If President Bush “lied” when he reported what all Western nations’ intelligence services had concluded about Saddam Hussein’s activities, then President Franklin Roosevelt perpetrated the biggest and most destructive lie in American history.
President Roosevelt repeatedly lied about the cause of the Depression. The legacy of that lie is three generations of Americans believing the mythology of socialism.
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In his first inaugural address in 1933 President Franklin Roosevelt blamed the Depression on the principles of individualism and economic liberty for which the colonists went to war in 1776. In retrospect we can see that his public statements about the source of the Depression were either deliberate lies, or harmful ignorance. We also can see that his policies were, to put the best face on it, ill-advised.
He called upon the American people to accept the socialistic state-planning techniques of Mussolini’s Fascist Italy and Stalin’s Soviet Union; he called upon the American people to become members of the proletarian masses moving, as he said, like a great army under his leadership to redistribute land ownership and to bring private industry under government planning.
His first legislative actions placed American manufacturers under the control of government councils to fix prices, production volumes, and wages. He next socialized the nation’s agriculture (by far our largest employer at that time), telling farmers what and how much they could plant, and fixing farm prices.
President Roosevelt got so many things wrong and misrepresented so many things that picking his most destructive one is difficult. For that I nominate the myth that the monetary gold standard caused the Depression and that only a fiat currency, inflated and managed by the Federal Reserve, could restore prosperity.
That lie removed our only effective check on unlimited expansion of the collectivized, socialized National State. Presidents and Congress can now rely upon the Fed to expand the money supply and finance any amount of debt to augment the welfare-state.
Expanding the money supply isn’t free. It comes out of your pocket via higher prices for everything, steadily reducing the value of every hour you work. At the Fed’s target of approximately 3 percent annual inflation, prices will more than double every generation (24 years). The dollar you have at age 18 will be worth less than 23 cents by the time you reach age 68. This is the reality behind the New York Times’s whining about the “end of the American middle-class dream,” which they propose to cure with more spending and more inflation.
Mr. Roosevelt’s economic advisors characterized the gold standard as an outworn relic that had caused the wave of bank failures and the Depression itself. They mythologized that a gold standard is too rigid a mechanism for regulating the amount of money in circulation, that only socialist state-planners have the necessary knowledge and skill to regulate the economy. (We experienced the fruits of that theory in the 1970s stagflation, when inflation went as high as 20 percent per annum).
Facts were altogether different. At no time was there an insufficiency of gold to back an appropriate expansion of the money supply via emergency lending that would have prevented the wave of bank failures in 1932 and 1933. The amounts of gold held by the Fed were far in excess of the legal reserve requirements for money in circulation. The Fed deliberately chose to ignore the gold standard and refused to act in one of the most fundamental roles assigned to it by the 1913 Federal Reserve Act: as lender-of-last-resort to prevent bank failures.
Because they wanted to devalue the dollar and induce inflation, believing that doing so would revitalize the economy, President Roosevelt and his advisors misrepresented the Fed’s failure to act as a failure of the gold standard. This became a rationalization behind the 1935 Banking Act (drafted by Harvard socialist economist and secret Soviet agent Lauchlin Currie) that put the Reserve Banks under the thumb of the Federal Reserve Board in Washington, making the Fed more susceptible to political influence.
In the years since the Depression, generations of students have been left ignorant of the true nature of the New Deal’s transformation of our original federal constitutional system into a collectivized, socialistic behemoth centered in Washington, DC.
The extent of President Roosevelt’s socialist revolution can be seen in contrast to the views of the people who wrote the Constitution.
In Federalist No. 9, Alexander Hamilton wrote: “The proposed Constitution, so far from implying an abolition of the State governments, makes them constituent parts of the national sovereignty, by allowing them a direct representation in the Senate, and leaves in their possession certain exclusive and very important portions of sovereign power. This fully corresponds, in every rational import of the terms, with the idea of a federal government.”
In Federalist No. 45, James Madison wrote: “The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State. The operations of the federal government will be most extensive and important in times of war and danger; those of the State governments, in times of peace and security.”
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