Can massive government stimulus actually work?:The German Experience

Discussion in 'Economics' started by Grandluxe, Sep 1, 2011.

  1. The Nazis came to power in the midst of the Great Depression.

    When the Nazis came to power the most pressing issue was an unemployment rate of close to 30%.

    Hitler appointed Hjalmar Schacht, as President of the Reichsbank in 1933 and Minister of Economics in 1934.

    Schacht kept interest rates low and government budget deficits high, with massive public works funded by large budget deficits.

    These policies were mostly Keynesian, relying on large public works programs supported by deficit spending — such as the construction of the Autobahn network — to stimulate the economy and reduce unemployment.

    For example,the "Reinhardt Program" for infrastructure development was introduced, with direct public investment in waterways, railroads and highways.

    Between 1933 and 1936, employment in construction rose from only 666,000 to over 2,000,000.

    According to Delong at UC Berkeley,The consequence was an extremely rapid decline in unemployment—the most rapid decline in unemployment in ANY country during the Great Depression.

    Therefore why would massive government spending on an extreme scale like Nazi Germany not lead to a similar outcome in the USA?

    Would the USA follow the historical path of Germany's political development(already we are seeing a rapid polarization in the political arena), leading to not merely a conservative government but a far right nationalist one which would seek the deportation of minorities back to their countries like Taiwan, Mexico, China,etc ?
  2. Hitler borrowed stocks from South America. Sold it at a discount then bought gold. The reich remained strong until VE day.
  3. But the United States has tons of gold too
  4. That will be in their benefit then.
  5. The country was broke before the war was over, and everybody's quality of life took dramatic drop during the last half of the Reich.

    Not exactly what I'd call a successful outcome...
  6. I am not talking about the war. The war is a different issue altogether, but the period from 1933-1937ish prior to massive rearmament by Hitler.
  7. Riiiiiiight.... If you mean strong as in "having a worthless currency, hyperinflation, and massive poverty" then yes, the reich was strong.

  8. Yep. That was one of his most successful actions. The gold bought was used to back the currency and helped the country grow. I think that the war had a negative impact as it would.
  9. It was after the hyperinflation and before the war. It was successful for about a five years.
  10. jem


    I remember obama talking about infrastructure spending and alternative energy.

    What he delivered was democrat pork and handouts.

    The former may have been a way to serve as a foundation for a future boom.

    The later was almost a trillion dollars of waste which contributed to fear of real business and required the fed to buy our debt at auction... causing the decline of our dollar and bad inflation.

    For instance...what if the govt spending on infrastructure resulted in a new CDMA like technology the way military spending did. We might be doing a hell of a lot better.

    But what Obama Pelosi and Reid did... tanked our economy.
    #10     Sep 1, 2011