Contrary to what you have heard and read over the last year, Hoover behaved as a textbook Keynesian after the stock-market crash. He immediately cut income tax rates by one percentage point (applicable to the 1929 tax year) and began ratcheting up federal spending, increasing it 42 percent from fiscal year (FY) 1930 to FY 1932. But to truly appreciate Hoover’s Keynesian bona fides, we must realize that this enormous jump in spending occurred amidst a collapse in tax receipts, due both to the decline in economic activity as well as the price deflation of the early 1930s. FULL ARTICLE
Source link: http://archive.mises.org/9817/the-fake-history-of-the-depression/
The Fake History of the Depression
Previous post: Standing Keynesianism on Its Head
Next post: Economic Calculation in the Environmentalist Commonwealth
{ 18 comments }
Dear Robert Murphy,
I ordered your book from the Mises bookstore over the weekend and I am anxiously waiting for its arrival.
The masses are finding themselves with alternatives which is one of the blessings of freedom.
I expect that your book will enhance the prospects of freedom in the future!
Call it Mises’ Law: People of the most widely divergent views nonetheless always converge in condemning “free market” capitalism for whatever they believe wrong. Particularly relevant is its derivation, Loberfeld’s Law: In a mixed economy, it’s the market element that takes the blame. (See BAILOUT.) Statism is eternally innocent.
And the corollary of Loberfeld’s Law: In a mixed economy, it’s always the statist element that gets the credit.
“The Cause of All Mankind”
Hopefully you can get on t.v. and radio to advertise what looks to be a great book!
Americans are comfortable with mythological history. History is written by the winners, never the losers whom voices are seldomly heard. The history of the depression is one such example.
Will someone please address this lunacy?
http://www.nytimes.com/2009/04/19/business/economy/19view.html?_r=2
> Will someone please address this lunacy?
Oh my, thanks for the laugh. That article could have been posted here verbatim and I would have thought it was a brilliant reductio ad absurdum example of the bankruptcy of Keynesian thought.
“By the same token, if Obama wanted to reduce unemployment today, he could take two million laid-off workers, equip them with arm floaties, and send them to fight pirates. Voilà ! The unemployment rate would fall.”
Bwuhahaha, I can imagine Obama doing that very thing with a straight face–a “green” way of fighting pirates!
New York Times seeks out the simple-minded ones or the narcissistic, ambitious, and unethical ones. It is difficult to tell into which category falls N. Gregory Mankiw, professor of economics at Harvard and former adviser to President George W. Bush.
He probably is a blend of both of these ignominious
distinctions.
I believe that Thomas Woods, in his current book Meltdown, says something to the effect that you should read the New York Times economics page and always believe THE OPPOSITE.
Who can argue against such bulletproof logic? :p
Funny. My algebra is a bit rusty, but unless I’m mistaken, even the author’s example is in error. What number twice itself plus 6 = 0? I’m thinking the 2 should be a 3.
Typical fuzzy headed thinking.
2x + 6 = 0
2x = 0 – 6
2x = -6
x = -6/2
x = -3
The author made a logical fallacy (saying that the existence of negative numbers somehow has to do with the idea that having a negative interest rate is a sound option), but that’s it. The math is correct (he just wanted a problem that ended with a negative number).
Oops. Now I’m the fuzzy headed thinker. My algebra is rustier than I thought. Thanks for clearing that up.
Even though I learned a hell of a lot on this site (John Flynn’s ‘Roosevelt myth’ and MNR’s ‘AGD’), I’m still really looking forward to reading this bastard.
N. Gregory Mankiw is a professor of economics at Harvard. He was an adviser to President George W. Bush.
@Barry Loberfeld
Loberfeld’s law is true! Here is why:
It boils down to measurement. (Dr. Murphy does a wonderful job of re-evaluating the figures, thanks Doc!)
The Dollar is not a valid tool to measure with. So the market must re-evaluate it against those things that the market truly values, and then set a pricebased on that evaluation. Is it any wonder then, that when the measuring device itself has to undergo calibration every time it is used, that the measurements made with it are full of errors? Not at all. If I use a rubber band to measure length, I must stretch it out against a true standard, and then carefully carry it over to what I’m measuring and compare them. I can only get a somewhat accurate measurement if I can maintain the length of my standard as I perform the measurement.
The market has the same problem when measuring value against the Dollar. There is no objective measurement for the dollar itself, other than the here and now re-evaluation, the here and now calibration, that one must make to evaluate a thing.
Malinvestment comes about because the measure is not accurate enough to give a true estimation of actual value. Saying a house is worth $250,000 has no meaning except by today’s calibration. It will not mean the same thing in 10 years.
But measure the house in gold today. $880/ounce for gold today. $250,000/house(the house in question). 250,000/880 = 284ozAU/house
10 years ago, Gold was $270/oz. 284oz * $270/oz = $76,680/house.
Yup, that’s about what the house cost when we bought it 10 years ago. It’s still worth 284oz of Gold even after 10 years. If we had been measuring our value this way, we would have seen that the 284oz House was over valued at $350,000 in 2009. Bubble? Keynesian multiplier? Malinvestment? Is any of this too hard to measuere?
In ten years time, the Dollar price of that same house will be much much higher. But the weight price in gold will remain relatively constant. If the Dollar price on the house excedes the gold weight price of the house by too much, a bubble is forming in the housing market. Malinvestment is taking place, and the market price of houses is due to fall.
The market corrects because it must re-evaluate it’s measuring device. It re-evaluates the Dollars, not the things! Look here to find Keyne’s Magic Multiplier. It is in the error of pricing caused by the malinvestment, caused by the lack of a stable standard of value over time. Measure with a Dollar and you measure with a rubber band. Measure instead with gold, or your choice of actual intrinsic value commodities, by weight, or by volume, and your measurements of values will remain consistent over time.
1924 Green Bay Wisconsin
Seven-Room Home for Sale (All Modern, with Garage, Lot 53×264, Fruit Crop Land)
$5200
Grabbed this at random off Google. Gold was about $20/oz that year.
5200/20=260oz
Now THAT is a consistent measurement of value!!!
That same house today would cost $228,000.
What changed? Not the value of the House. Not the value of the people. Not the value of the market. Not the value of the gold.
What changed was the value of the Dollar.
What changed was the value of the MEASURE!!!
Austrians All. Stop using Fiat measurements in your arguments!!! You can’t prove anything that way and Keynes will have you chasing your own tail.
Measure value in Gold. Convert using spot price to get a true evaluation of the Currency. Don’t measure with currency and call it science.
Thanks Murph,
Your book, which I ordered from mises.org, helps you, the cause, the site, and I get a great fun read.
Free market transactions really do benefit all! (BTW, love how easy it is to buy using paypal).
I hope you go all the way through to 1947 or so, since Rothbard leaves off in the early 30′s.
Comments on this entry are closed.