[I]t is now generally agreed that the following ingredients came together to worsen an inevitable downturn and turn it into the Great Depression:
1. a crash in asset prices, wiping out much wealth that had been thought secure, 2. a revival in protectionism early in the downturn, destabilizing the world payments equilibrium and causing world trade to decline 3. a series of serious banking crashes – the Bank of the United States failure of December 1930, followed by the Austrian Creditanstalt crash of May 1931, leading to a collapse in the US and global money supply which was not corrected by the Fed4. a determined diversion of resources from the private sector to the public sector, initially in 1931-32 by President Herbert Hoover’s Reconstruction Finance Corporation and then by the New Deal 5. a panicky incentive-killing tax increase pushing up top marginal income tax rates sharply from 25% to 63% 6. a partial abandonment of basic principles of capitalism through the first New Deal, disrupting relations between buyers and sellers 7. a government-directed destruction of capital raising mechanisms, motivated by hatred of Wall Street and rendering risky debt and equity issues almost impossible for the next decade
"There are men, in all ages, who mean to exercise power usefully; but who mean to exercise it. They mean to govern well; but they mean to govern. They promise to be kind masters; but they mean to be masters." Daniel Webster
Monday, September 29, 2008
How To Create the Next Great Depression
Martin Hutchinson explains how:
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