The Audacity of Wrong
This past Wednesday Glenn Beck had a segment on the Cure Worse Than Disease, in which he discussed the depression of 1920-21. As Glenn mentioned himself, I also had never heard much about that time in United States history. What I had heard was something about continuing booms and busts of the economy as America closed the western frontier, became a world power through WWI, and had the Roaring ’20s ,which ended in the Great Depression. Then thankfully the New Deal was issued in by FDR, America was saved from total anarchy until we were forced to fight Japan and those terrible Nazis.
I had begun to question this whole New Deal salvation when I read the “The Forgotten Man: A New History of the Great Depression” by Amity Shales, earlier this year, So I wondered what I might find online, to increase my knowledge of this unknown earlier depression that Glenn had used as a model for fixing our country’s and the world’s economic mess. After some searching I came across “The U. S. Economy in the 1920s” an article by Gene Smiley of Marquette University. This is a very thorough discussion of that decade of almost twenty six thousand words and graphs that took up sixty four pages in my computer’s PDF format. A link to the article is also found under our Resources Tab.
What the Smiley article showed, and as Beck addressed, the Depression that began in 1920 was much more severe that anything we have faced in the current meltdown and bailouts. Furthermore the fix of letting the markets work to rebuild, or as Glenn said, “reboot the system” accomplished an economic miracle in which unemployment fell from over 11% to less than 2% in short order.
As with our current situation, speculation in securities coupled with tight money policies, was a correct but simplistic description of the beginning of the Great Depression. However if you link the growth of the 1920s followed by the Depression of the 1930s, this broader historical context more vividly displays the reality pointed out so well in “The Forgotten Man.” In this larger context Roosevelt’s New Deal was truly the antithesis of what the economy really needed.
If looked at in a global perspective, the hyperinflation of the Weimar Republic happened essentially concurrently with the 1920s depression. While Germany’s problems were related to reparations required under terms of the War’s armistice for payment in gold, Hitler himself attributed much of that period’s instability to the success of his ability to bring National Socialism to Germany, which began in 1925 through 1933 when Nazi power was finally established.
Just as with the Great Depression, the current Obama Administration is determined to save the country and by extension the world, by a bigger and better New Deal. Ben Bernanke has been put in charge of the Federal Reserve for another four years because he saved the universe from another Great Depression, when he was Alan Greenspan’s easy money debt lieutenant as this totally unforeseen economic catastrophe developed? So now we are just beginning to see that United States program of huge governmental spending, coupled with creation of essentially worthless money, is quickly becoming the Audacity of Wrong.
What makes this so serious is that the economic recovery during the 1920s and thwarted during the 1930s Great Depression, was essentially get out of the way and let the market system work, while a broad spectrum of economic opportunities became reality. The problem we face today is that those growth industries and services are not only mature but beyond their prime.
The political leadership of the United States in both political parties are basically saying, “Don’t worry, be happy, the 1990s (1920s) will be here again.” Surely this is the Audacity of Wrong, there are currently no quantum leaps in either energetics or information to carry us forward, In fact much of that mature infrastructure is in the way of producing a new economy. Government bureaucrats, big unions, and crony capitalists all want the status quo to continue because they have their piece of the pie and they are unwilling to share that shrinking pie with what is generally called the folks, or the American people. This problem is even more pronounced now in the eurozone where you add the reality of crony nation states.
The first step in economic rebooting the United States, and the world for that matter, is the realization that debt doesn’t create wealth, all it can do is shuffle or reshuffle the deck chairs on the global economic Titanic now that it has hit an iceberg. There are some life rafts that can get some to shore, and thereby use the knowledge we have gained to build some newly designed economic ships, but the major problem is the great flood of the ocean of non energetic debt money that has covered all the dry land. For those who only have life jackets, they must realize they cannot borrow their way to shore, but must tread water looking for emerging sprouts on the slowly reemerging land. The allegory of the Noah flood in the Bible comes to mind. Soon dry land will emerge from the sea, and the seeds and sprouts of new opportunties will appear.
The moral to the story is that as much as we think we control the world, and have a plan to save the world, new opportunities of growth will come from reclaimed liquidity water that will irrigate a dry land, not from human wishful thinking. The basis for that new land and the irrigation system in the United States, was and is the vision of our Founders, and the documents that they produced. In short, wealth production needs real equity liquidity to grow, not quick sprinkling economic debt stimulus. That new equity will in short order change the Audacity of Wrong into the Promise of New Real Wealth.
I had begun to question this whole New Deal salvation when I read the “The Forgotten Man: A New History of the Great Depression” by Amity Shales, earlier this year, So I wondered what I might find online, to increase my knowledge of this unknown earlier depression that Glenn had used as a model for fixing our country’s and the world’s economic mess. After some searching I came across “The U. S. Economy in the 1920s” an article by Gene Smiley of Marquette University. This is a very thorough discussion of that decade of almost twenty six thousand words and graphs that took up sixty four pages in my computer’s PDF format. A link to the article is also found under our Resources Tab.
What the Smiley article showed, and as Beck addressed, the Depression that began in 1920 was much more severe that anything we have faced in the current meltdown and bailouts. Furthermore the fix of letting the markets work to rebuild, or as Glenn said, “reboot the system” accomplished an economic miracle in which unemployment fell from over 11% to less than 2% in short order.
As with our current situation, speculation in securities coupled with tight money policies, was a correct but simplistic description of the beginning of the Great Depression. However if you link the growth of the 1920s followed by the Depression of the 1930s, this broader historical context more vividly displays the reality pointed out so well in “The Forgotten Man.” In this larger context Roosevelt’s New Deal was truly the antithesis of what the economy really needed.
If looked at in a global perspective, the hyperinflation of the Weimar Republic happened essentially concurrently with the 1920s depression. While Germany’s problems were related to reparations required under terms of the War’s armistice for payment in gold, Hitler himself attributed much of that period’s instability to the success of his ability to bring National Socialism to Germany, which began in 1925 through 1933 when Nazi power was finally established.
Just as with the Great Depression, the current Obama Administration is determined to save the country and by extension the world, by a bigger and better New Deal. Ben Bernanke has been put in charge of the Federal Reserve for another four years because he saved the universe from another Great Depression, when he was Alan Greenspan’s easy money debt lieutenant as this totally unforeseen economic catastrophe developed? So now we are just beginning to see that United States program of huge governmental spending, coupled with creation of essentially worthless money, is quickly becoming the Audacity of Wrong.
What makes this so serious is that the economic recovery during the 1920s and thwarted during the 1930s Great Depression, was essentially get out of the way and let the market system work, while a broad spectrum of economic opportunities became reality. The problem we face today is that those growth industries and services are not only mature but beyond their prime.
The political leadership of the United States in both political parties are basically saying, “Don’t worry, be happy, the 1990s (1920s) will be here again.” Surely this is the Audacity of Wrong, there are currently no quantum leaps in either energetics or information to carry us forward, In fact much of that mature infrastructure is in the way of producing a new economy. Government bureaucrats, big unions, and crony capitalists all want the status quo to continue because they have their piece of the pie and they are unwilling to share that shrinking pie with what is generally called the folks, or the American people. This problem is even more pronounced now in the eurozone where you add the reality of crony nation states.
The first step in economic rebooting the United States, and the world for that matter, is the realization that debt doesn’t create wealth, all it can do is shuffle or reshuffle the deck chairs on the global economic Titanic now that it has hit an iceberg. There are some life rafts that can get some to shore, and thereby use the knowledge we have gained to build some newly designed economic ships, but the major problem is the great flood of the ocean of non energetic debt money that has covered all the dry land. For those who only have life jackets, they must realize they cannot borrow their way to shore, but must tread water looking for emerging sprouts on the slowly reemerging land. The allegory of the Noah flood in the Bible comes to mind. Soon dry land will emerge from the sea, and the seeds and sprouts of new opportunties will appear.
The moral to the story is that as much as we think we control the world, and have a plan to save the world, new opportunities of growth will come from reclaimed liquidity water that will irrigate a dry land, not from human wishful thinking. The basis for that new land and the irrigation system in the United States, was and is the vision of our Founders, and the documents that they produced. In short, wealth production needs real equity liquidity to grow, not quick sprinkling economic debt stimulus. That new equity will in short order change the Audacity of Wrong into the Promise of New Real Wealth.