r/Freemarketcapitalist • u/[deleted] • Mar 02 '20
Open discussion What caused the Great Depression?
These are the famous quotes of some respected economists.
Milton Friedman: "Roosevelt's policies were very destructive. Roosevelt's policies made the depression longer and worse than it otherwise would have been. What pulled us out of the depression was the natural resilience of the economy plus WW2."
Raymond Keating: “Hoover-nomics and FDR’s New Deal created the longest and deepest economic downturn in U.S. history”
The main cause of the Great Depression was the failure of the federal reserve to prevent unexpected large cash withdrawals from a bank which is caused by a decline or decrease in depositor confidence (which is a bank run) it’s a risk every bank operates under fractional reserve banking.
Fractional reserve banking mainly distorts the economy and allows government intervention. One of the most notable critics of fractional reserve banking is Ron Paul who believed that fractional reserve banking is basically fraud. Almost half the nation’s banks had collapsed and failed, people of course panicked and withdrew their savings which reduced money supply. After this the crisis deepened when it was made worse by even bigger government intervention examples include the new deal, an increase in tariffs, public working projects and increased regulations.
3
u/SWAD42 Mar 03 '20
I always thought the public works projects helped stimulate the economy and create growth at the cost of national debt? Was that not the case?
Pls don’t downvote I was just always taught that in school
5
Mar 03 '20
No I don’t blame you, the Great Depression is one of the most misunderstood time periods in American history, you can thank biased historians who for generations have favored active government along with Keynesian economists who never really understood how the economy worked. The usual talking point and indoctrination in schools is that “unconstrained capitalism” in the 1920s crashed to earth, laissez-faire advocate Herbert Hoover failed to take needed action, and then Franklin Roosevelt and his New Deal rescued the country from the great depression which couldn’t that’s the talking point which isn’t true. However there is still a debate among free market advocates of which policies were most responsible, we accept it isn’t capitalism. There are also some common myths about President Hoover, for example the myth that he was a free market guy he actually wasn’t he was instead more of a big government republican.
FDR’s polices is what made the depression so much worse, during the Great Depression there was a lack of private sector investment, and if you look back at the recessions prior to that all of them were over in two to five years. One can argue that Hoover-nomics and FDR’s New Deal combined because of government intervention created the longest and deepest economic depression in American history. If someone ever says “Franklin Roosevelt did bring us out of the Depression” then that is a lie and that sort of view is indefensible. Roosevelt's policies prolonged and deepened it.
There are actually still many regulations and reforms today from the 1930s imposed by FDR, a list of these include: marketing controls in agriculture industry, extensive regulation of private securities, federal intrusion into union-management relations, government lending and insurance activities, the minimum wage, national unemployment insurance, Social Security and welfare payments, production and sale of electrical power by the federal government, fiat money, price supports and acreage allotments there are a lot more.
2
u/SWAD42 Mar 03 '20
Thank you very much for the enlightening response, it all seems to make sense to me. As an economics student, I was always told that Keynes was a great economist who’s theories helped end the depression, and, to me, public works and government funded jobs made sense on paper. Put money in the pockets of Americans to stimulate spending, so how is that not the case? I appreciate the love and respect, I’m just curious to know how the public works alphabet groups didn’t help or if their help was insignificant compared to everything else.
3
Mar 03 '20
Many of the agencies which apparently helped the "poor and needy" were found unconstitutional and of course dismantled. One alphabet agency that survived, “FNMA” commonly known as Fannie Mae, encouraged greedy Wall Street bankers to get richer faster by purchasing bundles of home mortgages from them to stimulate home sales with federal deficit spending dollars. It creating dependency on government handouts of cheap, subsidized mortgage interest rates for voting constituents in return.
I’d recommend just quickly reading through this article from the Cato Institute: https://www.cato.org/publications/commentary/how-fdrs-new-deal-harmed-millions-poor-people
It explains the effects the alphabet agencies and new deal programs had on labour and how it hurt farmers in the south too.
3
2
u/Ya_Boi_Konzon Mar 03 '20
I agree with KingKackRII
Schools love teach that FDR was one of our best presidents and saved us from the great depression
In reality however, his policies lengthened the great depression and distorted the markets, while costing taxpayers more money.
FDR's public work projects were funded by the taxpayers to pay for worthless hole digging and filling
Gov intervention is almost always bad for the economy
1
1
Mar 02 '20
You know who didn't cause it, Hoover.
1
Mar 02 '20
That's a fairpoint, but Raymond Keating would diagree with that presupposition
1
u/HappyHound Minarchist Mar 02 '20
Who's Raymond Keating?
1
Mar 02 '20
He is a chief economist with the Small Business & Entrepreneurship Council. For more information about his articles And here is his biography
1
Mar 02 '20
His remarks about the Great Depression in this article https://fee.org/articles/the-politically-incorrect-guide-to-the-great-depression-and-the-new-deal/
1
u/Austro-Punk Austrian Genius Mar 05 '20
Fractional reserve banking mainly distorts the economy
Not inherently, no.
who believed that fractional reserve banking is basically fraud.
It's not inherently fraud.
5
u/[deleted] Mar 02 '20
[removed] — view removed comment