Don’t Trust the Brain Trust
The ghost of FDR is everywhere, haunting both Washington and New York. The terrible trouble is that the minds in power have confused an economic wrecker with an angel of mercy. They are following his confusions and prescriptions day to day in an attempted repeat of the longest economic calamity in modern American history.
They have looked at the history of the New Deal and completely misunderstood it, believing the civics-book claptrap about how FDR saved us from the Depression, whereas the fact is that FDR’s theories and policies lengthened and deepened it to the point that the only way out that the Roosevelt administration saw was war.
The great theoretical error of the New Dealers was to confuse the symptom of low prices with the causes of the economic downturn. The real problem was that prices were massively inflated before the stock-market crash of 1929. The correction had to occur and would have occurred peacefully, if not wholly painlessly, had the government not intervened.
No government in all of human history that has waged war on prices has won.
The Great Depression is exhibit A.
First there was Hoover with his attack on the “bitter-end liquidationists,” whose advice he summarily rejected. Instead he increased taxes, regulated against short selling, attempted to expand liquidity and the money supply, attempted to maintain existing wage rates, extended loans via government, and bailed out debtors with bankruptcy laws. For more on Hoover’s antimarket program, see Rothbard’s America’s Great Depression.
Roosevelt took office and extended this program, while rhetorically claiming that it was the free-market policy of the Hoover administration that failed. Today we see Bush’s attack on speculators and the mediawide attempt to claim that the meltdown is caused by unregulated markets run amok. No doubt the next president, whoever he may be, will continue this crusade against markets, pretending
Article from Mises Wire