Discussion in 'Economics' started by Bestmiler, Feb 23, 2009.
According to austrian economics, what ended the Great Depression (in the US)?
Supplying goods to the Allies in WWII before the US entered the war. Also, time was a factor.
Fed also starting growing Money Supply again, with the US gov ramping up spending for the war.
Why the Great Depression Lasted
So Long and Why Prosperity
Resumed after the War
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you can ask them at www.mises.org
but it was the demand for "real products" which was caused by the war.
During the war, the FED increased the money supply and govt also purchased lots of war material (financed by debt from the FED)
Unemployment at less than 1% in 1942.
According to the Austrians, 8000 bank failures, millions of homeless and 30% unemployment helped create "a cleared out system and a clean base" to start out from.
In other words, the Austrians argue that when everything turns to sh** at some point it can't get much worse. That's not too long before it starts getting better.
They call this tipping point the "Look we told you so, the free market worked its magic"-point
Wrong. The high unemployment is caused by the government trying to prevent any unemployment.
Austrians argue that shit will happen, but if we get to the pain fast we will recover fast. Not withstanding the agressive pumping of the FED in 2001, the government did absolutely nothing except cut taxes and we rapidly recovered. The problems where the natural tendency for markets to recover where pumped up via the low rates.
Also, why is the health of an economy measured primarily by employment, the Soviet Union or Cuba has full employment. Yet no one would seriously argue its a healthy economy.
Somehow if the unemployment rate is 15% or 20% the world ends? Why cant we except cyclical natures of the economy, and people should expect every 15 years or so high unemployment for a short period 8-12 months.
Also, history tends to show that high extended unemployment scenarios go correspondingly with higher government intervention the 1930's and 1970's being perfect examples.
Its the half ass attempts of government intervention that are so destructive, depressing private capital, opressing with high government debt and taxation, creating high uncertainty. And then saying how terrible private markets are and we need a little more government intervention.
I mean if the end goal is really full employment why keep playing this game with free markets. Why not just centralize all markets, and guarantee full employment. Problem solved.
also, i would add, conscription, (the draft) started in 1940. what a coincidence. that's when unemployment went down. 10+million men go into army.
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