It sounds like what you're saying is there's lots of different symptoms,
but they're all being treated with the same medicine. Medicine that hasn't shown to be
effective in any single specific instance. So instead of focusing on treating symptoms,
let's focus on preventative measures. If you have an economy based on capitalism
you inevitably have these depressions. They happen cyclically. So maybe the New Deal couldn't fix the
situation because all those programs were just band-aids that didn't address the real cause.
It's very easy and fashionable to say that, but actually depressions are not a natural feature
of capitalism. This or that sector may go up and down, but system wide collapses are foreign
to capitalism without government intervention. Think of it this way. Imagine a master builder,
who has a blueprint to build a house, but he doesn't have enough resources to build
the house that the blueprint calls for. So the longer he persists in working on it
the more resources and labor hours he wastes, because the project will eventually have to be
abandoned for lack of materials. The sooner he spots his error the better. This is what happens
with the economy as a whole when the Federal Reserve pushes interest rates down artificially.
It gives entrepreneurs the idea that there are more resources available than there really are.
The economy becomes too ambitious, embarking on long term projects for which the necessary
resources do not exist. We obviously don't want fiscal or monetary stimulus at a time like that
because that just encourages entrepreneurs to continue along this unsustainable path rather than
making them realize they need to abandon it and shift resources into more appropriate channels.
Wait a minute. So you're saying it's like taking an energy drink and you're running
around on that artificial high, but if you try to nourish yourself entirely on
energy drinks with nothing else, you're gonna crash and you're gonna collapse.
And that's what happened in the 1920's under Herbert Hoover leading up to the stock market
crash. And one of the first things Hoover did was convene a meeting of big business leaders and urge
them to keep wages stable, even in a time when prices are falling. To keep wages stable you're
basically trying to give everybody a raise during the worst economic downturn in American history.
Not the best time for a raise really. Right, because the business can barely
afford to keep the workers they have at those wages that they're paying them when the prices
are falling through the floor. So at a certain point if those wages are kept high enough,
everyone is going to lose their job because the business is going to go out of business.
That's exactly right. And by the way, contrary to what most people have been told, Hoover did
not sit on his hands, he had no problem spending money. He spent more on public works projects in
four years than had been spent in the previous twenty. His Reconstruction Finance Corporation
gave emergency low interest loans to failing businesses and then began to bail out the states,
helping them pay for unemployment relief, fund public works projects, etc. And then let's talk
taxes. The Smoot-Hawley Tariff introduced tariffs, that is taxes on imported goods, on over 20,000
products. And the idea was to have these taxes be so high that nobody in his right mind would pay
them, instead of buying a foreign product with these ridiculous taxes on them, you would just
buy the American product, which could therefore be raised in price because you have nowhere else
to go. Now this disrupted international trade and hurt Americans because American trading
partners retaliated, when their products were basically shut out of U.S. markets. The Italian
government doubled its tariffs on American cars in response to what the U.S. was doing to them.
So American automobile sales in Italy fell by 90%. And then just as the Depression is getting really
bad, Hoover took the top marginal income tax rate and raised it from 25% to 63%. And then corporate
taxes go up, estate taxes go up, gift taxes go up, as do taxes on cars, tires, gasoline, toiletries,
electric energy, luxury items, bank checks, and even telephone, telegraph, and radio messages.
So I might point out that at the time his opponent in the 1932 election Franklin Roosevelt and
Roosevelt's vice presidential nominee Jack Garner were criticizing him for this. Garner said Hoover
is leading the country down the road to socialism. And Franklin Roosevelt himself didn't say "if
only Hoover would spend more money," he called Hoover's "the greatest spending administration
in peacetime in all our history." So not exactly what you learned in the 7th grade textbook.