Libertarian View of Great Depression

[quote]LIFTICVSMAXIMVS wrote:
Economics for Real People
Economics for Real People | Mises Institute [/quote]

I’m working on this book and it’s great. Definitely recommended.

[quote]DrSkeptix wrote:
Headhunter actually–at last, to my surprise–makes a valid and true point; the US had a policy of inflating its money as a direct result of Stanley Baldwin’s disastrous re-introduction of the Gold Standard to Britain in 1924. Also, Britain experienced its recession while we were still expanding, because of these events.

[/quote]

Okay, good. Now, why would the United States government want to do that? If they don’t do so, gold would flow into our coffers. So, why?

Are you saying that international bankers manipulate currencies, over and above their national governments, and perhaps not even in a country’s best interest?

DrSkeptix, you conspiracy theorist you!!!

[quote]DrSkeptix wrote:
There was not wage or price controls pre-war, right? It would be antithetical to the business contraction to do so. So why did you presume FDR’s enacted wage and price controls? I think you are laboring under some impressive historical misconceptions.
[/quote]

Wrong. Virtually every wartime agency - including the OPA - had its analogue during the depression. The NRA instituted regulations that tried to end “cut throat competition,” set minimum prices in all industries, and forced businesses to work with government to set price codes, etc… And the AAA, as I suggested above, cut farm production so as to raise prices.

There’s lots more to say but I’ve got to get to work.

@lifty - thanks for the link; yeah, very good stuff that. I’ve read your posts in the past with great interest. It’s rare indeed to find a fellow mises/hayek devotee.

Cheers all, ~katz

[quote]katzenjammer wrote:
DrSkeptix wrote:
There was not wage or price controls pre-war, right? It would be antithetical to the business contraction to do so. So why did you presume FDR’s enacted wage and price controls? I think you are laboring under some impressive historical misconceptions.

Wrong. Virtually every wartime agency - including the OPA - had its analogue during the depression. The NRA instituted regulations that tried to end “cut throat competition,” set minimum prices in all industries, and forced businesses to work with government to set price codes, etc… And the AAA, as I suggested above, cut farm production so as to raise prices.

There’s lots more to say but I’ve got to get to work.

[/quote]

Setting minimum prices for commodities and food is NOT wage and price controls, as anyone else understands the term. You may be mistaking the NRA, which served to boost wages, arguably, and stop deflation, less convincingly.
SO where are these wage and price controls?
I may be misinformed, but can you point out the equivalent agency to the OPA, say between 1929 and 1937?

I can wait.

[quote]LIFTICVSMAXIMVS wrote:
DrSkeptix wrote:
I posted figures, perhaps facts, about unemployment 1932-1941. The War effort did not contribute during that period. Further, I suggested that with 5 million in uniform, and one-half-million dead, there was a change in unemployment to be sure. BUt the major change in employment–18 million new jobs–occurred because of the domestic production and mobilization for the the war, not because men were taken out of circulation. Prove me wrong.

This is precisely my point…there had to be a build up to the war first. The dates and numbers you provide do not prove anything. There is no reason to believe that the depression wouldn’t have fixed it self had the gov’t just left everything alone.

People still need to produce and consume to survive and government intervention isn’t required for that.

Hence the Third Depression–predicted by Marxists, Keynesians, and Austrians–which never happened after WWII.

FDR inflated our way out of an other depression…so what does that prove?!

Third, you did not answer my question. There was not wage or price controls pre-war, right? It would be antithetical to the business contraction to do so. So why did you presume FDR’s enacted wage and price controls

Perhaps I misspoke about who did what…they were enacted by the Hoover admin after the initial Crash and kept in place by FDR. The fact still remains it hurt economic expansion more than helped it.[/quote]

There is so much here that just ain’t so, it is hard to know where to start. So i won’t belabor more than a point or two, and I won’t wage a debate beyond this post.

Was there inflation between 1932 and 1938? Or was deflation blunted? What happened to commodity prices–say, iron and steel and coal-- between 1932 and 1940? Does this represent commodity price inlfation? Wage inflation?

Next, I can understand if someone misspeaks. But Hoover, of all people, started wage and price controls? Here is a snippet from Wiki:
“[Hoover] [a]ctively encouraged businesses to maintain high wages during the Depression, in line with the philosophy, called Fordism, that high wages create prosperity. Most corporations maintained their workers’ wages early in the Depression in the hope that more money into the pockets of consumers would end the economic downturn.”

This is NOT wage and price controls. But please, show me your source for your assertions.

[quote]Headhunter wrote:
DrSkeptix wrote:
Headhunter actually–at last, to my surprise–makes a valid and true point; the US had a policy of inflating its money as a direct result of Stanley Baldwin’s disastrous re-introduction of the Gold Standard to Britain in 1924. Also, Britain experienced its recession while we were still expanding, because of these events.

Okay, good. Now, why would the United States government want to do that? If they don’t do so, gold would flow into our coffers. So, why?

Are you saying that international bankers manipulate currencies, over and above their national governments, and perhaps not even in a country’s best interest?

DrSkeptix, you conspiracy theorist you!!!

[/quote]

No, I do not believe in conspiracies. But there are some very influential people with some very suspect and earnest theories. And not all of them are Austrian, if you please.

Was it in the interest of the US to buy sterling at the fixed gold standard? Someone thought so. Did Mr Norman screw them royally? Offered, for your personal delectation, HH, without endorsement:

http://tarpley.net/29crash.htm

[quote]DrSkeptix wrote:
Headhunter wrote:
DrSkeptix wrote:
Headhunter actually–at last, to my surprise–makes a valid and true point; the US had a policy of inflating its money as a direct result of Stanley Baldwin’s disastrous re-introduction of the Gold Standard to Britain in 1924. Also, Britain experienced its recession while we were still expanding, because of these events.

Okay, good. Now, why would the United States government want to do that? If they don’t do so, gold would flow into our coffers. So, why?

Are you saying that international bankers manipulate currencies, over and above their national governments, and perhaps not even in a country’s best interest?

DrSkeptix, you conspiracy theorist you!!!

No, I do not believe in conspiracies. But there are some very influential people with some very suspect and earnest theories. And not all of them are Austrian, if you please.

Was it in the interest of the US to buy sterling at the fixed gold standard? Someone thought so. Did Mr Norman screw them royally? Offered, for your personal delectation, HH, without endorsement:

http://tarpley.net/29crash.htm

[/quote]

Of course.

[quote]DrSkeptix wrote:
katzenjammer wrote:
DrSkeptix wrote:
There was not wage or price controls pre-war, right? It would be antithetical to the business contraction to do so. So why did you presume FDR’s enacted wage and price controls? I think you are laboring under some impressive historical misconceptions.

Wrong. Virtually every wartime agency - including the OPA - had its analogue during the depression. The NRA instituted regulations that tried to end “cut throat competition,” set minimum prices in all industries, and forced businesses to work with government to set price codes, etc… And the AAA, as I suggested above, cut farm production so as to raise prices.

There’s lots more to say but I’ve got to get to work.

Setting minimum prices for commodities and food is NOT wage and price controls, as anyone else understands the term. You may be mistaking the NRA, which served to boost wages, arguably, and stop deflation, less convincingly.
SO where are these wage and price controls?
I may be misinformed, but can you point out the equivalent agency to the OPA, say between 1929 and 1937?

I can wait.
[/quote]

The NRA was created specifically to regulate work hours, wages, and prices. The theory was that the general price levels throughout the economy could be raised by raising individual prices industry by industry.

From Wikipedia: “The NRA included a multitude of regulations imposing the pricing and production standards for all sorts of goods and services. Individuals were arrested for not complying with these codes. For example, a man named Jack Magid was jailed for violating the “Tailor’s Code” by pressing a suit for 35 rather than NRA required 40 cents.” There were many such court cases involving violations and/or challenges to price controls.

Now, Monsieur Skeptix, I gather you don’t consider this “price fixing,” which is rather odd because even Johnson himself - the head of the NRA, and the very architect of these codes - considered it so.

For example, the problems stemming from the NRA price fixing became so immediately apparent that in 1934 the NIRB was set up to look into price fixing and to deal with the problems therein - and, indeed, lashed out at the NRA for these price controls. Johnson, head of the NRA, then issued a memorandum prohibiting what he himself called “price-fixing” in future NRA codes - but because 90% of industry had already been “codified” by his agency, this didn’t actually mean very much.

So, even the head of the NRA understood what he was doing as “price-fixing.”

Or, let’s take Jules Backman, a noted historian of the New Deal: “Price-fixing actions may take the form of: (1) determination of the price without controlling supply or demand (e.g. minimum price-fixing) [he footnotes this with NRA codes] ; (2) control over supply (e.g. production restriction) or demand (e.g. rationing); or (3) simultaneous control of supply, demand, and price. The first, which may be described as direct price-fixing, represents the restricted meaning of the term used by many people.”

And here’s a fairly contemporary understanding of what the NRA was doing:


TIME
Monday, Dec. 31, 1934
Unpriced Lumber

Price-fixing was written into the Oil Code on the ground that it would help conserve a great natural resource. Hordes of hungry businessmen from other prostrate industries were soon loudly demanding the same thing. Before the battle of the codes was done, NRA was fixing garage rentals, dry-cleaning charges and the price of a shampoo. Out of 677 codes in force today, no less than 510 provide for some measure of price control.

Yet the Administration never really made up its mind on the problem. It approved “cost protection,” “loss limitation” and all the other pretty names for price-fixing with serious misgivings. First to go were the service codes. Last week the National Industrial Recovery Board struck price-fixing from a basic industry code - Lumber.

The job of policing 1,000,000 different prices in an industry composed of thousands of individual units was too much of a chore.

Southern hardwood lumbermen openly defied NRA to enforce code prices after they were offered a huge order from Fisher Body Corp. (TIME, Sept. 17). In the softwood regions of the Northwest chiseling was the rule. To keep a finger on the chaotic industry, NIRB last week made a point of retaining the Lumber Code’s production control.

Despite the fact that price-fixing (price-raising at the start) often cut into volume, reduced employment and retarded recovery, an amazing number of businessmen are still enthusiastic about it. But last fortnight S. (for Samuel) Clay Williams, NIRB Chairman, revealed that the Administration would frown on any attempt to inject price-fixing provisions into new NRA legislation, arguing that an NRA floor under wages was, in effect, a floor under prices.

[quote]DrSkeptix wrote:
Headhunter wrote:
DrSkeptix wrote:
Headhunter actually–at last, to my surprise–makes a valid and true point; the US had a policy of inflating its money as a direct result of Stanley Baldwin’s disastrous re-introduction of the Gold Standard to Britain in 1924. Also, Britain experienced its recession while we were still expanding, because of these events.

Okay, good. Now, why would the United States government want to do that? If they don’t do so, gold would flow into our coffers. So, why?

Are you saying that international bankers manipulate currencies, over and above their national governments, and perhaps not even in a country’s best interest?

DrSkeptix, you conspiracy theorist you!!!

No, I do not believe in conspiracies. But there are some very influential people with some very suspect and earnest theories. And not all of them are Austrian, if you please.

[/quote]

Only the best ones are.

Capitalism was still in the ascendency in the 1920’s. The world is currently fragmenting into many polygot states. The next depression will be like the era following the fall of Rome in the 4th/5th century. Electronic feudalism is our future — only small targets will survive the devolution of the size of weaponry.

The only hope for order is if someone in weapons technology can invent a weapon to conquer the world before complete dissolution happens. Look to nanotech for this, where most of the globe can be peacefully lobotimed into docile sheep.

[quote]DrSkeptix wrote:
Setting minimum prices for commodities and food is NOT wage and price controls, as anyone else understands the term.
[/quote]
Yes it is. You can call it price fixing for all I care. the result is the same thing no matter what it’s called by whom. Your lack of understanding of the laws of economics give you no merit for argumentation.

If you tell a farmer not to raise the price of his crop and he can’t do it with out taking a personal loss what do you think will happen? If you tell an employer he has to pay a certain wage and he has to take a personal loss in order to do it what do you think will happen?

This should be elementary to someone with the word dr in his name.

[quote]DrSkeptix wrote:
Was there inflation between 1932 and 1938? Or was deflation blunted? What happened to commodity prices–say, iron and steel and coal-- between 1932 and 1940? Does this represent commodity price inlfation? Wage inflation?
[/quote]

Money was pumped into the system (called inflation) to “help” the economy with job creation. Price fixing was used to stop deflation because the Keynesians saw low prices as the root of problem rather than a symptom of the problem they created.

BTW, deflation is a good thing in a depressed economy. It allows the newly created poor to consume goods and keep the economy running. It also keeps production costs low so that jobs can be created.

[quote]LIFTICVSMAXIMVS wrote:
DrSkeptix wrote:
Was there inflation between 1932 and 1938? Or was deflation blunted? What happened to commodity prices–say, iron and steel and coal-- between 1932 and 1940? Does this represent commodity price inlfation? Wage inflation?

Money was pumped into the system (called inflation) to “help” the economy with job creation. Price fixing was used to stop deflation because the Keynesians saw low prices as the root of problem rather than a symptom of the problem they created.

BTW, deflation is a good thing in a depressed economy. It allows the newly created poor to consume goods and keep the economy running. It also keeps production costs low so that jobs can be created.[/quote]

It also stifles growth and risk taking and encourages people to hoard their money because it will be worth more tomorrow.

It is bad.

[quote]Zap Branigan wrote:
It also stifles growth and risk taking and encourages people to hoard their money because it will be worth more tomorrow.
[/quote]

Why is that bad? It’s called saving. When money is available to entrepreneurs in the form of savings it actually promotes investment in capital goods. Investment with easy credit (especially fractional reserve credit) creates bubbles. Either way, money needs to be saved or payed back in the future. Savings is what keeps interest rates low. When interest rates get too low people start spending. The market is amazing in that it is self-regulating.

BTW, there will always be risk takers. They are the ones who figure out that people want personal computers and cheap, fuel-efficient automobiles, etc. Entrepreneurs figure this stuff out. Not regulators and central bankers.

[quote]LIFTICVSMAXIMVS wrote:
Zap Branigan wrote:
It also stifles growth and risk taking and encourages people to hoard their money because it will be worth more tomorrow.

Why is that bad? It’s called saving. When money is available to entrepreneurs in the form of savings it actually promotes investment in capital goods. Investment with easy credit (especially fractional reserve credit) creates bubbles. Either way, money needs to be saved or payed back in the future. Savings is what keeps interest rates low. When interest rates get too low people start spending. The market is amazing in that it is self-regulating.

BTW, there will always be risk takers. They are the ones who figure out that people want personal computers and cheap, fuel-efficient automobiles, etc. Entrepreneurs figure this stuff out. Not regulators and central bankers.[/quote]

When people stop spending money it is caled a recession.

[quote]Zap Branigan wrote:
When people stop spending money it is caled a recession.[/quote]

People cannot stop spending indefinitely. Everyone needs to eat. Everyone needs to pay rent, etc. Everyone consumes. There is no reason to hold cash because there is no value to it. It is an exchange mechanism only and carries no value except for what it can be used to purchase. People will always buy and sell based on their current value scales – wants and needs.

When spending goes down prices will follow until buyers are brought into the market. When there is a large demand to hold cash (saving) interest rates also go down which also promotes spending and capital investment.

Recession is not necessarily a bad thing. It depends how insulated one is in each market. For people with very low debt and good spending habits now is the time to buy property. How is that bad thing?

[quote]katzenjammer wrote:
DrSkeptix wrote:
katzenjammer wrote:
DrSkeptix wrote:
There was not wage or price controls pre-war, right? It would be antithetical to the business contraction to do so. So why did you presume FDR’s enacted wage and price controls? I think you are laboring under some impressive historical misconceptions.

Wrong. Virtually every wartime agency - including the OPA - had its analogue during the depression. The NRA instituted regulations that tried to end “cut throat competition,” set minimum prices in all industries, and forced businesses to work with government to set price codes, etc… And the AAA, as I suggested above, cut farm production so as to raise prices.

There’s lots more to say but I’ve got to get to work.

Setting minimum prices for commodities and food is NOT wage and price controls, as anyone else understands the term. You may be mistaking the NRA, which served to boost wages, arguably, and stop deflation, less convincingly.
SO where are these wage and price controls?
I may be misinformed, but can you point out the equivalent agency to the OPA, say between 1929 and 1937?

I can wait.


Or, let’s take Jules Backman, a noted historian of the New Deal: “Price-fixing actions may take the form of: (1) determination of the price without controlling supply or demand (e.g. minimum price-fixing) [he footnotes this with NRA codes] ; (2) control over supply (e.g. production restriction) or demand (e.g. rationing); or (3) simultaneous control of supply, demand, and price. The first, which may be described as direct price-fixing, represents the restricted meaning of the term used by many people.”


Despite the fact that price-fixing (price-raising at the start) often cut into volume, reduced employment and retarded recovery, an amazing number of businessmen are still enthusiastic about it. But last fortnight S. (for Samuel) Clay Williams, NIRB Chairman, revealed that the Administration would frown on any attempt to inject price-fixing provisions into new NRA legislation, arguing that an NRA floor under wages was, in effect, a floor under prices.

[/quote]

I believe you have proved my point for me.
Price fixing or production control is NOT “wage and price controls,” the subject at issue here. Wage and price controls are designed, of course, to stop the upward spiral costs of wages, commodities and services.
To “put a floor” under wages or prices in that environment can in no way be construed as “wage and price controls.”

I will wait some more.

[quote]LIFTICVSMAXIMVS wrote:
DrSkeptix wrote:
Was there inflation between 1932 and 1938? Or was deflation blunted? What happened to commodity prices–say, iron and steel and coal-- between 1932 and 1940? Does this represent commodity price inlfation? Wage inflation?

BTW, deflation is a good thing in a depressed economy. It allows the newly created poor to consume goods and keep the economy running. It also keeps production costs low so that jobs can be created.[/quote]

OK…'splain this to me.

A poor jobless man has his savings run out. There is $8 in the bank account. Rent is due. He hopes the landlord will accept a lower rent–this week. Yes, the price of bread just went down, and an apple is 5 cents, but, as my father said, “Who had a nickel?”

(re: production costs, they may be very low if wages plummet in a competitive market, but who will buy the widgets? Factories shuttered during the early Depression, with very low production costs. You can look it up)

SO how is deflation a good thing? Can you demonstrate this–not by some theory, but by some observation from the historical period in question?

[quote]DrSkeptix wrote:

I believe you have proved my point for me.
Price fixing or production control is NOT “wage and price controls,” the subject at issue here. Wage and price controls are designed, of course, to stop the upward spiral costs of wages, commodities and services.
To “put a floor” under wages or prices in that environment can in no way be construed as “wage and price controls.”

I will wait some more.[/quote]

“Putting a floor under prices” is not an attempt to control them?

It is not as bad as fixing a price but what else would it be?

[quote]DrSkeptix wrote:
LIFTICVSMAXIMVS wrote:
DrSkeptix wrote:
Was there inflation between 1932 and 1938? Or was deflation blunted? What happened to commodity prices–say, iron and steel and coal-- between 1932 and 1940? Does this represent commodity price inlfation? Wage inflation?

BTW, deflation is a good thing in a depressed economy. It allows the newly created poor to consume goods and keep the economy running. It also keeps production costs low so that jobs can be created.

OK…'splain this to me.

A poor jobless man has his savings run out. There is $8 in the bank account. Rent is due. He hopes the landlord will accept a lower rent–this week. Yes, the price of bread just went down, and an apple is 5 cents, but, as my father said, “Who had a nickel?”

(re: production costs, they may be very low if wages plummet in a competitive market, but who will buy the widgets? Factories shuttered during the early Depression, with very low production costs. You can look it up)

SO how is deflation a good thing? Can you demonstrate this–not by some theory, but by some observation from the historical period in question?

[/quote]

He can only explain it in theory, because you cannot simply wish the mess the government created with the Great Depression away.

How is eating healthy and working out a good thing under the condition that I just stabbed you in the heart?