Why You've Never Heard of the Great Depression of 1920

[Masha]

A good and very clear video explaining why you should never "stimulate" economy with stimulus packages and money-printing. I recommend listening to the whole thing.

[briann]

There are plenty of more recent examples of this:

1)  Japan's recession in the 90's, they tried to print too much money to no avail.

2)  We did the same thing in the 70's... also it didn't help at all.

Both of these examples caused stagflation which is actually a deterrent from recovering.  Thats not to say that a central bank shouldn't try and keep a reasonable amount of liquidity available during collapsed, but you cant force banks to lend by printing more during large recessions... it never never never works!!!

[TheCoon]

Anyone with half a brain can understand when you print more money you cause inflation. Same reason Zimbabwe is a basket case.

[Masha]

Briann, are you a follower of Austrian economics?

[Masha]

Anyone with half a brain can understand when you print more money you cause inflation. Same reason Zimbabwe is a basket case.

It will end by the U.S. running out of paper.

[Moshe92]

There are plenty of more recent examples of this:

1)  Japan's recession in the 90's, they tried to print too much money to no avail.

2)  We did the same thing in the 70's... also it didn't help at all.

Both of these examples caused stagflation which is actually a deterrent from recovering.  Thats not to say that a central bank shouldn't try and keep a reasonable amount of liquidity available during collapsed, but you cant force banks to lend by printing more during large recessions... it never never never works!!!

I learned in my economics class a few days ago about how Japan was stuck in a liquidity trap.

[briann]

Briann, are you a follower of Austrian economics?

Yes.  I am the biggest proponent of Austrian economics you will ever find.  Its not a theory... its a fact....  and if Obama understood this... he would NEVER try to prolong the downturn with his stupid 'stimulus'. 

[Masha]

Briann, are you a follower of Austrian economics?

Yes.  I am the biggest proponent of Austrian economics you will ever find.  Its not a theory... its a fact....  and if Obama understood this... he would NEVER try to prolong the downturn with his stupid 'stimulus'. 

Interesting. I an just beginning to learn about this.

[briann]

Briann, are you a follower of Austrian economics?

Yes.  I am the biggest proponent of Austrian economics you will ever find.  Its not a theory... its a fact....  and if Obama understood this... he would NEVER try to prolong the downturn with his stupid 'stimulus'. 

Interesting. I an just beginning to learn about this.

Well its not really very complicated.  Its very simple.  Just remember that nearly everything that the government has done to interfere with private enterprise in the last 20 years has made things worse.  The idea of 'Tinkering' with the economy always causes something very bad to happen down the line.

The best example of this is the stupidity behind the Community Reinvestment Act.  But there are so many other examples.  IE:  The government not allowing GM to go into bankruptcy MUCH earlier.  The government trying to 'stimulate' the economy with spending.  The government coercing the fed to print $ unnecessarily.

But also... a key component.. is that IF a boom/bubble has occurred.... (whether it is the roaring 20s, the .com boom, or the the real estate boom)... it is impossible to stop the bust.  When the government intervenes and tries to spend its way out of it.... all the government does is delay the collapse a bit... and makes its eventual collapse much stronger.  If a moderate recession is prolonged long enough... it will become a depression.

The 70's were a great example of this.  The government refused to let the economy contract the way it needed to... and hence... the 70's became a lost decade.  They kept printing money rather than allowing the economy to contract.  Also... they tried other stupid tinkering ideas... such as price caps... etc... thinking they could artificially hold down prices and STILL print money.  The 30's was also a great example of this.  FDR insisted that he could spend his way out of the depression.... At first it looked like it was working... but then we went into a second depression in 37 while nearly every other country was completely out of the depression by then. 

What is the moral to this?  Obama needs to understand that the economy HAS to contract.  The boom was MASSIVE.... 4x as massive as the boom that caused the 70's disaster.  If Obama doesnt stop his intervening... we could be in a 20 year depression.  However... he is so ultra-leftist... that we are in a perfect storm... where Obama could potentially destroy our country if he isnt stopped.

THis isnt to say that we shouldnt have a central banking system or anything like that.... I am not a Ron Paul Wacko.  But it does say that our government should NOT be in the business of tinkering with the economy... thinking that it can make things better.

[Teutonic Knight]

Austrian economics is a joke. I still can't believe how people even take it seriously.

Can anyone show me their formulas? Economic models? This might be the only economic school of thought that never uses Math to prove what they say. How in the world can we predict anything with this school of thought?

I have books by Hazlitt, Von Mises and others. It's an attractive ideology, but it's pure fantasy. Keynes basically proved the markets could be fixed with a little push from the government.

[cjd]

Austrian economics is a joke. I still can't believe how people even take it seriously.

Can anyone show me their formulas? Economic models? This might be the only economic school of thought that never uses Math to prove what they say. How in the world can we predict anything with this school of thought?

I have books by Hazlitt, Von Mises and others. It's an attractive ideology, but it's pure fantasy. Keynes basically proved the markets could be fixed with a little push from the government.

A little push might be one thing but what we have going on here in America with the printing presses pumping out worthless money is quite another. Government should oversee and regulate to some extent not pump worthless money into the economy. Bolstering failing companies like GM and Chrysler then in the end only to see them end up in the same situation they tried to prevent was a joke. They say 20,000 people will still be out of a job after GM's restructuring is complete anyway. I could see the government propping up the banks to some extent because at the end of the day they would have been on the hook for a good part of that money anyway. The gridlock that would have developed in the financial markets may have taken the entire system down.... Even with that the risk of the government  becoming overly invested in the banking system may not have been worth it. I have never heard much made about Austrian economics before and did some reading on it to see what it consisted of. It seems like a claptrap of conflicting ideas that follow no set pattern of action. About the only idea I agreed with in the  synopsis I read  was the policy of Laissez-faire.

[Teutonic Knight]

Austrian economics is a joke. I still can't believe how people even take it seriously.

Can anyone show me their formulas? Economic models? This might be the only economic school of thought that never uses Math to prove what they say. How in the world can we predict anything with this school of thought?

I have books by Hazlitt, Von Mises and others. It's an attractive ideology, but it's pure fantasy. Keynes basically proved the markets could be fixed with a little push from the government.

A little push might be one thing but what we have going on here in America with the printing presses pumping out worthless money is quite another. Government should oversee and regulate to some extent not pump worthless money into the economy. Bolstering failing companies like GM and Chrysler then in the end only to see them end up in the same situation they tried to prevent was a joke. They say 20,000 people will still be out of a job after GM's restructuring is complete anyway. I could see the government propping up the banks to some extent because at the end of the day they would have been on the hook for a good part of that money anyway. The gridlock that would have developed in the financial markets may have taken the entire system down.... Even with that the risk of the government  becoming overly invested in the banking system may not have been worth it. I have never heard much made about Austrian economics before and did some reading on it to see what it consisted of. It seems like a claptrap of conflicting ideas that follow no set pattern of action. About the only idea I agreed with in the  synopsis I read  was the policy of Laissez-faire.

Agreed, what is going on today is far from minimal, and nothing of what Keynes attended. I don't agree with this massive stimulus package one bit.

You're right in saying there is no set pattern for Austrian economics. Some of it just absurd. I've read articles where Murray Rothbard insist we abolish monopoly laws and abolish laws against insider trading. The trouble with Rothbard, along with Von Mises and others; they are anarchists. Nothing more, nothing less. Some of them have good ideas, Hayek himself predicted the great depression. But again, this school of thought just cannot be taken seriously.

[briann]

Austrian economics is a joke. I still can't believe how people even take it seriously.

Can anyone show me their formulas? Economic models? This might be the only economic school of thought that never uses Math to prove what they say. How in the world can we predict anything with this school of thought?

I have books by Hazlitt, Von Mises and others. It's an attractive ideology, but it's pure fantasy. Keynes basically proved the markets could be fixed with a little push from the government.

What the hell are you talking about?  Keynesian 'economics'  and I use that term very liberally... has NO empirical evidence that supports it.  NONE.  Its nonsense that is only taught by leftist idiots who revise history... it was only 'used' by FDR and his staff as a ridiculous way to justify going deep into debt and to spend his way out of of the great depression.  The truth of the matter is that ultimately, his policies caused us to go to a second depression in 37 while nearly every other country was completely out of the depression. 

Keynesian's formulas DONT WORK in the real world.  They completely ignore the fact that people and businesses dont behave like robots. Having governments demand extra goods and services in place of the public DOESNT help the economy in the long run.  It is like giving the economy a really bad sugar-high.  It causes valuable resources to be missalocated.... and worse... since everyone knows its temporary.... businesses arent 'fooled' and they dont start spending and investing like everything is back to normal.  And once the sugar-high is over... the 'coming down' makes the countries go back into a severe recession.  And most importantly... governments dont know how the real world works.  They dont know anything about businesses and economics.

This is why Austrian economics is brilliant in its simplicity.  Its simply states that IF a boom/bubble has occurred.... (whether it is the roaring 20s, the .com boom, or the the real estate boom)... it is impossible to stop the ultimate bust.  When the government intervenes and tries to spend its way out of it.... all the government does is delay the collapse a bit... and makes its eventual collapse much stronger.  Also.... if you look at historical evidence... you will see that it is ALWAYS proven right. 

By the way.  Even Obama admitted that the new deal didnt work!!!!!!!!  But in his mind.. he said the reason why it didnt work, and that we went into a second depression in 37... was because it was TOO SMALL!!!!!   This is the evilness that Keynesian economics can create.

On a separate note, Keynesian economics has NOTHING to do with giving flexibility to out money supply which Friedman supports.  Don't give him credit for something he was too stupid to understand and that he actually DIDNT SUPPORT AT ALL.  Of course countries need a central bank to tighten and loosen the money supply in order to stave off bank collapses and hyperdeflation.   But that MUST be something that is independent of those that control fiscal policy.  THe more dependence (Which Obama is pushing for)... the more inflation and corruption.  And most importantly, it should NEVER be used to support monetizing the debt (WHich Obama will do) and should NEVER be used to try and pressure banks to lend when in fact... we know they wont.

I am saddened to see economic students seduced by an Keynesianism.  I hope this depression proves once and for all of its stupidity... but I know it wont.

[Teutonic Knight]

You’re all over the place. I find it hilarious you read all my criticisms on Austrian economics but then chose to attack only my last sentence in which I said Keynes proved a little push from the government is necessary.

Austrian economics is a flawed school of economic thought. It is basically ignored by any and all major economists because there are no set formulas, models or anything of the sort. It’s all over simplified mumbo-jumbo. There is no way to prove anything Mises, Rothbard, or whoever else says.

You’re attack on Keynesian economics is a joke. Keynes himself made no models at all, subsequent economists have. All Keynes did was prove without a shadow of a doubt that glitches in capitalism can be fixed with minimal government intervention. Minimal is the key word, it can’t be stressed enough. Keynes was ignored during the Great Depression, it was only until World War 2 gave a dramatic example of how the government can rescue the economy from a downturn did people finally take him seriously. Capitalism is not perfect, these fringe Austrian economists have bastardized the concept of the ‘invisible hand’.

I find it hilarious that Marxists and Austrian economists have so much in common. These two fringe ideologies ultimately want to achieve the exact same thing; anarchy. Both want no state at all. Rothbard himself has written about abolishing public education, social security, abolishing monopoly laws, abolishing insider trading laws. This is part of a fringe ideology. This has no place in America. I'm surprised people would even agree with these kind of ideas; the people that identify with these fringe beliefs are quite far and displaced from the hearts and minds of the average American.

[briann]

You’re all over the place. I find it hilarious you read all my criticisms on Austrian economics but then chose to attack only my last sentence in which I said Keynes proved a little push from the government is necessary.

Austrian economics is a flawed school of economic thought. It is basically ignored by any and all major economists because there are no set formulas, models or anything of the sort. It’s all over simplified mumbo-jumbo. There is no way to prove anything Mises, Rothbard, or whoever else says.

You’re attack on Keynesian economics is a joke. Keynes himself made no models at all, subsequent economists have. All Keynes did was prove without a shadow of a doubt that glitches in capitalism can be fixed with minimal government intervention. Minimal is the key word, it can’t be stressed enough. Keynes was ignored during the Great Depression, it was only until World War 2 gave a dramatic example of how the government can rescue the economy from a downturn did people finally take him seriously. Capitalism is not perfect, these fringe Austrian economists have bastardized the concept of the ‘invisible hand’.

I find it hilarious that Marxists and Austrian economists have so much in common. These two fringe ideologies ultimately want to achieve the exact same thing; anarchy. Both want no state at all. Rothbard himself has written about abolishing public education, social security, abolishing monopoly laws, abolishing insider trading laws. This is part of a fringe ideology. This has no place in America. I'm surprised people would even agree with these kind of ideas; the people that identify with these fringe beliefs are quite far and displaced from the hearts and minds of the average American.

You really don't know what you are talking about. After WW2, the economic intervention that the U.S. and the rest of the world successfully used to stave off regular depressions was smart independent fiscal policy that is separate and independent from those who make fiscal policy decisions (Which Keynes specifically argued against).

Depressions occurred regularly before WW2, because of the simple fact that the recessions would nearly always cause liquidity to dissapear, and ultimately cause banks collapses and bank panics as fear set in.  Since WW2.... nearly every country in the world now follows some sort of modern monetary policy in which banks are given liquidity (and lent money as a last resort) to ensure such a panic doesn't occur.  And on the flipside... the central bank must use counter-inflationary policies when the economy starts to expand again... to ensure stagflation doesnt take hold.... (Also argued against by Keynes)

Again.. this ONLY works... if the central banks is independent from fiscal policy makers... and that the Fed had the stated goals of preventing deflationary panic and banks collapsing, and on the flipside, limiting inflation.  I could go into it in FAR more detail, as I teach an international finance class that specifically deals with comparative monetary policy.

This is all in STARK contrast to Keynsian's economics.  What separates Keynesianism aggregate demand intervention is his insistence that the government's fiscal policy must be used to stabilize the economy during large slumps.

The truth is Keysian economics doesnt work.  Give me 1 example... just 1.... where you can show that it worked.  Give me 1 example where country X tried to spend their way out of a major economic slump.. and  country Y did not... and Country X got out of the major slump quicker and with less devastation.  (Assuming X and Y both used similar monetary policies and that they were both affected relatively the same by the onset of the slump)

By the way... I am not an anarchist.  I think that the government should make laws and protect our rights, and I think its great that the government helps us make better-informed decisions.  However... this is very much different than thinking like Keynes does..  that the government should spend to make up for lost demand... which is absolute nonsense.

[Moshe92]

I was a high school junior this past year, and my history teacher who was a liberal said that WWII was an example of Keynesian economics working since the depression ended after WWII, and the government spent a lot of money employing people in the military during the war. What do you think of that argument, briann?

[Sentinel For Truth]

A good and very clear video explaining why you should never "stimulate" economy with stimulus packages and money-printing. I recommend listening to the whole thing.

Thank you for sharing this wonderful video, I truly enjoyed it. 

Ludwig Von Mises was a brilliant Jew who clearly saw the mechanisms of the economy and the nature of boom-bust cycles in his creation of Austrian economics, while Keynes was a socialist idiot buffoon who politicians like because he gives them a justification to print/borrow and spend endlessly on any cockamamie scheme they want.  This is why today Von Mises is lambasted while Keynes is revered, the ultimate perversion of real economics.

[Sentinel For Truth]

By the way while this topic is a prominent thread, if anyone wants to be astonished by the clarity of thinking that the Austrian school of economics gives, watch Peter Schiff, another brilliant Jew, tell an entire auditorium of mortgage brokers they're about to lose their jobs at the height of the housing and mortgage boom in 2006!  It's a wonder they didn't chase him out with pitchforks and torches, but of course history proved he was right.

http://uk.youtube.com/results?search_query=peter+schiff+mortgage+bankers&search_type

Here's a rather famous compilation of television appearances that show Peter Schiff was right.  This video has been seen by most floor traders on Wall Street and hundreds of thousands of others.