Reader comments
Walter E. Williams: History shows federal intervention slows economic recoveries

Ridgerunner | 12:51 a.m. Nov. 4, 2009

Powerful article! Should be required reading in every College and High School classroom in America! No need to waste the time of the President and the Democrats, they believe more government is the answer to everything and that the private sector is the problem and MUST be regulated out of existance! Don't believe that? Ask GM and Chrysler and most of the bigger banks in America who now rules them now! Thus the economy is still stuggling and still declining!

Reed | 1:04 a.m. Nov. 4, 2009

Thank you for telling the truth about government interference in an economy. Clearly sound economic reasoning no longer has place in our Federal government. Sad. I pose this question. With corruption, incompetence, America haters in office, unconstitutional interference in other nations affairs, and Government stealing from the working to give to the lazy, and on and on ... Is it even morally right to contunue to pay taxes?

Tim D. | 5:41 a.m. Nov. 4, 2009

"The bottom line is that the idea that government bureaucrats have enough knowledge to manage an economy well is the height of conceit – what Nobel Laureate Friedrich Hayek called the "fatal conceit."

Amen Walter, and conceit has reached all time highs in Washington.

Comments continue below

JMT | 7:14 a.m. Nov. 4, 2009

I have no doubt some are going to trash this Walter Williams editorial.

Let me add that a few years ago there was a special dinner held in the honor of Milton Friedman. It was a 'who's who' of economics. One of the key speeches was given by Ben Bernake, Chairman of the Federal Reserve. In his speech he publicly acknowledged to Milton Friedman that the Federal Reserve got it wrong during the Great Depresssion. Milton had engaged in much discussion and writing about how the Federal Reserve policies had really caused fits during the 1930's.

So for those who are going to toe the party line, even Ben Bernake admits it. Walter Williams is right on the money!

Himself | 7:24 a.m. Nov. 4, 2009

Dr. W is in the 95% today

Thanks Walter | 7:39 a.m. Nov. 4, 2009

for yet another well thought out letter exposing our "dear leaders" for who they really are - conceited and self-absorbed powermongers.

Anonymous | 8:18 a.m. Nov. 4, 2009

Not really so, Walt. You start with the conclusion and write to buoy it up. But for the federal government agreeing to GM's request for intervention, GM goes down, along with many other ancillary companies. This would have had a devastating impact on the economy and likely contributed to not just a recession but a depression. GM gets the breathing room it needs, turns itself around, planning to repay the government on its investment, and the potential dire consequences are averted. In many other ways, capitalism would have destroyed itself but for the intervention of government. Just because you say it, Walt, does not make it so. Just because you cite scholar's who agree with you does not make it right. There are scholars on every topic who disagree with one another. A wise person would scrutinize the scholar's work and conclusions rather than give them blind reliance.

Roland Kayser | 8:25 a.m. Nov. 4, 2009

Dr. Williams seems to agree with Ben Bernanke that the Fed got it wrong during the depression. Since the Fed today is doing the exact opposite of what they did then, does Mr. Williams support their current policies?

History reveals truth | 8:37 a.m. Nov. 4, 2009

The giant leftist myth of the benevolent FDR is finally being debunked. His henchmen admitted that keeping the country in economic crisis abetted their lefitist agenda. Read Secrets of the Temple, a history of the Federal Reserve and its disasterous misteps down the many years. Bernake is a goat. It should be required reading for any Economics Degree.

@Anonymous 8:18 | 8:52 a.m. Nov. 4, 2009

Did the stockholders of GM ask for the government intervention? I thought it was the incestous managment and unions. I must have missed the stockholders saying "here take my stock".

Right vs wrong intervention | 9:06 a.m. Nov. 4, 2009

Of course the libertarian Cato Institute is going to advocate a "hands-off" approach.

However, it isn't Fed intervention which slows recoveries--it is the WRONG intervention which slows recoveries. Bernanke has talked about wrong interventions the Fed did during and before the Great Depression--such as tightening the money supply. Bernanke: "Finally, perhaps the most important lesson of all is that price stability should be a key objective of monetary policy. By allowing persistent declines in the money supply and in the price level, the Federal Reserve of the late 1920s and 1930s greatly destabilized the U.S. economy and, through the workings of the gold standard, the economies of many other nations as well."
federalreserve

RedShirt | 9:25 a.m. Nov. 4, 2009

To "Roland Kayser | 8:25 a.m." what is the current fed doing that is the oppoosate from the Great Depression?

Here are the things that are the same:

Bank bailouts

Bailouts of major transportation manufactureres (then it was trains, now it is cars)

Increased tarrifs (waxman climate bill that would put increased tarrifs on goods purchased from countries without carbon limits)

Increased social welfare programs (longer unemployment benefits, etc..)

Increased deficit spending.

Government control of wages (GM, Chrysler, AIG, and other banks have limits on compensation)

FDR had the National Recovery Administration, Obama has lobbyists from GE, merging business with government.

FDR pushed health care, Obama is pushing health care.

Obama did "cash for clunkers", FDR burned crops to help create demand.

FDR had "fireside chats" and Obama is out on YouTube and the TV every other week.

So, please explain how the Current Federal Government is doing anything the opposite way from FDR's administration.

David Decker | 10:09 a.m. Nov. 4, 2009

Great column although I feel (a depression baby) that he was a little hard on FDR. WPA (kidingly referred to as "We Piddle Along") did produce highways that enabled this country to progress; plus employed thousands of workers who wanted to work instead of stand in breadlines.(No, not my dad who was employed otherwise throughout the depression) Williams does overlokk the fact that Obama "wants" the country to fail so that he can hasten his "Socialist" plan.

Red | 10:12 a.m. Nov. 4, 2009

"Hanke says that the most repeated statement about the cause of the U.S. Great Depression is that it was caused by the October 1929 stock-market crash. How could that be? By April 1930, the stock market had recovered to its pre-crash level."

Walt. Walt! WALT!

If you're going to wander into the fact-free zone of right-wingnut fantasy, you'd be better off not asserting easily checked-out falsehoods.

Source for the following: Yahoo!Finance's Dow Jones Industrial chart.

Pre-crash high: August 1929, 380.33

In April 1930, the market hadn't recovered; it was still in slow-motion free-fall. Not only had it not "recovered to its pre-crash level," it hadn't even hit bottom!

It bottomed out in May of 1932 at 44.74 and didn't see 380 again until November 1954!

According to Bernanke | 10:16 a.m. Nov. 4, 2009

On the Great Depression

"Long-established central banking practice required that the Fed respond both to the speculative attack on the dollar and to the domestic banking panics. However, the Fed decided to ignore the plight of the banking system and to focus only on stopping the loss of gold reserves to protect the dollar. To stabilize the dollar, the Fed once again raised interest rates sharply, on the view that currency speculators would be less willing to liquidate dollar assets if they could earn a higher rate of return on them. The Fed's strategy worked, in that the attack on the dollar subsided and the U.S. commitment to the gold standard was successfully defended, at least for the moment. However, once again the Fed had chosen to tighten monetary policy despite the fact that macroeconomic conditions--including an accelerating decline in output, prices, and the money supply--seemed to demand policy ease."

So there, RedShirt.

Earl | 10:46 a.m. Nov. 4, 2009

Bernanke and Friedman both have it wrong. And Bernanke is doing more of the wrong thing in spades. The idea that the government can "prime the pump" of the economy is a myth based on the mistaken belief that WWII brought us out of the depression. That has been disproved by economist Robert Higgs. Don't expect it to be accepted by "mainstream" economists, though, because it contradicts their belief in economic magic. There is nothing that will get us out of this recession/depression other than liquidating bad (toxic) assets and stabilizing the money supply. To do that, interest rates have to come up significantly, jobs will be lost and businesses will inevitably be shut down. If we don't do it now, it will be much worse later. Trying to inflate ourselves out of this situation defies the laws of economics and will result in the inevitable collapse of the economy a la Weimar Germany 1922-23.

RedShirt | 11:34 a.m. Nov. 4, 2009

To "According to Bernanke | 10:16 a.m. " according to the FDIC web site, it was "was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s." Sounds like a bailout.

You also forgot that FDR implemented the Emergency Banking Act of 1933, which put increased controls on banks by the Feds.

Also, I said that during the depression banks were bailed out. The depression started before FDR took office. Under Hoover, at the onset of the depression, banks were given money for bailouts.

Want to try again?

All Knowing | 11:36 a.m. Nov. 4, 2009

@Anonymous 8:18 a.m.:

"In many other ways, capitalism would have destroyed itself but for the intervention of government."

Much of capitalism that has been destroyed in this country and fled overseas is the result of unions and government action:

Textiles, shoes, steel, automobiles, clothing, toys, computers, furniture to name a few lost industries caused by union obscene wages and benefits demands plus government environmental, social security, health care, etc., impositions on businesses.

Eddie | 11:38 a.m. Nov. 4, 2009

The assumption that the omniscient government is the final solution to all ills is ideologically driven and not supported by facts. In practice the opposite is often true. Our legislators are no smarter, and occasionally less smart, than other "experts." Obama's agenda is based on this false assumption which is part of liberal philosophy.

Roland Kayser | 11:42 a.m. Nov. 4, 2009

To Red Shirt: By "the Fed" I was speaking of the Federal Reserve, not the federal government. They are increasing the money supply rather than decreasing it. The opposite of what they did during the depression.

To Earl: You are fighting the wrong war. The Fed is currently battling deflation, not inflation. If they were to encourage deflation, as you suggest, we would soon be in worse shape than we were during the depression. It is virtually impossible for serious inflation to take hold in an era of declining real wages like ours. Inflation may well be a problem again in the future, then we can go back to fighting your war.

Bernake inflation | 11:44 a.m. Nov. 4, 2009

The M-1 & M-2 money supply has doubled in approximately last 12 months. Dollar dropping, as it should when it is diluted to such a dangerous extent.

Earl | 12:12 p.m. Nov. 4, 2009

@Roland: wrong again. Deflation IS the cure! Only the Keynesian school of economics believes that deflation is evil. Better stated, we need to experience DISinflation. The problems we're experiencing are caused by excessive inflation of the money supply, which causes economic bubbles and the rise in prices. We are merely creating another bubble that will inevitably burst. NOTHING IS BEING SOLVED! The current track is only making things worse. According to Shadow Government Statistics which shows how we once kept track of inflation (prior to the Clinton revised methodology), we're still experiencing a 5+% rate of price inflation. The best thing that can happen is for prices to come down so that our real wages will increase. The opposite is happening, thanks to Bernanke, Geitner et al.

Locke | 12:23 p.m. Nov. 4, 2009

A key observation in Williams' article is that the Federal government has no constitutional authority to intervene in the economy.

Study the 9th and 10th amendments to see just how true that is.

Earl | 12:34 p.m. Nov. 4, 2009

Bernanke argues, along with Friedman, that government didn't provide sufficient liquidity to bring us out of the depression. Of course, the opposite is true. Both Hoover and FDR borrowed heavily and injected liquidity at a rate heretofore unseen in the American economy. Bernanke says the cure now is to flood the market with liquidity, even dropping cash out of helicopters if necessary (hence the nickname "Helicopter Ben"). But consider this, taken from Robert Murphy's Politically Incorrect Guide to Economics:

"Between 1839 and 1843 the money supply fell by 34 percent and wholesale prices fell by 42 percent. If the monetarists are right, and it was the Fed's refusal to counteract the falling money supply in the early 1930s that gave us the Great Depression, then the 1839—1843 period should have been devastating. Yet Murray Rothbard (relying on Peter Temin's historical research) reports otherwise. (p. 71)"

Likewise, consider the recession/depression of 1921-22 that righted itself totally without government intervention. No Keynesian has been able to adequately explain that event. It's simply because the market can cure itself ONLY without government intervention!

PROFESSOR | 12:47 p.m. Nov. 4, 2009

The current resident of the WHITE HOUSE was a PROFESSOR.

The protagonist of the article is a PROFESSOR.

The author of the article is a PROFESSOR.

An ELITEST PROFESSOR writes an article, citing an ELITEST PROFESSOR, condeming the economic practice and policies of an ELITEST PRESIDENT.

HOLY GLENN BECK!

thatthatguy | 2:09 p.m. Nov. 4, 2009

Wait, so for 50 years we were told that the heavy spending of WWII brought about the end of the depression. Now that the right is loosing position because they're on the wrong side of history they've decided to rewrite the history books. Please, I'm really tired of all this politically motivated revisionist history.

Williams has it wrong | 3:23 p.m. Nov. 4, 2009

What slowed the United States getting out of the great depression was the Feds tight money policy. It was their refusal to pump money into the system.

Rosevelts new deal didn't prolong it, it merely made it more bearable for a few people hit the hardest by it.

Earl | 3:30 p.m. Nov. 4, 2009

@thatthatguy: thanks for the laugh, I really needed that! Ok, just for fun, maybe you should actually do some reading. Read Robert Higgs' book "Depression, War and Cold War." Let the facts speak for themselves. The myth that has been perpetuated is that spending creates wealth. I mean, does that really make sense to you? Can YOU become wealthy by spending all you have and then going into debt? Of course not! Only savings creates wealth! Yes, yes, sometimes you have to go into debt to leverage an investment, but you don't become wealthy until the assets outweigh the debts. It's always been true and always will be. We are broke and going even more broke by spending money we don't have!

Tell you what, thatthatguy, we're all on the losing side now. Everyone is being hurt by allowing the falsehoods perpetrated by politically-motivated economics to rule in universities and in government. The immutable laws of economics are about to cave in on us. The fairytale world of Keynesians is going to cause the death of our economy.

Hmm | 11:14 p.m. Nov. 4, 2009

The reason that Obama wants government intervention is just that, and that is to have misery within the populace. If there's misery then there's need for him. If people are happy and contented then there's no need for Obama and his ilk....

What happens if we are all happy? Does that mean that Obama is miserable?

Ty | 11:34 p.m. Nov. 4, 2009

How refreshing to see not only a spot-on article, but a vast majority of grounded comments with reason and substance!

People ARE waking up. It could make a person pretty hopeful!

Add your comment

Comments are monitored. Any comments found to be abusive, offensive, off-topic, misrepresentative, more than 200 words or containing URLs will not be posted.

Words Remaining

E-mail address: For internal use only. We may want to contact you to publish your comment (not your e-mail address) in the newspaper or for a separate story idea.