economics free market

Things to remember about the great depression

I keep hearing comparisons to the great depressions when people talk about banks closing, markets tumbling, etc. It’s important to remember that what we are experiencing is a financial meltdown, not an economic one… so far. The government has stepped in to “stabilize” markets. The result? Wild wild volatility (look for another big drop tomorrow) in the stock markets and an unknown effect on the financial institutions that they are trying so desperately to save.

One thing that we should remember about the great depression is how long it was and why it was that long. We have to remember that government cannot produce jobs, productivity, or wealth unless it takes it from somewhere else. Like it or not, it is the private sector that drives an economy. If you want to jump start the economy, make sure that businesses can make good decisions. This is a rather good podcast about the great depression. I found it quite illuminating, the key thing I got out of it was that the length of the depression can mostly be laid at the government’s feet, more specifically at the feet of FDR and Keynes.

FDR, following the advice of Keynes, managed to inject so much uncertainty into markets that the private sector was unwilling to invest for a very long time. It’s a lesson we should remember these days. Nobody has a good idea what kind of effect the latest shenanigans will have on wall street. And nobody is sure how it will impact the credit markets. Left to their own devices, they would have had to figure something out, now they’re all waiting for the feds to figure things out instead. I can only hope that lessons have been learned and not forgotten…

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