More economic GOOD News...DOW hits new record..on track to hit 17K.

[Sallow]

What a load of hooey.

And if Lehman were the model you were looking for?

We would been in deep shit.

Every financial institution was going to go under. Each and every one of them.

There were too many interdependencies. Lehman was actually a unique case, because it went under first. Had their been others that collapsed? There would be no one "salvaging" them, because quite simply there aren't that many Barclays and Nomuras around. And even with the "Salvaging"? Thousands of people lost their jobs.

Had the government NOT stepped in? This collapse would have made the depression look like a cakewalk. Even with MASSIVE government intervention, it took a good deal of time to right things again.

How do we know this? You folks remind us daily.

Is that provable fact, or just your opinion?

Because Lehman Brothers, was actually the largest bank failure, and had the largest dependence of any of the banks. Lehman had $660 Billion in securities and assets, not including property.

Bear Stearns, had $400 Billion in assets
Washington Mutual, had $330 Billion.
Countrywide, had $40 Billion in assets. (information sketchy)

If bankruptcy was going to cause an economic melt down, the Lehman Brothers should have done it.

Further, there are numerous examples where banks were allowed to fail, and nothing happened, or better still, economic growth happened much faster than in other countries.

Iceland for example, let *ALL* of their major banks fail, and they recovered far faster, and far better, than the US. Estonia allowed their banks to fail back in the 90s, and they became part of the Baltic Tiger economies.

And it's ironic that you referred to the Great Depression, because they did exactly the same thing back in the 1930s, with bailing out banks, and it dragged the recession out into a depression. TARP had basically the same effect today, with one of the slowest, most anemic recoveries in US history. Comparable only to the Depression.

And it's ironic that you referred to the Great Depression, because they did exactly the same thing back in the 1930s, with bailing out banks

Ummmm.....they didn't bail out any banks in the 1930s. Made the Depression MUCH worse.
Believe it or not, as poorly as they run the FDIC, it's still a good thing.

The Depression was already pretty bad before the government intervened. Had the government not intervened, we may well have become a communist or fascist state.

You might think that's a good thing.

 

[RKMBrown]

is that provable fact, or just your opinion?

Because lehman brothers, was actually the largest bank failure, and had the largest dependence of any of the banks. Lehman had $660 billion in securities and assets, not including property.

Bear stearns, had $400 billion in assets
washington mutual, had $330 billion.
Countrywide, had $40 billion in assets. (information sketchy)

if bankruptcy was going to cause an economic melt down, the lehman brothers should have done it.

Further, there are numerous examples where banks were allowed to fail, and nothing happened, or better still, economic growth happened much faster than in other countries.

Iceland for example, let *all* of their major banks fail, and they recovered far faster, and far better, than the us. Estonia allowed their banks to fail back in the 90s, and they became part of the baltic tiger economies.

And it's ironic that you referred to the great depression, because they did exactly the same thing back in the 1930s, with bailing out banks, and it dragged the recession out into a depression. Tarp had basically the same effect today, with one of the slowest, most anemic recoveries in us history. Comparable only to the depression.

and it's ironic that you referred to the great depression, because they did exactly the same thing back in the 1930s, with bailing out banks

ummmm.....they didn't bail out any banks in the 1930s. Made the depression much worse.
Believe it or not, as poorly as they run the fdic, it's still a good thing.

the depression was already pretty bad before the government intervened. Had the government not intervened, we may well have become a communist or fascist state.

You might think that's a good thing.

rofl

 

[Andylusion]

Is that provable fact, or just your opinion?

Because Lehman Brothers, was actually the largest bank failure, and had the largest dependence of any of the banks. Lehman had $660 Billion in securities and assets, not including property.

Bear Stearns, had $400 Billion in assets
Washington Mutual, had $330 Billion.
Countrywide, had $40 Billion in assets. (information sketchy)

If bankruptcy was going to cause an economic melt down, the Lehman Brothers should have done it.

Further, there are numerous examples where banks were allowed to fail, and nothing happened, or better still, economic growth happened much faster than in other countries.

Iceland for example, let *ALL* of their major banks fail, and they recovered far faster, and far better, than the US. Estonia allowed their banks to fail back in the 90s, and they became part of the Baltic Tiger economies.

And it's ironic that you referred to the Great Depression, because they did exactly the same thing back in the 1930s, with bailing out banks, and it dragged the recession out into a depression. TARP had basically the same effect today, with one of the slowest, most anemic recoveries in US history. Comparable only to the Depression.

And it's ironic that you referred to the Great Depression, because they did exactly the same thing back in the 1930s, with bailing out banks

Ummmm.....they didn't bail out any banks in the 1930s. Made the Depression MUCH worse.
Believe it or not, as poorly as they run the FDIC, it's still a good thing.

The Depression was already pretty bad before the government intervened. Had the government not intervened, we may well have become a communist or fascist state.

You might think that's a good thing.

Huh? You are nutz. Read "Herbert Hoover Father of the New Deal"
by Steven Horwitz

In back in 1921, Hoover was in the Commerce Department, and called government-business cooperation, called for public works programs, and price controls and planning to end the recession.

Thankfully Coolidge ignored Hoover completely, and the recession, even though it was far more steep than the 2008 one, was over very quickly.

In 1927, Hoover created a government program called "Own your own Home", which Hoover pushed, and Congress approved, and the Federal Reserve made low interest loans available to mortgage lenders, and housing construction companies, to encourage more home ownership.

Sound familiar?

In 1929, Hoover doubled the size of the Federal Farm Board, extending millions of dollars in loans to farms across the country, buying up surplus food, and when that didn't work, engaged in subsidies for farming, and when that didn't work, started paying farmers to not plant crops.

At the same time, Hoover also proposed public works. Authorized the building of $400 Million dollars in new government buildings, and $175 Million in "public works" through the Federal Shipping Board.

In 1931, Hoover pushed for, and signed, the Davis-Bacon Act, which mandated that all jobs fund entirely, or partially by government, pay the same wage as Union jobs. The idea was, this would force up wages to non-union employees, but instead it effectively killed off non-union jobs, and more people were unemployed.

At the same time, it granted legal safety to Unions, prevent employers from stopping strikes.

Additionally, in 1930, Hoover put a nearly complete halt on all immigration. By 1931, immigration dropped to 10% of what it was in 1930.

And of course Hoover also signed the Smoot-Hawley Act, which killed off imports, and of course... killed off our exports as well.

Lastly, between 1929, and 1933, Hoover pushed for, and approved, increasing Federal Spending in all areas, by nearly double. The Federal Budget in 1929, was just over $3 Billion, and by 1933 it was over $6 Billion.

Seeing that his plans up till 1932 had accomplished nothing, and the economy was getting worse every month, Hoover proposed the following programs to Congress.

Reconstruction Finance Corporation expansion, and more money.
Home Loan Bank, to lend and subsidize construction spending.
Congressional legalization and expansion of blocking immigration (Hoover signed it by executive order, not legislation to that point).
Direct loans to state governments for spending on relief for the unemployed. (sound familiar?)
More money to Federal Land Banks.
Creating a Public Works Administration that would both better coordinate
Federal public works and expand them.
More vigorous enforcement of antitrust laws.

Does any of this sound familiar? Like nearly all of it?

Hoover was the original "new deal". FDR simply did everything that Hoover had done, only more of it. And had more of the same result Hoover did, which was of a terrible economy.

 

[Andylusion]

Iceland for example, let *ALL* of their major banks fail, and they recovered far faster, and far better, than the US.

When most of your depositors are foreigners, it is easier to screw them, they don't vote.

These were the major banks of Iceland. The deposits were domestic, not foreign... at least from what I've read. Do you have another source?

Iceland Wins Case on 2008 Refusal to Cover Foreign Deposits - Bloomberg

Iceland in 2008 declined to cover $5.4 billion in guarantees to 350,000 U.K. and Dutch citizens who had opened Icesave accounts at Landsbanki Islands hf, one of three major banks to fail during the island’s financial meltdown. The British and Dutch governments covered the guarantees and Iceland was then taken to court by the EFTA Surveillance Authority.

The $85 billion default of Kaupthing Bank hf, Glitnir Bank hf and Landsbanki in 2008 plunged the $13 billion economy into its worst recession in six decades. Iceland escaped sovereign default by refusing to back the banks.

Pretty cool. Screw foreign depositors out of a bit over 40% of your GDP.
Not sure what the foreign losses were in the other banks.
40% of GDP would be us defaulting on $7 trillion in foreign held bonds.
I'm guessing our economy might do well after that. LOL!

Right, but the government didn't cover the domestic deposits.

I grasp that the big three didn't replace foreign deposits. You've made your point on that, and I don't question it.

The question I have is... $5.4 Billion in foreign deposits, doesn't tell us much of anything on how much in domestic deposits they didn't cover.

Because they didn't bailout those banks, so someone in THAT economy, lost money. Are you saying no one lost any money in Iceland?

 

[Toddsterpatriot]

Is that provable fact, or just your opinion?

Because Lehman Brothers, was actually the largest bank failure, and had the largest dependence of any of the banks. Lehman had $660 Billion in securities and assets, not including property.

Bear Stearns, had $400 Billion in assets
Washington Mutual, had $330 Billion.
Countrywide, had $40 Billion in assets. (information sketchy)

If bankruptcy was going to cause an economic melt down, the Lehman Brothers should have done it.

Further, there are numerous examples where banks were allowed to fail, and nothing happened, or better still, economic growth happened much faster than in other countries.

Iceland for example, let *ALL* of their major banks fail, and they recovered far faster, and far better, than the US. Estonia allowed their banks to fail back in the 90s, and they became part of the Baltic Tiger economies.

And it's ironic that you referred to the Great Depression, because they did exactly the same thing back in the 1930s, with bailing out banks, and it dragged the recession out into a depression. TARP had basically the same effect today, with one of the slowest, most anemic recoveries in US history. Comparable only to the Depression.

And it's ironic that you referred to the Great Depression, because they did exactly the same thing back in the 1930s, with bailing out banks

Ummmm.....they didn't bail out any banks in the 1930s. Made the Depression MUCH worse.
Believe it or not, as poorly as they run the FDIC, it's still a good thing.

The Reconstruction Finance Corp, purchased stakes in over 6,800 banks, for $2 Billion dollars. ($50 Billion in today's money).

It was a bank bailout, like any other. Ironically, they followed the same pattern too. It didn't help at all, and soon the RFC was investing in farms, and companies, and by the time it was shut down, in 1957, they had spent over $50 Billion in tax payer money, which is a ton in those dollars.

FDIC is terrible. You should read the book The Financial Crisis and the Free Market Cure, by John Allison. In there he describes how the FDIC encourages banks to engage in risky behavior.

Think about it.... if you have two FDIC insured banks, to the public the risk looks equally zero. Both banks are insured by the Federal government. Thus the only difference is how much they pay the public in interest. So of course, the bank who engages in the most risky, high-interest behavior, gets more business.

The FDIC inherently creates an incentive for banks to make risky bets, because there is zero benefit to being safe and prudent. Allison admits openly that his bank, BB&T, had no choice but to also lower their risk standard, and engage in more risky investments, in order to stop losing customers to banks that were doing the same.

Now of course, when those competitors failed, costing tax payers, through the FDIC, millions on million in tax money, then BB&T raised their risk standards back up.

But the FDIC is absolutely terrible. Just terrible. I have never once, read anything by anyone, who described exactly how the FDIC works, and what incentives it creates, say it was a net positive. Even FDR was against the FDIC for this very reason. It benefits the banks, by allowing them to be as risky as they want, without any fear of customers pulling out, and it screws over the tax payers, not the bankers, when they fail.

Horrible awful, terrible program.

The FDIC inherently creates an incentive for banks to make risky bets, because there is zero benefit to being safe and prudent.

Of course that's not true. Just ask the shareholders, or officers, of Washington Mutual and Wells Fargo.

It benefits the banks, by allowing them to be as risky as they want, without any fear of customers pulling out, and it screws over the tax payers, not the bankers, when they fail.

It's funded by the banks, not the tax payers, how is the tax payer screwed?

 

[Toddsterpatriot]

Is that provable fact, or just your opinion?

Because Lehman Brothers, was actually the largest bank failure, and had the largest dependence of any of the banks. Lehman had $660 Billion in securities and assets, not including property.

Bear Stearns, had $400 Billion in assets
Washington Mutual, had $330 Billion.
Countrywide, had $40 Billion in assets. (information sketchy)

If bankruptcy was going to cause an economic melt down, the Lehman Brothers should have done it.

Further, there are numerous examples where banks were allowed to fail, and nothing happened, or better still, economic growth happened much faster than in other countries.

Iceland for example, let *ALL* of their major banks fail, and they recovered far faster, and far better, than the US. Estonia allowed their banks to fail back in the 90s, and they became part of the Baltic Tiger economies.

And it's ironic that you referred to the Great Depression, because they did exactly the same thing back in the 1930s, with bailing out banks, and it dragged the recession out into a depression. TARP had basically the same effect today, with one of the slowest, most anemic recoveries in US history. Comparable only to the Depression.

And it's ironic that you referred to the Great Depression, because they did exactly the same thing back in the 1930s, with bailing out banks

Ummmm.....they didn't bail out any banks in the 1930s. Made the Depression MUCH worse.
Believe it or not, as poorly as they run the FDIC, it's still a good thing.

The Depression was already pretty bad before the government intervened. Had the government not intervened, we may well have become a communist or fascist state.

You might think that's a good thing.

Huh? The Fed should have stopped the money supply from collapsing during the 1930s.
Bernanke refused to make the same mistake. He was correct.

 

[Toddsterpatriot]

These were the major banks of Iceland. The deposits were domestic, not foreign... at least from what I've read. Do you have another source?

Iceland Wins Case on 2008 Refusal to Cover Foreign Deposits - Bloomberg

Iceland in 2008 declined to cover $5.4 billion in guarantees to 350,000 U.K. and Dutch citizens who had opened Icesave accounts at Landsbanki Islands hf, one of three major banks to fail during the island’s financial meltdown. The British and Dutch governments covered the guarantees and Iceland was then taken to court by the EFTA Surveillance Authority.

The $85 billion default of Kaupthing Bank hf, Glitnir Bank hf and Landsbanki in 2008 plunged the $13 billion economy into its worst recession in six decades. Iceland escaped sovereign default by refusing to back the banks.

Pretty cool. Screw foreign depositors out of a bit over 40% of your GDP.
Not sure what the foreign losses were in the other banks.
40% of GDP would be us defaulting on $7 trillion in foreign held bonds.
I'm guessing our economy might do well after that. LOL!

Right, but the government didn't cover the domestic deposits.

I grasp that the big three didn't replace foreign deposits. You've made your point on that, and I don't question it.

The question I have is... $5.4 Billion in foreign deposits, doesn't tell us much of anything on how much in domestic deposits they didn't cover.

Because they didn't bailout those banks, so someone in THAT economy, lost money. Are you saying no one lost any money in Iceland?

Right, but the government didn't cover the domestic deposits.

Sure they did.

 

[Andylusion]

And it's ironic that you referred to the Great Depression, because they did exactly the same thing back in the 1930s, with bailing out banks

Ummmm.....they didn't bail out any banks in the 1930s. Made the Depression MUCH worse.
Believe it or not, as poorly as they run the FDIC, it's still a good thing.

The Reconstruction Finance Corp, purchased stakes in over 6,800 banks, for $2 Billion dollars. ($50 Billion in today's money).

It was a bank bailout, like any other. Ironically, they followed the same pattern too. It didn't help at all, and soon the RFC was investing in farms, and companies, and by the time it was shut down, in 1957, they had spent over $50 Billion in tax payer money, which is a ton in those dollars.

FDIC is terrible. You should read the book The Financial Crisis and the Free Market Cure, by John Allison. In there he describes how the FDIC encourages banks to engage in risky behavior.

Think about it.... if you have two FDIC insured banks, to the public the risk looks equally zero. Both banks are insured by the Federal government. Thus the only difference is how much they pay the public in interest. So of course, the bank who engages in the most risky, high-interest behavior, gets more business.

The FDIC inherently creates an incentive for banks to make risky bets, because there is zero benefit to being safe and prudent. Allison admits openly that his bank, BB&T, had no choice but to also lower their risk standard, and engage in more risky investments, in order to stop losing customers to banks that were doing the same.

Now of course, when those competitors failed, costing tax payers, through the FDIC, millions on million in tax money, then BB&T raised their risk standards back up.

But the FDIC is absolutely terrible. Just terrible. I have never once, read anything by anyone, who described exactly how the FDIC works, and what incentives it creates, say it was a net positive. Even FDR was against the FDIC for this very reason. It benefits the banks, by allowing them to be as risky as they want, without any fear of customers pulling out, and it screws over the tax payers, not the bankers, when they fail.

Horrible awful, terrible program.

The FDIC inherently creates an incentive for banks to make risky bets, because there is zero benefit to being safe and prudent.

Of course that's not true. Just ask the shareholders, or officers, of Washington Mutual and Wells Fargo.

It benefits the banks, by allowing them to be as risky as they want, without any fear of customers pulling out, and it screws over the tax payers, not the bankers, when they fail.

It's funded by the banks, not the tax payers, how is the tax payer screwed?

Look back at the 1980 S&L crisis. That ended up costing the taxpayers $150 Billion dollars. Apparently the banks didn't fund it.

The only reason that the FDIC didn't cost tax payers billions in this recent crash, is because the biggest crashes were moved by TARP. At one point the FDIC was down to a mere $600 Million or so.

Again, I would suggest that the reason so many banks engaged in risky behavior is because the FDIC makes the risk look like zero to the public.

If the public was told openly, that if you deposit your money with a risky institution, and they crash, you lose your money... a ton of people likely would have avoided WaMu, or WaMu would have been less risky in their loans.

And apparently WaMu's shareholders didn't mind the extra risk, did they? So you can say they should have held the company in check, but they didn't.

For any type of financial institution there are all people who have an interest in the institution. We call them usually stake-holders. They are depositors, other lenders; there are managers, there are shareholders, and the directors which represent the shareholders. And the problem is, is that many of these parties, don't actively, aren't working as actively as they should be to ensure that the institutions don't take too much risk. Part of that is because--we'll say the managers or directors--don't bear a lot of risk if the institution fails, for themselves. They take on certain risky decisions. And the other is that we've provided all kinds of insurance to all the other lenders, so that they don't pay enough attention. If you had to ask any depositor who held $50,000, $100,000, $200,000, we had a limit of deposit insurance of $100,000. But many people who had $200,000 or $300,000 in the bank would never even think of running on the bank because there's an implicit insurance. They believe the government won't allow the institution to fail, so why should they seek out a safer institution?

Eugene White on Bank Regulation | EconTalk | Library of Economics and Liberty

Eugene White. "Rethinking the Regulation of Banking: Choices or Incentives"

 

[Toddsterpatriot]

The Reconstruction Finance Corp, purchased stakes in over 6,800 banks, for $2 Billion dollars. ($50 Billion in today's money).

It was a bank bailout, like any other. Ironically, they followed the same pattern too. It didn't help at all, and soon the RFC was investing in farms, and companies, and by the time it was shut down, in 1957, they had spent over $50 Billion in tax payer money, which is a ton in those dollars.

FDIC is terrible. You should read the book The Financial Crisis and the Free Market Cure, by John Allison. In there he describes how the FDIC encourages banks to engage in risky behavior.

Think about it.... if you have two FDIC insured banks, to the public the risk looks equally zero. Both banks are insured by the Federal government. Thus the only difference is how much they pay the public in interest. So of course, the bank who engages in the most risky, high-interest behavior, gets more business.

The FDIC inherently creates an incentive for banks to make risky bets, because there is zero benefit to being safe and prudent. Allison admits openly that his bank, BB&T, had no choice but to also lower their risk standard, and engage in more risky investments, in order to stop losing customers to banks that were doing the same.

Now of course, when those competitors failed, costing tax payers, through the FDIC, millions on million in tax money, then BB&T raised their risk standards back up.

But the FDIC is absolutely terrible. Just terrible. I have never once, read anything by anyone, who described exactly how the FDIC works, and what incentives it creates, say it was a net positive. Even FDR was against the FDIC for this very reason. It benefits the banks, by allowing them to be as risky as they want, without any fear of customers pulling out, and it screws over the tax payers, not the bankers, when they fail.

Horrible awful, terrible program.

The FDIC inherently creates an incentive for banks to make risky bets, because there is zero benefit to being safe and prudent.

Of course that's not true. Just ask the shareholders, or officers, of Washington Mutual and Wells Fargo.

It benefits the banks, by allowing them to be as risky as they want, without any fear of customers pulling out, and it screws over the tax payers, not the bankers, when they fail.

It's funded by the banks, not the tax payers, how is the tax payer screwed?

Look back at the 1980 S&L crisis. That ended up costing the taxpayers $150 Billion dollars. Apparently the banks didn't fund it.

The only reason that the FDIC didn't cost tax payers billions in this recent crash, is because the biggest crashes were moved by TARP. At one point the FDIC was down to a mere $600 Million or so.

Again, I would suggest that the reason so many banks engaged in risky behavior is because the FDIC makes the risk look like zero to the public.

If the public was told openly, that if you deposit your money with a risky institution, and they crash, you lose your money... a ton of people likely would have avoided WaMu, or WaMu would have been less risky in their loans.

And apparently WaMu's shareholders didn't mind the extra risk, did they? So you can say they should have held the company in check, but they didn't.

For any type of financial institution there are all people who have an interest in the institution. We call them usually stake-holders. They are depositors, other lenders; there are managers, there are shareholders, and the directors which represent the shareholders. And the problem is, is that many of these parties, don't actively, aren't working as actively as they should be to ensure that the institutions don't take too much risk. Part of that is because--we'll say the managers or directors--don't bear a lot of risk if the institution fails, for themselves. They take on certain risky decisions. And the other is that we've provided all kinds of insurance to all the other lenders, so that they don't pay enough attention. If you had to ask any depositor who held $50,000, $100,000, $200,000, we had a limit of deposit insurance of $100,000. But many people who had $200,000 or $300,000 in the bank would never even think of running on the bank because there's an implicit insurance. They believe the government won't allow the institution to fail, so why should they seek out a safer institution?

Eugene White on Bank Regulation | EconTalk | Library of Economics and Liberty

Eugene White. "Rethinking the Regulation of Banking: Choices or Incentives"

Look back at the 1980 S&L crisis.

I'm talking about the FDIC, not savings and loans.
The FDIC is funded by the banks, not the tax payer.

Again, I would suggest that the reason so many banks engaged in risky behavior is because the FDIC makes the risk look like zero to the public.

Is that why Lehmann engaged in risky behavior, because of the FDIC?
Countrywide? Bear Stearns?

And apparently WaMu's shareholders didn't mind the extra risk, did they?

I'm sure they mind the extra risk.

 

[Sallow]

And it's ironic that you referred to the Great Depression, because they did exactly the same thing back in the 1930s, with bailing out banks

Ummmm.....they didn't bail out any banks in the 1930s. Made the Depression MUCH worse.
Believe it or not, as poorly as they run the FDIC, it's still a good thing.

The Depression was already pretty bad before the government intervened. Had the government not intervened, we may well have become a communist or fascist state.

You might think that's a good thing.

Huh? You are nutz. Read "Herbert Hoover Father of the New Deal"
by Steven Horwitz

In back in 1921, Hoover was in the Commerce Department, and called government-business cooperation, called for public works programs, and price controls and planning to end the recession.

Thankfully Coolidge ignored Hoover completely, and the recession, even though it was far more steep than the 2008 one, was over very quickly.

In 1927, Hoover created a government program called "Own your own Home", which Hoover pushed, and Congress approved, and the Federal Reserve made low interest loans available to mortgage lenders, and housing construction companies, to encourage more home ownership.

Sound familiar?

In 1929, Hoover doubled the size of the Federal Farm Board, extending millions of dollars in loans to farms across the country, buying up surplus food, and when that didn't work, engaged in subsidies for farming, and when that didn't work, started paying farmers to not plant crops.

At the same time, Hoover also proposed public works. Authorized the building of $400 Million dollars in new government buildings, and $175 Million in "public works" through the Federal Shipping Board.

In 1931, Hoover pushed for, and signed, the Davis-Bacon Act, which mandated that all jobs fund entirely, or partially by government, pay the same wage as Union jobs. The idea was, this would force up wages to non-union employees, but instead it effectively killed off non-union jobs, and more people were unemployed.

At the same time, it granted legal safety to Unions, prevent employers from stopping strikes.

Additionally, in 1930, Hoover put a nearly complete halt on all immigration. By 1931, immigration dropped to 10% of what it was in 1930.

And of course Hoover also signed the Smoot-Hawley Act, which killed off imports, and of course... killed off our exports as well.

Lastly, between 1929, and 1933, Hoover pushed for, and approved, increasing Federal Spending in all areas, by nearly double. The Federal Budget in 1929, was just over $3 Billion, and by 1933 it was over $6 Billion.

Seeing that his plans up till 1932 had accomplished nothing, and the economy was getting worse every month, Hoover proposed the following programs to Congress.

Reconstruction Finance Corporation expansion, and more money.
Home Loan Bank, to lend and subsidize construction spending.
Congressional legalization and expansion of blocking immigration (Hoover signed it by executive order, not legislation to that point).
Direct loans to state governments for spending on relief for the unemployed. (sound familiar?)
More money to Federal Land Banks.
Creating a Public Works Administration that would both better coordinate
Federal public works and expand them.
More vigorous enforcement of antitrust laws.

Does any of this sound familiar? Like nearly all of it?

Hoover was the original "new deal". FDR simply did everything that Hoover had done, only more of it. And had more of the same result Hoover did, which was of a terrible economy.

Oh gosh, this really skips over a lot of history and cherry picks.

Forget about WWI? The country left standing after that one was the United States.

Which, led to a great deal of prosperity. The other shoe was that it led to a great deal of money going into the hands of a very few people, especially under Coolidge.

And when that happens? When the people notice that their work is not reward and instead their wages of stagnant? They turn to government for parity.

Blaming Hoover's government spending for the depression is laughable at best. It was in reaction to what people wanted. The US agriculture industry was so successful, that prices remained low. And workers were productive but couldn't afford essentials. Like housing

Because what did the "Captain's of industry" at the time do with the big money?

Invest in new technology?
Raise worker pay?
Build more factories?

Naw. They started gambling in the stock market. Putting together dodgy exotic financial schemes. And when those schemes went south? That's what led to the financial cataclysm that cascaded into the depression. And the government had done absolutely nothing to prevent it or deal with it.

But neither did they cause it with spending on infrastructure or social issues.

 

[Andylusion]

Iceland Wins Case on 2008 Refusal to Cover Foreign Deposits - Bloomberg

Iceland in 2008 declined to cover $5.4 billion in guarantees to 350,000 U.K. and Dutch citizens who had opened Icesave accounts at Landsbanki Islands hf, one of three major banks to fail during the island’s financial meltdown. The British and Dutch governments covered the guarantees and Iceland was then taken to court by the EFTA Surveillance Authority.

The $85 billion default of Kaupthing Bank hf, Glitnir Bank hf and Landsbanki in 2008 plunged the $13 billion economy into its worst recession in six decades. Iceland escaped sovereign default by refusing to back the banks.

Pretty cool. Screw foreign depositors out of a bit over 40% of your GDP.
Not sure what the foreign losses were in the other banks.
40% of GDP would be us defaulting on $7 trillion in foreign held bonds.
I'm guessing our economy might do well after that. LOL!

Right, but the government didn't cover the domestic deposits.

I grasp that the big three didn't replace foreign deposits. You've made your point on that, and I don't question it.

The question I have is... $5.4 Billion in foreign deposits, doesn't tell us much of anything on how much in domestic deposits they didn't cover.

Because they didn't bailout those banks, so someone in THAT economy, lost money. Are you saying no one lost any money in Iceland?

Right, but the government didn't cover the domestic deposits.

Sure they did.

Ok... well obviously your information, and my information differ. My understanding is that the big three banks, went through a normal bankruptcy proceeding, and the government didn't bailout anything.

 

[Vigilante]

Leftist, Subversive George Soros Bets $2 Billion on Stock Market Collapse!!!!!!!!!e

Newsmax ^

Billionaire investor George Soros has increased his financial bet that U.S. stocks will collapse to more than $2 billion. The legendary hedge fund manager has been raising his negative bet on the Standard & Poor’s 500 Index since late last year. The latest 13-F filing with the Securities and Exchange Commission shows that Soros Fund Management increased its position in “puts” on the SPDR S&P 500 exchange-traded fund by a staggering amount in the second quarter from the first. …

 

[Andylusion]

The Depression was already pretty bad before the government intervened. Had the government not intervened, we may well have become a communist or fascist state.

You might think that's a good thing.

Huh? You are nutz. Read "Herbert Hoover Father of the New Deal"
by Steven Horwitz

In back in 1921, Hoover was in the Commerce Department, and called government-business cooperation, called for public works programs, and price controls and planning to end the recession.

Thankfully Coolidge ignored Hoover completely, and the recession, even though it was far more steep than the 2008 one, was over very quickly.

In 1927, Hoover created a government program called "Own your own Home", which Hoover pushed, and Congress approved, and the Federal Reserve made low interest loans available to mortgage lenders, and housing construction companies, to encourage more home ownership.

Sound familiar?

In 1929, Hoover doubled the size of the Federal Farm Board, extending millions of dollars in loans to farms across the country, buying up surplus food, and when that didn't work, engaged in subsidies for farming, and when that didn't work, started paying farmers to not plant crops.

At the same time, Hoover also proposed public works. Authorized the building of $400 Million dollars in new government buildings, and $175 Million in "public works" through the Federal Shipping Board.

In 1931, Hoover pushed for, and signed, the Davis-Bacon Act, which mandated that all jobs fund entirely, or partially by government, pay the same wage as Union jobs. The idea was, this would force up wages to non-union employees, but instead it effectively killed off non-union jobs, and more people were unemployed.

At the same time, it granted legal safety to Unions, prevent employers from stopping strikes.

Additionally, in 1930, Hoover put a nearly complete halt on all immigration. By 1931, immigration dropped to 10% of what it was in 1930.

And of course Hoover also signed the Smoot-Hawley Act, which killed off imports, and of course... killed off our exports as well.

Lastly, between 1929, and 1933, Hoover pushed for, and approved, increasing Federal Spending in all areas, by nearly double. The Federal Budget in 1929, was just over $3 Billion, and by 1933 it was over $6 Billion.

Seeing that his plans up till 1932 had accomplished nothing, and the economy was getting worse every month, Hoover proposed the following programs to Congress.

Reconstruction Finance Corporation expansion, and more money.
Home Loan Bank, to lend and subsidize construction spending.
Congressional legalization and expansion of blocking immigration (Hoover signed it by executive order, not legislation to that point).
Direct loans to state governments for spending on relief for the unemployed. (sound familiar?)
More money to Federal Land Banks.
Creating a Public Works Administration that would both better coordinate
Federal public works and expand them.
More vigorous enforcement of antitrust laws.

Does any of this sound familiar? Like nearly all of it?

Hoover was the original "new deal". FDR simply did everything that Hoover had done, only more of it. And had more of the same result Hoover did, which was of a terrible economy.

When the people notice that their work is not reward and instead their wages of stagnant? They turn to government for parity.

Blaming Hoover's government spending for the depression is laughable at best. It was in reaction to what people wanted. The US agriculture industry was so successful, that prices remained low. And workers were productive but couldn't afford essentials. Like housing

Naw. They started gambling in the stock market. Putting together dodgy exotic financial schemes. And when those schemes went south? That's what led to the financial cataclysm that cascaded into the depression. And the government had done absolutely nothing to prevent it or deal with it.

But neither did they cause it with spending on infrastructure or social issues.

Fact: Hoover engaged in massive intervention into the economy right at the start of the recession.

Fact: Hoover did everything that FDR did, before FDR did it.

Fact: Contrary to leftist dogma, the economy got worse, not better.

Fact: FDR doubled down in 1936, with even more vast government programs and invention.

Fact: Contrary to leftist dogma, the economy got worse, not better.

Rustici on Smoot-Hawley and the Great Depression | EconTalk | Library of Economics and Liberty

"The 1929 Stock Market: Irving Fisher Was Right"
Ellen R.McGrattan
Federal Reserve Bank of Minneapolis
and University of Minnesota

According to Ellen McGratten of the Federal Reserve, and Thomas Rustici of George Mason University agrees, by any economic and financial criteria, the stock market in August of 1929, was not overvalued. If anything... the market was undervalued.

What happened was, the government passed economic legislation, which changed the economic values of the stocks. And that is what killed the stock market. Not gambling, or any dodgy scheme. That's a myth.

Thomas Rustici, examined the stock market, and compared it to the Tariff bill. There is a clear correlation between the two. Investors realized that when the Tariff passed, the companies they had invested in would be harmed. And thus they started pulling their money out.

When Hoover won the presidency, the Tariff bill passed the House pretty quick, but the Senate was pro-free-trade. No one expected the Senate to pass the bill.

On October 21th, 16 Free-Trade Sentors flipped sides, and passed the Tariff. If you look at the market slide, the slide started exactly on the 21st of October, culminating to 1/3rd of the market by Black Tuesday the 29th.

However, the two Tariff bills were different, so Congress goes into reconciliation. For a month, from Nov, to Dec, they work on the bill and can't agree. Congress leaves the bill, and everyone proclaims the Tariff is dead. From Dec to about April, everyone assume it's over, it's finished, the bill is dead.

The stock market from Dec to April, recovers to just 8% of where it was at the start of 1929.

But in May, they go back to work on the bill, and in June, come to a compromise on the 13th, and the bill is passed by the house June 14th, and signed into law by Hoover June 17th.

Again the market takes a huge dive in May, and then slide all month long in June, from May to June, the market loses almost 1/3rd of it's value, all over again.

This is the cause of the Depression, I am absolutely convinced by the evidence.

 

[kaz]

Fact: Hoover did everything that FDR did, before FDR did it.

Fact: Contrary to leftist dogma, the economy got worse, not better.

Fact: FDR doubled down in 1936, with even more vast government programs and invention.

Fact: Contrary to leftist dogma, the economy got worse, not better

WWII ended the great depression, all FDR was keep it going by doing more of the government intervention that got us into it. The depression started about a decade after implementation of ... the income tax ...

 

[Sallow]

Huh? You are nutz. Read "Herbert Hoover Father of the New Deal"
by Steven Horwitz

In back in 1921, Hoover was in the Commerce Department, and called government-business cooperation, called for public works programs, and price controls and planning to end the recession.

Thankfully Coolidge ignored Hoover completely, and the recession, even though it was far more steep than the 2008 one, was over very quickly.

In 1927, Hoover created a government program called "Own your own Home", which Hoover pushed, and Congress approved, and the Federal Reserve made low interest loans available to mortgage lenders, and housing construction companies, to encourage more home ownership.

Sound familiar?

In 1929, Hoover doubled the size of the Federal Farm Board, extending millions of dollars in loans to farms across the country, buying up surplus food, and when that didn't work, engaged in subsidies for farming, and when that didn't work, started paying farmers to not plant crops.

At the same time, Hoover also proposed public works. Authorized the building of $400 Million dollars in new government buildings, and $175 Million in "public works" through the Federal Shipping Board.

In 1931, Hoover pushed for, and signed, the Davis-Bacon Act, which mandated that all jobs fund entirely, or partially by government, pay the same wage as Union jobs. The idea was, this would force up wages to non-union employees, but instead it effectively killed off non-union jobs, and more people were unemployed.

At the same time, it granted legal safety to Unions, prevent employers from stopping strikes.

Additionally, in 1930, Hoover put a nearly complete halt on all immigration. By 1931, immigration dropped to 10% of what it was in 1930.

And of course Hoover also signed the Smoot-Hawley Act, which killed off imports, and of course... killed off our exports as well.

Lastly, between 1929, and 1933, Hoover pushed for, and approved, increasing Federal Spending in all areas, by nearly double. The Federal Budget in 1929, was just over $3 Billion, and by 1933 it was over $6 Billion.

Seeing that his plans up till 1932 had accomplished nothing, and the economy was getting worse every month, Hoover proposed the following programs to Congress.

Reconstruction Finance Corporation expansion, and more money.
Home Loan Bank, to lend and subsidize construction spending.
Congressional legalization and expansion of blocking immigration (Hoover signed it by executive order, not legislation to that point).
Direct loans to state governments for spending on relief for the unemployed. (sound familiar?)
More money to Federal Land Banks.
Creating a Public Works Administration that would both better coordinate
Federal public works and expand them.
More vigorous enforcement of antitrust laws.

Does any of this sound familiar? Like nearly all of it?

Hoover was the original "new deal". FDR simply did everything that Hoover had done, only more of it. And had more of the same result Hoover did, which was of a terrible economy.

When the people notice that their work is not reward and instead their wages of stagnant? They turn to government for parity.

Blaming Hoover's government spending for the depression is laughable at best. It was in reaction to what people wanted. The US agriculture industry was so successful, that prices remained low. And workers were productive but couldn't afford essentials. Like housing

Naw. They started gambling in the stock market. Putting together dodgy exotic financial schemes. And when those schemes went south? That's what led to the financial cataclysm that cascaded into the depression. And the government had done absolutely nothing to prevent it or deal with it.

But neither did they cause it with spending on infrastructure or social issues.

Fact: Hoover engaged in massive intervention into the economy right at the start of the recession.

Fact: Hoover did everything that FDR did, before FDR did it.

Fact: Contrary to leftist dogma, the economy got worse, not better.

Fact: FDR doubled down in 1936, with even more vast government programs and invention.

Fact: Contrary to leftist dogma, the economy got worse, not better.

Rustici on Smoot-Hawley and the Great Depression | EconTalk | Library of Economics and Liberty

"The 1929 Stock Market: Irving Fisher Was Right"
Ellen R.McGrattan
Federal Reserve Bank of Minneapolis
and University of Minnesota

According to Ellen McGratten of the Federal Reserve, and Thomas Rustici of George Mason University agrees, by any economic and financial criteria, the stock market in August of 1929, was not overvalued. If anything... the market was undervalued.

What happened was, the government passed economic legislation, which changed the economic values of the stocks. And that is what killed the stock market. Not gambling, or any dodgy scheme. That's a myth.

Thomas Rustici, examined the stock market, and compared it to the Tariff bill. There is a clear correlation between the two. Investors realized that when the Tariff passed, the companies they had invested in would be harmed. And thus they started pulling their money out.

When Hoover won the presidency, the Tariff bill passed the House pretty quick, but the Senate was pro-free-trade. No one expected the Senate to pass the bill.

On October 21th, 16 Free-Trade Sentors flipped sides, and passed the Tariff. If you look at the market slide, the slide started exactly on the 21st of October, culminating to 1/3rd of the market by Black Tuesday the 29th.

However, the two Tariff bills were different, so Congress goes into reconciliation. For a month, from Nov, to Dec, they work on the bill and can't agree. Congress leaves the bill, and everyone proclaims the Tariff is dead. From Dec to about April, everyone assume it's over, it's finished, the bill is dead.

The stock market from Dec to April, recovers to just 8% of where it was at the start of 1929.

But in May, they go back to work on the bill, and in June, come to a compromise on the 13th, and the bill is passed by the house June 14th, and signed into law by Hoover June 17th.

Again the market takes a huge dive in May, and then slide all month long in June, from May to June, the market loses almost 1/3rd of it's value, all over again.

This is the cause of the Depression, I am absolutely convinced by the evidence.

You cut out half my post then start peppering us with "facts"?

That's pretty cute.

You also leave out the "Treaty of Versaille", which plundered the German Economy and made reconstruction near impossible.

Tariffs or no..Europe was in trouble. And with that, trade was affected.

The Depression was a world wide hit.

It didn't just occur in the United States.

You're basically as "insightful" about this stuff as the binary tea party types.

 

[Toddsterpatriot]

Right, but the government didn't cover the domestic deposits.

I grasp that the big three didn't replace foreign deposits. You've made your point on that, and I don't question it.

The question I have is... $5.4 Billion in foreign deposits, doesn't tell us much of anything on how much in domestic deposits they didn't cover.

Because they didn't bailout those banks, so someone in THAT economy, lost money. Are you saying no one lost any money in Iceland?

Right, but the government didn't cover the domestic deposits.

Sure they did.

Ok... well obviously your information, and my information differ. My understanding is that the big three banks, went through a normal bankruptcy proceeding, and the government didn't bailout anything.

If your bank has $10 billion in deposits and only $5 billion in assets and then you screw foreign depositors out of $5 billion, the domestic depositors are fine. With no need for the government to "cover" anyone.

Not saying those were the actual numbers, but you get the drift.

 

[Toddsterpatriot]

Huh? You are nutz. Read "Herbert Hoover Father of the New Deal"
by Steven Horwitz

In back in 1921, Hoover was in the Commerce Department, and called government-business cooperation, called for public works programs, and price controls and planning to end the recession.

Thankfully Coolidge ignored Hoover completely, and the recession, even though it was far more steep than the 2008 one, was over very quickly.

In 1927, Hoover created a government program called "Own your own Home", which Hoover pushed, and Congress approved, and the Federal Reserve made low interest loans available to mortgage lenders, and housing construction companies, to encourage more home ownership.

Sound familiar?

In 1929, Hoover doubled the size of the Federal Farm Board, extending millions of dollars in loans to farms across the country, buying up surplus food, and when that didn't work, engaged in subsidies for farming, and when that didn't work, started paying farmers to not plant crops.

At the same time, Hoover also proposed public works. Authorized the building of $400 Million dollars in new government buildings, and $175 Million in "public works" through the Federal Shipping Board.

In 1931, Hoover pushed for, and signed, the Davis-Bacon Act, which mandated that all jobs fund entirely, or partially by government, pay the same wage as Union jobs. The idea was, this would force up wages to non-union employees, but instead it effectively killed off non-union jobs, and more people were unemployed.

At the same time, it granted legal safety to Unions, prevent employers from stopping strikes.

Additionally, in 1930, Hoover put a nearly complete halt on all immigration. By 1931, immigration dropped to 10% of what it was in 1930.

And of course Hoover also signed the Smoot-Hawley Act, which killed off imports, and of course... killed off our exports as well.

Lastly, between 1929, and 1933, Hoover pushed for, and approved, increasing Federal Spending in all areas, by nearly double. The Federal Budget in 1929, was just over $3 Billion, and by 1933 it was over $6 Billion.

Seeing that his plans up till 1932 had accomplished nothing, and the economy was getting worse every month, Hoover proposed the following programs to Congress.

Reconstruction Finance Corporation expansion, and more money.
Home Loan Bank, to lend and subsidize construction spending.
Congressional legalization and expansion of blocking immigration (Hoover signed it by executive order, not legislation to that point).
Direct loans to state governments for spending on relief for the unemployed. (sound familiar?)
More money to Federal Land Banks.
Creating a Public Works Administration that would both better coordinate
Federal public works and expand them.
More vigorous enforcement of antitrust laws.

Does any of this sound familiar? Like nearly all of it?

Hoover was the original "new deal". FDR simply did everything that Hoover had done, only more of it. And had more of the same result Hoover did, which was of a terrible economy.

When the people notice that their work is not reward and instead their wages of stagnant? They turn to government for parity.

Blaming Hoover's government spending for the depression is laughable at best. It was in reaction to what people wanted. The US agriculture industry was so successful, that prices remained low. And workers were productive but couldn't afford essentials. Like housing

Naw. They started gambling in the stock market. Putting together dodgy exotic financial schemes. And when those schemes went south? That's what led to the financial cataclysm that cascaded into the depression. And the government had done absolutely nothing to prevent it or deal with it.

But neither did they cause it with spending on infrastructure or social issues.

Fact: Hoover engaged in massive intervention into the economy right at the start of the recession.

Fact: Hoover did everything that FDR did, before FDR did it.

Fact: Contrary to leftist dogma, the economy got worse, not better.

Fact: FDR doubled down in 1936, with even more vast government programs and invention.

Fact: Contrary to leftist dogma, the economy got worse, not better.

Rustici on Smoot-Hawley and the Great Depression | EconTalk | Library of Economics and Liberty

"The 1929 Stock Market: Irving Fisher Was Right"
Ellen R.McGrattan
Federal Reserve Bank of Minneapolis
and University of Minnesota

According to Ellen McGratten of the Federal Reserve, and Thomas Rustici of George Mason University agrees, by any economic and financial criteria, the stock market in August of 1929, was not overvalued. If anything... the market was undervalued.

What happened was, the government passed economic legislation, which changed the economic values of the stocks. And that is what killed the stock market. Not gambling, or any dodgy scheme. That's a myth.

Thomas Rustici, examined the stock market, and compared it to the Tariff bill. There is a clear correlation between the two. Investors realized that when the Tariff passed, the companies they had invested in would be harmed. And thus they started pulling their money out.

When Hoover won the presidency, the Tariff bill passed the House pretty quick, but the Senate was pro-free-trade. No one expected the Senate to pass the bill.

On October 21th, 16 Free-Trade Sentors flipped sides, and passed the Tariff. If you look at the market slide, the slide started exactly on the 21st of October, culminating to 1/3rd of the market by Black Tuesday the 29th.

However, the two Tariff bills were different, so Congress goes into reconciliation. For a month, from Nov, to Dec, they work on the bill and can't agree. Congress leaves the bill, and everyone proclaims the Tariff is dead. From Dec to about April, everyone assume it's over, it's finished, the bill is dead.

The stock market from Dec to April, recovers to just 8% of where it was at the start of 1929.

But in May, they go back to work on the bill, and in June, come to a compromise on the 13th, and the bill is passed by the house June 14th, and signed into law by Hoover June 17th.

Again the market takes a huge dive in May, and then slide all month long in June, from May to June, the market loses almost 1/3rd of it's value, all over again.

This is the cause of the Depression, I am absolutely convinced by the evidence.

Smoot-Hawley sure didn't help the economy or the market, but it didn't cause the Depression or the stock market crash.

 

[Toddsterpatriot]

Leftist, Subversive George Soros Bets $2 Billion on Stock Market Collapse!!!!!!!!!e

Newsmax ^

Billionaire investor George Soros has increased his financial bet that U.S. stocks will collapse to more than $2 billion. The legendary hedge fund manager has been raising his negative bet on the Standard & Poor’s 500 Index since late last year. The latest 13-F filing with the Securities and Exchange Commission shows that Soros Fund Management increased its position in “puts” on the SPDR S&P 500 exchange-traded fund by a staggering amount in the second quarter from the first. …

He's a p.o.s., no question, but this is no big deal.

The chairman of Soros Fund Management lifted his position to 11.3 million put options on the S&P 500 ETF (SPY), boosting the short position from 2.96 percent to 16.65 percent. The dollar value of the position soared to $2.2 billion from around $299 million. At 16.65 percent, that position is the biggest slice of the Soros firm's portfolio.


Basically, for every $5 he has invested in the market, he has $1 invested in the idea the market will go down.

 

[Andylusion]

Fact: Hoover did everything that FDR did, before FDR did it.

Fact: Contrary to leftist dogma, the economy got worse, not better.

Fact: FDR doubled down in 1936, with even more vast government programs and invention.

Fact: Contrary to leftist dogma, the economy got worse, not better

WWII ended the great depression, all FDR was keep it going by doing more of the government intervention that got us into it. The depression started about a decade after implementation of ... the income tax ...

And in reality, even that claim is entirely questionable.

The primary data point used to claim the war ended the great depression, was the drastic drop in the unemployment rate. By any other economic measure, it didn't end.

In fact, if you look at the economic growth of GDP before the war, to after the war, it's along the exact same slow growth as before. The war created an artificial growth, that didn't exist once the war was over. The real economy grew at the exact same slow rate as before.

During the war, again by any economic measure, standards of living fell. Reduced food, reduced consumables, rationing. If you really want to call the world war 2 years, as economic growth, it would have to be the only time an economy had economic growth, where the citizens had consistent economic decline.

Again, the primary data point used, is the drop in unemployment. While there was growth in manufacturing, which had zero value to the standard of living (no one bought a tank to drive to work, or go on vacation in), one of the biggest sources of employment, was enrollment into the army.

Rolls into the US military, was roughly 5 Million people, up from a few hundred thousand before hand.

That's between 4% to 5% of the total population of the country at the time, and most all of them were unemployed, and those that were employed, were replaced with unemployed who would not have had a job otherwise.

In other words, it would be like Obama issuing an executive order to round of 15 Million unemployed today, and either throwing them in prison, or drafting them into the military.

That would absolutely lower unemployment, but it wouldn't be because of economic growth. (although there is something somewhat appealing to having those on welfare/food stamps for longer than 12 months, automatically drafted into the military and shipped to the hottest spots in the world. Bet they can find a job then...)

 

[Andylusion]

When the people notice that their work is not reward and instead their wages of stagnant? They turn to government for parity.

Blaming Hoover's government spending for the depression is laughable at best. It was in reaction to what people wanted. The US agriculture industry was so successful, that prices remained low. And workers were productive but couldn't afford essentials. Like housing

Naw. They started gambling in the stock market. Putting together dodgy exotic financial schemes. And when those schemes went south? That's what led to the financial cataclysm that cascaded into the depression. And the government had done absolutely nothing to prevent it or deal with it.

But neither did they cause it with spending on infrastructure or social issues.

Fact: Hoover engaged in massive intervention into the economy right at the start of the recession.

Fact: Hoover did everything that FDR did, before FDR did it.

Fact: Contrary to leftist dogma, the economy got worse, not better.

Fact: FDR doubled down in 1936, with even more vast government programs and invention.

Fact: Contrary to leftist dogma, the economy got worse, not better.

Rustici on Smoot-Hawley and the Great Depression | EconTalk | Library of Economics and Liberty

"The 1929 Stock Market: Irving Fisher Was Right"
Ellen R.McGrattan
Federal Reserve Bank of Minneapolis
and University of Minnesota

According to Ellen McGratten of the Federal Reserve, and Thomas Rustici of George Mason University agrees, by any economic and financial criteria, the stock market in August of 1929, was not overvalued. If anything... the market was undervalued.

What happened was, the government passed economic legislation, which changed the economic values of the stocks. And that is what killed the stock market. Not gambling, or any dodgy scheme. That's a myth.

Thomas Rustici, examined the stock market, and compared it to the Tariff bill. There is a clear correlation between the two. Investors realized that when the Tariff passed, the companies they had invested in would be harmed. And thus they started pulling their money out.

When Hoover won the presidency, the Tariff bill passed the House pretty quick, but the Senate was pro-free-trade. No one expected the Senate to pass the bill.

On October 21th, 16 Free-Trade Sentors flipped sides, and passed the Tariff. If you look at the market slide, the slide started exactly on the 21st of October, culminating to 1/3rd of the market by Black Tuesday the 29th.

However, the two Tariff bills were different, so Congress goes into reconciliation. For a month, from Nov, to Dec, they work on the bill and can't agree. Congress leaves the bill, and everyone proclaims the Tariff is dead. From Dec to about April, everyone assume it's over, it's finished, the bill is dead.

The stock market from Dec to April, recovers to just 8% of where it was at the start of 1929.

But in May, they go back to work on the bill, and in June, come to a compromise on the 13th, and the bill is passed by the house June 14th, and signed into law by Hoover June 17th.

Again the market takes a huge dive in May, and then slide all month long in June, from May to June, the market loses almost 1/3rd of it's value, all over again.

This is the cause of the Depression, I am absolutely convinced by the evidence.

You also leave out the "Treaty of Versaille", which plundered the German Economy and made reconstruction near impossible.

Tariffs or no..Europe was in trouble. And with that, trade was affected.

The Depression was a world wide hit.

It didn't just occur in the United States.

While it is true that Europe did have problems, and I don't question that at all. However, the fact that the Depression was world wide, doesn't mean that the cause is exactly the same for every country.

It is entirely possible to have a crash in one country, have different root causes, than the cause of a crash in another country.

I don't understand why people automatically assume that if x policy causes a crash here, that if another country also crashes, and doesn't have x policy, then suddenly that x policy can't be the cause. That's not a logical, or rational explanation.

But let's set that aside.

Yes, the Depression did hit other countries...... and nearly ALL countries engaged in protectionism.

Back to Thomas Rustici.

Rustici on Smoot-Hawley and the Great Depression | EconTalk | Library of Economics and Liberty

Foreign governments retaliated; in early 1929 when Smoot-Hawley was going through the House and the Senate, a lot of countries started preemptive strikes on us, e.g., Spain, and raised tariffs to American goods. Speculators around the world saw the impending tariff war; tariff wars have a tendency to proliferate, so not just Spain against America, but Spain against France, Britain, etc. Exactly what ended up unfolding. Foreign buyers that were buying about 30% of our wheat, corn, cotton, put up tariffs to our goods; buying corn, wheat, cotton from other places, like Canada. Farmers dependent on the export market were also hit.

All these countries started putting in place protectionist tariffs. Not just the US. And many of them actually put in place protectionist tariffs, BEFORE the US put there's in place.

Have you ever looked up the very first European bank failure? It was Austria's agricultural bank, Creditanstalt. Why there?

Europe in Retropsect: Disorder: Europe in the 1920's

Europe In Retrospect
by Raymond F.Betts

the rearrangement of the European political map disturbed the economy. The increase of protective tariffs among the newly created nations slowed down the flow of goods on the continental level. Nowhere was this more evident than in the lands of the former Austrian Empire now divided, as a result of the peace settlement, into separate nation-states that had once existed as a large customs union but now were burdened with national trade barriers.

Now how exactly does protectionism kill the economy?

Back to Thomas Ructici.

We put up tariffs to a lot of Canadian goods. After 1930 they deliberately went after our iron and steel exports to Canada. We were exporting about $200 million a year in iron and steel to Canada. After Smoot-Hawley when the Canadian government retaliated--specifically iron and steel but also other items--our exports to Canada dropped to $29 million a year--an 85% drop. Looking at the 17 months between the tariff retaliation by Canada and the decline in exports of iron and steel to Canada, in first 17 months, $359 million less exports. Why 17 months? Seventeen months after Smoot-Hawley, something happens in a particular city: Pittsburgh, city of iron and steel. Eleven of Pittsburgh's banks go insolvent and have to shut their doors. Depositor losses of $69 million, main structure of the entire banking system. If we are going to take most of the iron and steel out of the Pittsburgh economy, this is a good reason why you might have so many losses in the banks that were shut down.

Let me explain this very simply. The basics. Supply, and Demand, determines price. Right?

So... Iron and Steel companies buy raw Iron ore, and make it into Iron and Steel products.

Suddenly the cost of Iron Ore, reverses a downward trend since 1900, and goes back up. Why? Well of course, you just drastically increased the cost of imported Iron Ore, and the domestic supply isn't enough to cover demand. So price goes up.

At the exact same time, Canada slaps massive tariffs on our Iron and Steel exports. Suddenly purchases by Canada drop off (and others countries as well). International demand drops, and domestic demand isn't enough to maintain Iron and Steel prices.

Steel prices dropped after the tariff. In the first part of 1929, the price per ton of steel was around $52 per ton. By the same time 1930, the price was $47 per ton.

Now how simple is this? If you own a business, and the cost of production goes up, at the exact same time the value of sales goes down.... what happens to your business? Well it's goes bust, or into a hibernating state. Moth Ball the factory, or you run a skeleton crew part time.

Again, all the evidence clearly suggests that protectionism, tariff barriers, caused the Great Depression.