Quote from Renegen:
As for the New Deal, as Angrycat put it, a lot of it was dismantled in the 1940s, but tell me how it miraculously reappeared in the 1970s? The inflation in the 1970s was blamed on big labour and unions, it's a convenient theory because it ignores the Vietnam war or the budget deficits that were happening since the 1960s. While everyone gangs up on the key events that didn't completely solve the great depression, why not talk instead of causes of the great depression?
It didn't miraculously reappear in the 1970's. While a lot of the New Deal was dismantled, there was still plenty New Deal regulation left by the 1970's. I didn't mean to ignore price and wage controls Nixon wrote into law, the cost of the "Great Society" disaster or the Vietnam war. However, there were plenty price controls and other regulations dating to the New Deal that had yet to be dismantled by the 1970's.
These legacy New Deal policies made the economy more rigid (as they did during the Depression), stagnating production. The Fed's response was to loosen money supply, the combination of which caused hyperinflation.
Quote from Renegen:Let's start with the big guns, taxes were reduced in HALF from the beginning of the decade to the end. Budgets were in surplus, spending low.
Monetary policy was lax, (and no one ever blames the Fed for the 70s inflation?)
The use of credit purchases first appeared in the 1920s, as a result it was possible to have expansion and higher profits while you were really making future sales, you had terrible over expansion of industry. The employment figures of the late 1920s were UNSUSTAINABLE, get that.
People's wages didn't keep up either.
Or what about the use of leverage on Wall Street? Didn't anyone think that with too much leverage banks could be in trouble and with their weak banks as it was, it would spell doom?
Tax rates were not halved in the 70's. Until Kennedy lobbied for and got a reduction in tax rates, the top marginal tax rate was 90%. Through the 70's it was 78%. Tax rates were significantly reduced in the 80's.
Credit has always been around. It didn't begin in the 1920's. You seem to imply that the stock market crash caused the depression. It didn't. The stock market crash of 1929 wasn't even the low of the stock market for the Depression. Leverage also isn't a problem in and of itself. Poor investment policy coupled with leverage is what's dangerous.
Quote from Renegen:
What about a lack of SEC, that allowed Bank CEOs to short their own companies?
Or what about the over concentration of a few industries? Who knows what's to blame for that one, maybe lack of capitalism and technological growth prevented a diversified economy.[/B]
Well, since the SEC did such a great job stopping Madoff, Enron, WorldCom and Qwest - to name but a few - I'm inclined to think were were better off without the expense of paying incompetent regulators to twiddle their thumbs. The rest of your quote is just disjointed drivel.
Quote from Renegen:
When you look at economics you can't look at 5 years and say you got it.
Today's problems as most know go all the way back to the 1980s, even further in some areas.
Well, we can go back to the Depression for Fannie Mae, for example. But most of the housing crisis was caused by more recent government policy. It was only in this decade that Fan & Fred were allowed to buy Alt-A and subprime loans. In the 1990's the CRA was strengthened and in 2001, the Fed stepped on rates and kept them too long for far too long.
Quote from Renegen:
What's hard to understand that for general business to thrive and sell more every year it must pay more to its consumers? Take a look at the 19th century if that's what you want. The only industries that existed were industries of the bare necessities. You bought clothe, food, shelter, furniture and that's it. That went on for over 100 years, you call that capitalism? Only when people's incomes went higher could they spend on discretionary items, and those created whole industries.
Complete non sequitur
Quote from Renegen:
Don't give bullshit like "high wages forced small businesses to close." That's almost propaganda. Small business close for a number of reasons, take a look in Canada where junior exploration and drilling companies are closing because of LACK OF CREDIT and lower commodity prices. I bet a large number of the small businesses were suppliers to unsustainable over expanded industries or failed because the banking system failed. What the New Deal did is raise wages, it was not a silver bullet but it did its part. Why did you have prosperity in the 1950s? Everyone agrees that the full employment just after the war gave a lot of spending power. No spending power no growth.
80% of startups fail in the first 5 years. However, wage controls put manufactured pressure on small businesses. They kept wages artificially high. A business has only a certain amount it can spend on wages. The higher the wage, the fewer people can be hired. So if by "doing its part" you mean New Deal wage controls prolonged excessive unemployment, you're correct. We had prosperity (for anyone not black, jewish or female) in the 1950's because many of the dumbass New Deal programs were dismantled after the war.
Who is this "everybody" that agrees that full employment "gave a lot of spending power"? Beyond the sentence not making sense, the concept doesn't either. I can employ you to dig a ditch and fill it in again. If we employed everyone in this pursuit, will we be prosperous? No. Increased production of things of value is why the 50's was prosperous. What is important is what you produce because it is an economic fact that you can only spend (consume) what you produce over the long run. If you are not productive, you will not be able to consume above your production for long.
And that is exactly the root of the current crisis. We've already consumed more than we can reasonably produce in a relevant period of time. Government encouraging more consumption against an already overtaxed future production is just a recipe for an Iceland-like economic collapse.
