The View From 1776

The Road To Financial Decadence

While you may not share David Stockman’s blanket antipathy toward U.S. military engagement with the rest of the world (I don’t), his recitation of the monetary and economic history of the 1913 to 1929 era is on the mark.

How World War I Paved the Way for the Warfare State


The 1914-1929 Boom Was An Artifact of War And Central Banking


For a more detailed presentation of the economic and monetary history of that period, read Banjamin M. Anderson’s Economics and the Public Welfare.  Mr. Anderson was chief economist of the Chase National Bank during that period.

Posted by .(JavaScript must be enabled to view this email address) on 03/17 at 09:21 PM
  1. Stockman appears to go a little too easy on the massive blunders and incompetence of Hoover, in my humble opinion. These blunders compounded the affects of the depression.
    Posted by .(JavaScript must be enabled to view this email address)  on  03/23  at  08:22 PM
  2. J. Jay,

    By that, do you mean the very same blunders made by FDR (and Truman), only for far longer, deeper and with less reason? Hoover, at least, had the good sense to admit the error of his statist ways. FDR never did, not even when his longtime pal and Treasury Secretary (Morgenthau) admitted the spending had been a huge mistake and begged him to stop. Roosevelt got elected by denouncing Hoover's progressive policies, then quickly imposed policies of his own having much the same character, plus some that were even more distortive and disruptive.

    Just as we each have our competencies, we also have our incompetence, and the term must be contextualized (which you never do) to be meaningful. Before becoming President, Hoover had been a successful engineer and businessman. Roosevelt never excelled at anything other than politics. If Hoover was so ‘incompetent’, then why did Truman choose him, of all people, to chair the hugely important commission for reorganizing the executive branch more efficiently (i.e., Hoover Commission). If Hoover was 'incompetent', then FDR was grossly incompetent. FDR arbitrarily set interest rates and gold prices, armed the Soviets beyond what was prudent (much of it horded until after the war with Germany to fight us), patronized crackpots and swindlers his own cabinet disparaged, squandered public funds on wasteful displays and party propaganda, coerced farmers to destroy crops (at a time when poorest Americans were starving), distorted markets to point of rationing and black-marketeering, punished businesses he regarded ‘exploitative’, exacerbated high unemployment, stifled recovery, fixed prices and production, employed NRA enforcers (not unlike German brown-shirts), deliberately inflated our money, repeatedly took us off the gold standard, emulated the socio-economic programs of Soviets and fascists alike … the list goes on (see https://mises.org/books/rooseveltmyth.pdf ).

    Most FDR programs were such embarrassments they had to be suspended. It is reported he frustrated political allies almost as much as he did political enemies, and that he treated the serious business of running a country almost as a joke to be relished; and this, too, is a kind of incompetence as it results in much the same outcomes. FDR’s administrative incompetence had a trickle-down effect because of his reliance on patronage; resulting in party-loyalty hiring rather than merit. Featherbedding was another big problem under FDR more than most presidents. A competent president would have seen the need for balance, and cleaned these up. If Roosevelt ever saw these problems that he spawned, he neither acknowledged nor bothered fixing them.

    While Roosevelt may be forgiven continuing Hoover’s policies for a time, by 1936 it was clear to a growing body of businessmen, financiers and economists it wasn’t working and that government was the main impediment to recovery. Yet, it would take another six years to suspend even some of his policies, and another ten years to restore something resembling a free-market.

    Saying Hoover’s “blunders compounded the affects of the depression” is both grammatically faulty and logically absurd. If Hoover’s policies are blamed for having turned a mild recession into a strong one, they cannot also be said to have compounded anything more than that because FDR had it in his power to halt those policies (which he promised to do, but then didn’t) as well as adding ‘nutty-professor quick-fixes’ of his own. The Great Depression did not begin prior to Roosevelt’s administration. Therefore, if anyone ‘compounded the Depression’, that would logically have been FDR.

    I agree with you Hoover made mistakes, but, also as usual, must object to your caricaturizing.
    Posted by .(JavaScript must be enabled to view this email address)  on  03/29  at  07:34 PM
  3. Hoover (like many current conservatives) believe that recession and the Depression are just part of the Free Enterprise system at work and the economy will always magically straighten itself out. He felt that government should not take an active role in providing direct relief to those out-of-work, or even to the local and state governments. Abating misery was the job of private charities. He believed that states could control their own economies without federal interference.

    He did, however, believe in supporting big business. He did approve the Reconstruction Finance Corporation which provided relief to businesses, banks, and railroads.

    Roosevelt, on the other hand, pressed for direct action by the federal government to restore the economy. He said the federal government had three jobs to perform, direct Relief, immediate Recovery, and long term Reform. He ordered that banks be closed until they could be examined by federal inspectors. He put together a group of advisers (his "Brain Trust") and they came up with the programs that would become the "New Deal."

    While he was certainly no economic wizard, FDR believed it was better to try something, and if it didn't work, then try something else, instead of doing nothing like Hoover.
    Posted by .(JavaScript must be enabled to view this email address)  on  04/01  at  04:34 PM
  4. Mr. Jay, I believe that you are unaware of the policies pursued by President Hoover. He was as much a New Dealer as FDR.

    Hoover's first move was to summon the CEOs of the nation's largest corporations to the White House and threaten them with regulatory action if they reduced workers' wages in order to bring costs back in line with reduced sales. Temporary reduction of business costs, primarily wages, was the historic way to end recessions. Indeed, that policy turned the equally severe 1920 recession around completely within roughly 13 months.

    Surely you have heard of the Hoover Dam, the largest government stimulus program ever before enacted. Hoover set in motion planning for it in1928 and began construction in 1931, a year before FDR was elected.

    Hoover also created the Reconstruction Finance Corporation to lend money and to invest equity money into faltering businesses. This same RFC became one of FDR's primary, but ineffective, tools to deal with the Depression.

    As Secretary of Commerce before his presidency, Hoover had championed allowing businessmen to collude within industry groups for the purpose of fixing prices and production in good, old fashioned socialistic style. This policy was picked up by FDR and became his first major program, the National Recovery Administration, modeled on Mussolini's Fascist State Corporatism.
    Posted by .(JavaScript must be enabled to view this email address)  on  04/01  at  08:16 PM
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