Re: Progressive Liberals
Part you say about the cause is true except you left out that the FED lowering interest rates and ignoring the danger signs is what caused it all.
Nope.
There are numerous reasons why the 1929 Stock Market Crash happened, and from what I can find the FED lowering interest rates had nothing to do with it. The Federal Government did however ignore the destructive weight of private debt and the weaknesses within the banking and financial system.
So the Government as well as the Free Market both had a hand in causing the 1929 Stock Market Crash.
One reason for the crash was
management’s disposition to maintain prices and inflate profits while holding down wages and raw material prices. This meant that workers and farmers were denied the benefits of increases within their own productivity. The consequence for this was the relative decline of mass purchasing power. So as goods flowed out of the expanding capital plant in ever greater quantities, there was proportionately less and less cash in the hands of buyers to carry the goods off the market. This destructive pattern of income distribution, in short, was incapable of long maintaining prosperity.
Another reason why is that after seven years of fixed capital investment at high rates had “overbuilt” productive capacity (in terms of existing capacity to consume) and had thus
ended up saturating the economy. The slackening of the automotive and building industries was symptomatic. The existing rate of capital formation could not be sustained without different governmental policies – policies aimed not at helping those who had money to accumulate more but at transferring money from those who were letting it stagnate in savings to those who would spend it.
Another reason for why the Crash happened is that the sucking off into profits and dividends of the gains of technology meant the tendency to use excess money for speculation, transforming the Stock Exchange from a
securities market into a gaming house.
The Stock Market Crash completed the debacle. After Black Thursday, what rule was safe except
Sauve qui peut? And businessmen, in trying to save themselves, could only wreck the system; in trying to avoid the worst, they rendered the worst inevitable. By shattering confidence, the crash knocked out any hope of automatic recovery.
So in short, the federal government had encouraged tax policies that contributed to over-saving, monetary policies that were expansive when prices were rising and, deflationary when prices began to fall, tariff policies that left foreign loans as the only prop for the export trade, and policies toward monopoly which fostered economic concentration, introduced rigidity into the markets and anaesthetized the price system. Representing the businessmen, the federal government had ignored the dangerous imbalance between farm and business income, between the increase in wages and the increase in productivity. Representing the financiers, it had ignored irresponsible practices in the securities market. Representing the bankers, it had
ignored the weight of private debt and the profound structural weaknesses in the banking and financial system. Seeing all problems from the viewpoint of business, it had mistaken the class interest for the national interest. The result was both a class and national disaster.