How Can We Turn a Recession into a Depression

I have been telling you a shortened version of how Hoover and Roosevelt managed to turn a bursting speculative bubble, and a moderate recession into THE Great Depression.

In A previous article I gave you some unemployment data,based upon a Vedder & Gallaway  statistical study in their book “Out of Work”.

 Unemployment in November 1929 , was just over 5% almost two  months  after the market crash . 

Unemployment hit a high of 9% + in December 1929, but gradually dropped to mid 6% by the beginning of Summer 1930.

 President Hoover and later FDR began tampering with the economy . They attempting to reduce unemployment  by  imposing  protectionist  tariffs.

This intervention resulted in double digit unemployment , but it was more than a year after the crash.

The more they attempted to fix the economy, the higher the unemployment numbers became.

F D R interfered with the economy more than any President to that time. Previously, it was not considered the business of the Government to  intervene in economic cycles. 

The more Roosevelt tried to use government spending to help the economy, the higher the unemployment rates soared.

The methodology which he used , involved putting people to work!  Sponsoring Publick works! Rebuilding and improving the infrastructure! All honorable intentions.

However, let me explain.

Everyone knows the expression,” the road to someplace is paved with good intentions.”

Here is whar Franklin D Roosevelt and several other well intentioned leaders have done, or are about to do. 

For clarity, lets shrink everything down to a small parable.

Lets say the President has $ 1 million available to stimulate the economy.The money was from the Treasury , and had come via taxes collected.

He looks at the pile of bills.” Not bad,” He thinks. This is quite a large pile. I should be able to help a great many people with all this money.

He scratches his chin,” My citizens are hurting. Unemployment keeps going up. The people are hungry.”

“What should I do?”

OPTION #1

“I know what I have to do.” He picks up the phone. “Mr Secretary, we must do the right thing. The safe thing.  The Politically expedient thing .”

He holds the phone away from his ear. The voice on the line is speaking loudly.

Finally the President becomes impatient. ” Listen” He says, ” Do you want to help the country, or do you want to get reelected?’

There was silence on the other end.

“We must get money and stimulus directly to the people.” He continues,” We will take our $1 million and create public works jobs .Our people will build bridges, repair roads, construct  hydro electric plants and wind turbine farms.”

” Of the $ 1 Million, $400,000 will go to administer the programs, maybe $250000 will go towards advertising and Public Relations, so that the voters know who created all these jobs.The rest will go directly to the people  to put bread on their tables.”  

 The plan was implemented. The money was spent. The people were put to work… For 1 year…Then what?

In this scenario, which is what happened under FDR, the unemployment rate went up to over 20% and stayed there with a few short term exceptions, for over 4 years.

We had created new dams and new roads, but no new jobs, no new industry, and no new wealth.

OPTION #2

The President takes the $ 1million and calls in CEO’s from 5 small but successful private buisnesses.

” Gentlemen,” He says.” Our Nation is in trouble. The economy is in a slide, and unemployment is growing. “He looks around the room.

“We need your help. Your Country needs your help.

Here is $1million. Taxpayer money. A precious public trust.

I want to give it to you Gentlemen to invest.

Take the money, go back to your businesses and invest this public money. Use it to expand your business. Enter new markets, create new wealth.”

THE GREAT DEPRESSION ENDED IN 1932. A GENERATION OF PEACE AND PROSPERITY ENSUED. A WORLD WIDE VISION OF CORNICOPIA BECAME A REALITY. A LITTLE KNOW RADICAL GERMA, ADOLPH HITLER WAS LAUGHED OFF THE WORLD STAGE.THEY DIDN’T NEED HIM, THEY HAD PROSPERITY.

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