Taking Revenge on the Rich Will Not Bring Recovery

[Universe Prince]

http://online.wsj.com/article/SB122186507676758669.html

Police short sales and block them, says Securities and Exchange Commission Chairman Christopher Cox. Fire the SEC chairman, says John McCain. Investigate those short sellers, say state attorneys general. Hold hearings to grill Wall Streeters says Nancy Pelosi. "Fire the whole Trickle-Down, On-Your-Own, Look-the-Other-Way crowd" says Barack Obama, and "get rid of this whole do-nothing approach to our economic problems." The Democratic presidential candidate wants public affirmation of his argument that the whole free-market philosophy of economics has been wrong. Some of this talk carries an implicit suggestion: Do what I say or we will have another Great Depression. And no wonder: This September feels a lot like autumn 1929. But there's an important fallacy here. The stock market crash of October 1929 and the Great Depression were not the same thing. What made the depression great was not magnitude but duration -- the fact that unemployment was still 20% 10 years later. In the 1930s, policies like the ones described above did not speed recovery; they impeded it. Not long after the market crashed to 199 from its 381 high at the end of the summer of 1929, President Herbert Hoover turned on short sellers. Like our SEC, he demanded a curb on short sales. "Bear raids" or "bear parties" were to be stopped; the blame for the crash all belonged to "certain gentlemen." [...] But like today's politicians, Roosevelt also used the downturn as a weapon to trash markets generally. The New Dealers even used the same mocking phrases Mr. Obama does today. The rich might think that wealth trickled down, Roosevelt's speechwriter Sam Rosenman would later note, but "Roosevelt believed that prosperity did not 'trickle' that way." [...] In these years, the market was trying to recover, but prosecutors and tax collectors kept getting in the way. Mrs. Pelosi might note that even after the Pecora Commission finally completed its hearings, unemployment was still 20% rather than 10%. [...] A desperate Treasury Secretary Morgenthau traveled to New York to placate a crowd of 1,000 economists and businessmen at the Hotel Astor in November, 1937. The audience laughed at him for daring to try. By the next year the New Dealers were quietly telling themselves their anti-wealth experiment was over -- and turning to the impending war in Europe. The point for us in our own fragile moment is clear. To be sure, clean up is necessary. It can even help the market -- some. But in the long run what works politically is different from what works economically. Revenge, however sweet, cannot bring recovery.

[Xavier_Onassis]

Police short sales and block them, says Securities and Exchange Commission Chairman Christopher Cox. Fire the SEC chairman, says John McCain. Investigate those short sellers, say state attorneys general. Hold hearings to grill Wall Streeters says Nancy Pelosi. "Fire the whole Trickle-Down, On-Your-Own, Look-the-Other-Way crowd" says Barack Obama, and "get rid of this whole do-nothing approach to our economic problems." The Democratic presidential candidate wants public affirmation of his argument that the whole free-market philosophy of economics has been wrong.

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Those who have broken the law should be prosecuted.

Those who have been incompetent should be fired.

Legislation to prevent the bundling of mortgages should be passed, as should other laws to make profiteering on mortgages more difficult. Lenders should not be able to grant NINJA (no income, no job) loans, interest-only adjustable mortgages and such, since these result in far more harm than good.

As for public affirmation, well, enough legislation should be passed to restore confidence in the public among lenders and borrowers alike. I don't think this is difficult.

Capitalism is like gravity. It can be both bad and good. It needs to be controlled to maximize the benefits and minimize the deficits.

There never has been a pure capitalism, and it is unlikely that there ever will be, for the same reason that pure communism is impossible: humans are not pure or predictable. This is by and large a good thing. The world has a sufficient quantity of bees and ants already. Their societies are perfect and unchanging in structure, but their creativity seems to be nil. 

[Michael Tee]

<<What made the depression great was not magnitude but duration -- the fact that unemployment was still 20% 10 years later. In the 1930s, policies like the ones described above did not speed recovery; they impeded it.>>

Who's to say those policies weren't instrumental in holding the line at 20% throughout most of the decade, rather than letting the 20% grow to 40%?  If you see a graph line trending up and then plateauing, you've got to ask, why the plateau?  What happened at this point to stop the upward swing?

[Xavier_Onassis]

The way to end a Depression is to see that money continues to flow to as any of the people as possible. This worked after the horrible collapse in Japan in the 1990's, when real estate value plummeted by 85%. The government must be an employer of last resort to prevent the situation from getting worse.

It is not like there is a lack of infrastructure to be rebuilt. We could train people in windmill construction and design, geothermal, and other energy projects as well.

[Universe Prince]

Capitalism is like gravity. It can be both bad and good. It needs to be controlled to maximize the benefits and minimize the deficits.

I'm left wondering what laws the federal government has passed to control gravity to minimize the deficits. Anyway, the problem is that most of the attempts to control capitalism are the causes of most of the deficits.

[Xavier_Onassis]

Anyway, the problem is that most of the attempts to control capitalism are the causes of most of the deficits.


Prove that.

I suggest that the deficits are caused when the government spends more than it takes in.
This is the 'Borrow and squander" GOP answer to "tax and spend".

[Universe Prince]

Who's to say those policies weren't instrumental in holding the line at 20% throughout most of the decade, rather than letting the 20% grow to 40%?  If you see a graph line trending up and then plateauing, you've got to ask, why the plateau?  What happened at this point to stop the upward swing?

Michael, now you're just blindly speculating. Let me put it this way, when the National Industrial Recovery Act was repealed (by the Supreme Court declaring it unconstitutional) in 1935, the unemployment rate started to go down. When the government passed the Wagner Act, the unemployment rate went back up. Why the plateau? Because the government could only fuck up the economy so much, even under Roosevelt.

[Xavier_Onassis]

When the government passed the Wagner Act, the unemployment rate went back up.

The Wagner act allowed unions to be formed and established the NLRB.

Do you have something against the right of workers to unionize?

[Universe Prince]

The Wagner act allowed unions to be formed and established the NLRB.

Do you have something against the right of workers to unionize?

Whether I do or do not has no bearing on the effect of the act when it was passed. And it did more than just increase the unemployment rate. It forced many, many minority individuals out of work, because of course the people who ran the unions were white folks who were none too interested in helping out Negros. So don't talk to me like the Wagner Act was some sort of necessary, compassionate help for the working man. Many working men who happened not to be white found life much more difficult after the Wagner Act. And many who were white were not greatly helped by it either. Not that the NRA before it was much better. It was not criticized as the "Negro Removal Act" for no reason. And the NIRA was overturned by SCOTUS for legitimate reasons. Very little if any of Roosevelt's economic policies and plans for handling the Great Depression were of any real value. The Depression lasted a dozen years not in spite of Roosevelt's actions, but rather because of them.

[Plane]

The Depression lasted a dozen years not in spite of Roosevelt's actions, but rather because of them.[/color]

The Depression had world wide effects , in what area of the world did the effect of the depression lift first?

[Universe Prince]

The Depression had world wide effects , in what area of the world did the effect of the depression lift first?

Generally speaking, those parts of the world with the least influence from the U.S. East Asia, Australia and South Africa, as best I can recall, pulled out of the depression in the early to mid 1930s. Of course, also due to having the least influence from the U.S., the effects of the depression were relatively mild in those places.