Creating a Great Depression

That is the title of a piece by Martin Hutchinson over at The Bears Lair about the parallels between the lead up to The Great Depression and our current financial position. He posits, and I believe he is correct, that the course our government is pursuing will serve to make the situation worse, just as the 1929 events were precipitated by disastrous governmental policy. His opening sets the tone:

Financial downturns are unpleasant, but they do not need to turn into the Great Depression, which historians now agree was the product primarily of a number of egregious policy mistakes. For almost 80 years, we have thus felt safe from a recurrence of the “Great Depression” phenomenon, primarily on the basis of “we have learned from those mistakes – nobody would today be so stupid.” Sadly recent events suggest that this optimism may have been misplaced and that politicians, never the most economically intelligent of mankind, may be working towards the considerable feat of constructing a Great Depression – Mark II.

He goes on to provide a concise summary of the events and policies that lead to the crash and then shows in stark terms how much our government seems to be repeating the act. Martin closes with this warning:

Thus not all of these factors operate to repeat the 1930s exactly; on the other hand, some of them merely promise a more inflationary version of that sorry decade, which would probably be even more unpleasant. While a re-run of the Great Depression, with or without hyperinflation, is still by no means inevitable, we are a lot closer than we were a month ago.

Read Hutchinsons whole post and consider it.

As stated in Dick Armey’s piece I linked to earlier, “The market is rational and the government is dumb.”

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