Milton Friedman on the Great Depression

[LowDown]

Thoughts, comments anyone?

The Great Depression was started and maintained for 11 years by government mal-administration. The Fed was set up to back the banking system; the very function that so many people decry as "bailing out" the banks and financial institutions is exactly what the Fed was supposed to do. The Great Recession we've had recently was also the result of government mal-administration, setting up incentives and mandates to make poor investments. The only reason the recession didn't get to be as bad as the Great Depression is that the Fed did what it is supposed to do this go round, and so now we have people critical of the Fed for being in the pocket of big business. Populist nonsense on stilts. (As if corporations exist only to prey on the people and provide nothing desirable in terms of goods and services that people want. As if corporations should have no say at all in the taxes, regulations, and laws imposed on them.) In the recession, the government created the regulatory conditions that led to these big institutions being in trouble and then was just supposed to let them fail? It was the government's fault that they were in that condition in the first place -- they'd never have been making sub prime loans and hedging the risk with derivatives left to their own devices. No conceivable financial system could have withstood the shock caused by $2 trillion of bad loans injected into the system in response to government policy and by Fannie and Freddie.

We'd have been better off if the government had never gotten involved in regulating the markets and monetary system beyond the very basic functions of coining and printing money. Without the guarantees of backing by the Fed banks would have been much more responsible and the conditions leading up to the crash of '29 might never have developed. When the crash came the hoped for backing didn't materialize, and so the banks started closing. Thus, government mal-administration caused and then magnified the problems.

In the 1920s the Fed sought to step in and stop people from speculating. The result was the crash of 1929. And then their follow up response was to pucker up their anuses, which just made things that much worse. Then we got FDR with his bashing of corporations, higher taxes, regulations, bloating of unions, and cockamamie, wasteful schemes that pulled the economy down and prevented the sort of timely recovery that every other nation in creation enjoyed.

The more government got involved the worse things got. Hoover, far from being hands off, started trying to manage the economy with all sorts of schemes and then FDR followed on with lots more of the same. Left to its own devices and without burdensome extra regulations and taxes the market would have recovered much faster and done much better.

I suspect that the extent to which we have done better recently is partly because government is divided and the President can't do even half of the things he'd like to do. We are still reeling from the first 2 years of his tenure, though, when the Democrats acted as they wished. (That may be enough to ruin the country eventually regardless of all else. They called it a stimulus but in reality it was them busting the country out; they may have gone too far.)

And so now our heavily regulated and taxed financial system is poorly equipped to provide us with a recovery in anything like a reasonable span of time. And, frankly, they are too afraid of what the current Administration is going to do next; they wait to see what sort of crazy, misbegotten scheme will be foisted on them, FDR like, before risking anything. Will factories be denied the right to emit smoke? Will cap and trade be imposed on them? Will the EPA regulate the emission of water vapor? They wait to see what the chairman of the Fed, sitting before Congressional committees like a freeking sphinx, will tell them about how the economy will be further twerked. And we have government pimps blaming the private sector for all the problems and claiming to be the solution.

 

[justabubba]

Thoughts, comments anyone?

seems he was criticizing congress for its failure to raise taxes to stem inflation

 

[PeteEU]

Well we agree on most things. I think the fed should in its current form be completely obliterated, replaced by, like you suggested, a fully federal agency. I think this agency should be highly regulated and controlled. It should be their job to print money to only keep up with economic growth, not to try to spur it or lend to the mega rich. It is not the government's job to be master market manipulator, it is their job to be an impartial regulator.

Agreed for the most part.

Where we disagree is where you split the government from elected officials. It's no different. I was in the military for 8 years, and I saw the same exact crap our politicians pull. If our unit was underbudget, we'd have to spend the money real quick at the end of the fiscal year to avoid getting a smaller budget next time. The entire system is set up to spend money indiscriminately. Inter-agency squabbling and bickering is the same thing we see in congress.

Again that is because of politics.. you were forced to spend the money really quick because of politics, because of officers wanting promotions and moving up in the ranks, generals who wanted more power and the same bull**** that there is in the civilian life. You had a budget, and policy put in place by politicians state that if you dont use it all, then you get less next year.. who's fault is that? You as a government grunt or the politician who put the rules in place? And private companies are no different. It is the politics not the organisation that is the problem. In the private sector you have top management and wealthy shareholders dictating targets and to meet those targets they will do anything even firing half the work force.. despite the company running in profit.. just not enough according to the shareholders.. it is all about politics and a power grab.

Yes, you are saying the government and politicians should get a raise, because the higher our taxes are, the more that is swallowed up by the government, not used by the people. How the hell does it help the average citizen if the government gets more money from the rich?

Where on earth did I say that? Like it or not taxes are needed to pay for government and we all have to shoulder the burden.. and we have built a system where those that can afford it more, have a slightly bigger burden.. or that is how it should be. It is not in the US, and that is the problem.

Now we can discuss what should be spent on in government, but it does not change the fact that the rich 1-5% pay less in % on their income than someone earning considerably less... and that is not because of government, but because of politicians allowing it by setting the rules and laws that government follow.

And I did state that such tax changes would be futile if the system was not fixed...so that the politicians cant just spend the extra income on bridges to no where.. It would require a level of transparency and accountability that most Americans have never seen or understand... stuff we in Europe, especially in the Scandinavian countries, are well use too. We have had mayors suspended because their civil servants happen to pick a company for a public contract where a family member of the mayor worked.. a full investigation was put in place and later cleared the mayor, but the point is.. that would never ever happen in the US... and maybe it should?

The government has shown they can't even handle a simpler budget, so why give them more money and make the budget more complicated?

So you are saying that the military grunts, people in hospitals, hard working police and so on.. are all to blame? And the few politicians and top management (who are often the same btw), who write the laws and budgets and break them.. have zero blame? I would claim they have all the blame.. since no American politician seems to do anything for the people but everything for their self and their friends..

The way to income equality isn't through taxation. A good start would be to cut off the advantages the government gives the rich, such as the fed, or the laws mandating that only rich people can invest in start-up companies.

Yes it is, it is one of the ways to even out income inequality.. yes the dreaded moving of money from one part of society to another.. It is needed, but it wont work as long as the laws and rules are slanted so much in favour of the 1%. The very fact that the worlds 3rd richest man pays 15ish % on his yearly income, where as a plumber or factory worker pays 30%ish on his /her income shows that there is a massive problem... No one is saying that the worlds 3rd richest man should pay 75% in taxes, or even 50%, but he should in no way pay less than the average taxpayer and real work should always be rewarded ahead of moving money around on the markets.

 

[RabidAlpaca]

Agreed for the most part.



Again that is because of politics.. you were forced to spend the money really quick because of politics, because of officers wanting promotions and moving up in the ranks, generals who wanted more power and the same bull**** that there is in the civilian life. You had a budget, and policy put in place by politicians state that if you dont use it all, then you get less next year.. who's fault is that? You as a government grunt or the politician who put the rules in place? And private companies are no different. It is the politics not the organisation that is the problem. In the private sector you have top management and wealthy shareholders dictating targets and to meet those targets they will do anything even firing half the work force.. despite the company running in profit.. just not enough according to the shareholders.. it is all about politics and a power grab.



Where on earth did I say that? Like it or not taxes are needed to pay for government and we all have to shoulder the burden.. and we have built a system where those that can afford it more, have a slightly bigger burden.. or that is how it should be. It is not in the US, and that is the problem.

Now we can discuss what should be spent on in government, but it does not change the fact that the rich 1-5% pay less in % on their income than someone earning considerably less... and that is not because of government, but because of politicians allowing it by setting the rules and laws that government follow.

And I did state that such tax changes would be futile if the system was not fixed...so that the politicians cant just spend the extra income on bridges to no where.. It would require a level of transparency and accountability that most Americans have never seen or understand... stuff we in Europe, especially in the Scandinavian countries, are well use too. We have had mayors suspended because their civil servants happen to pick a company for a public contract where a family member of the mayor worked.. a full investigation was put in place and later cleared the mayor, but the point is.. that would never ever happen in the US... and maybe it should?



So you are saying that the military grunts, people in hospitals, hard working police and so on.. are all to blame? And the few politicians and top management (who are often the same btw), who write the laws and budgets and break them.. have zero blame? I would claim they have all the blame.. since no American politician seems to do anything for the people but everything for their self and their friends..



Yes it is, it is one of the ways to even out income inequality.. yes the dreaded moving of money from one part of society to another.. It is needed, but it wont work as long as the laws and rules are slanted so much in favour of the 1%. The very fact that the worlds 3rd richest man pays 15ish % on his yearly income, where as a plumber or factory worker pays 30%ish on his /her income shows that there is a massive problem... No one is saying that the worlds 3rd richest man should pay 75% in taxes, or even 50%, but he should in no way pay less than the average taxpayer and real work should always be rewarded ahead of moving money around on the markets.

First, a plumber is not paying 30% taxes. I made about 65k/year in the army, and I paid abput 5% in taxes after the tax return. Second, raising taxes on the rich does absolutely nothing to help the lower or middle classes. They will not see a dime of it. The government will swallow it up like it always does. We need to focus on making the game more fair instead of trying to punish those that are winning it.

 

[274ina]

Freedman is a traitor to America and needs his citizenship stripped as a minimum........

 

[Canell]

Freedman is a traitor to America and needs his citizenship stripped as a minimum........

Go ahead, strip him from his citizenship. :lol: The man has been dead for 7 years.

 

[head of joaquin]

Go ahead, strip him from his citizenship. :lol: The man has been dead for 7 years.

He was dead for longer than that upstairs.

That said, his contribution to monetary theory was important. He's dull-witted genuflection to market evangelism, however, was a real character flaw. His ideas about political and economic liberty were so low brow and unexamined that Ayn Rand could have written them for one of her wooden characters to spout. "Free to Chose" is about as dopey a book as any economist ever wrote.

 

[imagep]

Hrm... yeah... I guess it's better for all of us if the banks get near zero interest rates subsidized by our taxes (or dollar value if printing money), so that they can turn around and loan to us common-folk at 6%....

Why do you suggest that? The fed prints up the money that they lend to banks, they don't use tax money. The fed then turns the profit over to the treasury, thus reducing the federal deficit. The fed is a profit center for the government, not a net user of tax revenues.

 

[RabidAlpaca]

Why do you suggest that? The fed prints up the money that they lend to banks, they don't use tax money. The fed then turns the profit over to the treasury, thus reducing the federal deficit. The fed is a profit center for the government, not a net user of tax revenues.

I don't know if I can have a conversation with you about this, as I fear you might be in the JPHochbaum camp of "The government can print as much money as it wants but it's ok because it will NEVER cause inflation unless every person in America has a job".

When they print money without a proportional growth of the economy, they are devaluing the dollar. If the economy consisted of 10 trillion dollars, adding a trillion to the money supply (a 10% increase), without a 10% increase in goods and services, there will be inflation. We're averaging 2-4% a year on inflation, yet the fed is offering sub 1% loans.

That means they're making a net loss on the loans. We the taxpayers are fronting mega billionaires money so that they can reloan that money back to us at a major profit. It's sick and ridiculous.