Wednesday, October 8, 2008

Don't Trust the Brain Trust (Lew Rockwell)

Lew Rockwell on Bernanke and friends making the same mistakes the New Dealers made that prolonged the Great Depression:

The ghost of FDR is everywhere, haunting both Washington and New York. The terrible trouble is that the minds in power have confused an economic wrecker with an angel of mercy. They are following his confusions and prescriptions day to day in an attempted repeat of the longest economic calamity in modern American history.

They have looked at the history of the New Deal and completely misunderstood it, believing the civics-book claptrap about how FDR saved us from the Depression, whereas the fact is that FDR's theories and policies lengthened and deepened it to the point that the only way out that the Roosevelt administration saw was war.

The great theoretical error of the New Dealers was to confuse the symptom of low prices with the causes of the economic downturn. The real problem was that prices were massively inflated before the stock-market crash of 1929. The correction had to occur and would have occurred peacefully, if not wholly painlessly, had the government not intervened.

No government in all of human history that has waged war on prices has won. The Great Depression is exhibit A.

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