Friday, June 3, 2011

From the same DeLong blog post, he writes:

Friedrich Hayek and Andrew Mellon claimed--and Mellon dragged Herbert Hoover along into policies of austerity, of tax increases and spending cuts during the Great Depression--that as a result of lax monetary policy in the 1920s the economy in 1930s had too much plant and equipment and too many workers employed making capital goods, and had to suffer from a "prolonged liquidation" in order to productively redeploy resources into the consumer goods industries where they really should be.

In truth, Hoover cut taxes at first and vastly increased spending.

1930 $3.3 billion

1931 $3.6 billion

1932 $4.7 billion

1933 $4.6 billion

1934 $6.5 billion [FDR]

In 1931, the discount rate at the New York Fed was 1.5%. There was no "austerity" or policy of "liquidation", much less "prolonged liquidation". The entire establishment/liberal/Keynesian narrative has been and continues to be a complete hoax, like Keynesianism itself.

Further, there was no insistence that a liquidation must be a "prolonged liquidation".  The Great Depression was prolonged by interventionist policies, especially Hoover's insistence that prices and wages be maintained at high, unsustainable levels. Bob Murphy explains here.

The entirety of the inventionist economic program from which we suffer today is based upon falsehood and distortions of reality.

1 comment:

  1. But we can thank our lucky stars that we have state-funded education to teach us facts in an unbiased and completely true manner. I'm so glad that high school was not a waste of time at all and that I didn't have to go to Wikipedia to learn the real history.

    Our education/daycare/prison system is a joke. End it now, the children would be better off on their own.