant, a crash was unavoidable. Under such circumstances the best government could do was to do nothing that might make a bad thing worse. "Panics" had occurred in the 1830's under President [[Martin Van Buren]], in the 1850s under [[James Buchanan]], during [[Ulysses S. Grant]]'s term in the 1870s and, most notably, under [[Grover Cleveland]] in the 1890s.

[http://www.whitehouse.gov/history/presidents/hh31.html] [http://www.stock-market-crash.net/1929.htm] [http://econ161.berkeley.edu/TCEH/Slouch_Crash14.html][http://www.pbs.org/wgbh/amex/dustbowl/peopleevents/pandeAMEX07.html] [http://hoover.archives.gov/exhibits/Hooverstory/gallery07/gallery07.html] [http://www.econlib.org/LIBRARY/Enc/GreatDepression.html][http://us.history.wisc.edu/hist102/lectures/lecture18.html][http://www.presidency.ucsb.edu/herbert_hoover.php] [http://www.econlib.org/LIBRARY/Enc/GreatDepression.html] [http://www.suffolk.lib.ny.us/youth/jcssgreatdepression.html] [http://www.auburn.edu/~polisci/U102/spin-sp95/depress8.html][http://www.coe.uh.edu/courses/cuin6373/idhistory/index.html] [http://www.americaslibrary.gov/cgi-bin/page.cgi/jb/wwii/stockmrkt_1][http://www.fdrlibrary.marist.edu/research.html]

* [http://www.whitehouse.gov/history/presidents/hh31.html]

* [http://www.stock-market-crash.net/1929.htm]

* [http://econ161.berkeley.edu/TCEH/Slouch_Crash14.html]

* [http://www.pbs.org/wgbh/amex/dustbowl/peopleevents/pandeAMEX07.html]

* [http://hoover.archives.gov/exhibits/Hooverstory/gallery07/gallery07.html]  

* [http://www.econlib.org/LIBRARY/Enc/GreatDepression.html]

* [http://us.history.wisc.edu/hist102/lectures/lecture18.html]

* [http://www.presidency.ucsb.edu/herbert_hoover.php]

* [http://www.econlib.org/LIBRARY/Enc/GreatDepression.html]  

* [http://www.suffolk.lib.ny.us/youth/jcssgreatdepression.html]

* [http://www.auburn.edu/~polisci/U102/spin-sp95/depress8.html]

* [http://www.coe.uh.edu/courses/cuin6373/idhistory/index.html]

* [http://www.americaslibrary.gov/cgi-bin/page.cgi/jb/wwii/stockmrkt_1]

* [http://www.fdrlibrary.marist.edu/research.html]

 

 

 

[[category:United States History]]

[[category:United States History]]

[[Category:Great Depression]]

[[Category:Great Depression]]