"WWII ended the Depression..."

[peritonlogon]

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Food and money subsidies, including Social Security, stopped the riots for food - and helped pay for product. If I remember correctly, the depression was not about supply, there was abundant supply.


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Think about that, though. Why would there be food riots if there is abundant supply? If people are rioting because they don't have food, why would policies that shrink supply be a good thing?


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The 1930s was a full 10 years. I'm sure many of the food riots were directly caused by the dust bowl, which was responsible for a good chunk of the depression all by itself.

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That may be, but the New Deal policies aimed at agriculture were trying to keep food from being grown in the hopes that higher prices would be good for the farmers. If people are starving, what sense does making food harder to buy make?

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I'm just saying, I don't feel like reading an indepth study on the 30s right now and a lot of things happened in the depression, as it was a long ass time. What I mean by this is that, for all I know, the starvation/food riots and new deal policies to which you refered may not have been contemporaneous.

[Bill Haywood]

So credit created a problem, and then credit solved that same problem? How does this work? More specifically why didn't the New Deal programs have the same effect?

Read the post a little more slowly. People stopped buying in 1930, triggering the depression. They began buying again big time in 1946, and maintained the recovery. They were not buying on credit this time, but with their war production savings.

The war worked far better than the New Deal because is was on such a vast scale. Governments have great difficulty gaining support to do anything big -- except for war.

the New Deal policies aimed at agriculture were trying to keep food from being grown in the hopes that higher prices would be good for the farmers. If people are starving, what sense does making food harder to buy make?

The idea was that if spending could be restarted among farmers, it would get the merrygoround going again and eventually revive the whole economy, although it would temporarly worsen things for some people. It was insufficient to end the Depression. Only the ginormous war spending was sufficient.

The business cycle is caused DIRECTLY by manipulations of the money supply - inflation - directed by central banks.

So how did depressions occur before there was a central bank? You've memorized some monetarist dogma, but not related it to actual events. Explain how it was the government, not the stock market crash, that scared consumers into closing their wallets and precipitating the depression.

My freedom? MY freedom? America's never been hated more...

It was irony. I agree military spending is corporate socialism, and I like your handle, Shakezula.

[tolbiny]

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Read the post a little more slowly

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I read your post several times.

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Then the war came. The government printed, out of air, a big stack of money to buy munitions. The factories converted to war production and paid workers, who then began consuming again, albeit under wartime rationing

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Your posts indicate that government spending (which was done on credit) during WW2 lead the country out of the depression. Is this your contention or is it not your contention?

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The war worked far better than the New Deal because is was on such a vast scale.

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So again you are saying that the government spending (that was done on credit) lead us out of the depression, and somehow this is different from the debt spending that got us into it (again your claim) in the first place?

[Bill Haywood]

So again you are saying that the government spending (that was done on credit) lead us out of the depression, and somehow this is different from the debt spending that got us into it (again your claim) in the first place?

Yes, they are entirely different. One agent stopped spending, the other started spending. The problem with the public was not that it was in debt, but that it stopped going further into debt. The key is to keep spending, no matter who does it. It was like two kids of equal weight on a teeter totter. They get stuck in the middle and can't go up or down. But once government restarts the seesawing, the kids can keep it going. Once the economy started spinning again during WWII, real growth was possible, and the deficits could be paid off.

This is a very standard interpretation of the Depression and WWII, nothing inventive on my part.

The underlieing problem is that production tends to outstrip consumption. Automation produces more and more, while employers do all they can to hold down wages. Eventually, there is a surplus of unbought goods, which leads to layoffs, then even less buying. All kinds of things can counteract this cycle (like buying on credit), but it is a real tendency that regularly shows itself.

[Brainwalter]

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The problem with the public was not that it was in debt, but that it stopped going further into debt.

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Good thing we've solved that problem today, and anytime the economy flags we can drop the interest rate to 1% and induce everyone to pile on more debt! This plan can never fail! And it's consequence-free!

[hmkpoker]

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The problem with the public was not that it was in debt, but that it stopped going further into debt.

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You know that debts eventually HAVE to be paid, or else creditors would never loan money, right?

[Bill Haywood]

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You know that debts eventually HAVE to be paid, or else creditors would never loan money, right?

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Yes, that's the scary part.

[hmkpoker]

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You know that debts eventually HAVE to be paid, or else creditors would never loan money, right?

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Yes, that's the scary part.

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So you admit that the economic policies you propose MUST create depressions?

[Mr Rick]

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But millions of men were drafted and sent to Europe, so it wasn't like the number of people in the factories suddenly swelled by the number of women joining the work force.

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My point was that immediately following the war there was a tremendous new supply of labor which would help keep labor costs down during the economic boom that followed the war.

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Think about that, though. Why would there be food riots if there is abundant supply?

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Because the suppliers were unwilling to sell at a price the demanders could pay. It would have put the suppliers out of business.

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If people are rioting because they don't have food, why would policies that shrink supply be a good thing?

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It wasn't that the policies shrunk supply that mattered - it was that the policies allowed for the people needing the goods to pay for them - at a price that would keep the suppliers in business. This kept the country intact and functioning.

[ianlippert]

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Yes, they are entirely different. One agent stopped spending, the other started spending. The problem with the public was not that it was in debt, but that it stopped going further into debt. The key is to keep spending, no matter who does it. It was like two kids of equal weight on a teeter totter. They get stuck in the middle and can't go up or down. But once government restarts the seesawing, the kids can keep it going. Once the economy started spinning again during WWII, real growth was possible, and the deficits could be paid off.


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The catch is that once the deficit financing begins any gains in the economy have to be equal to former levels plus the debt plus the interest on the debt. In the short run this might help the economy but somebody at some point is going to have to pay for it, and the more money you use to prop the economy up the less useful it is. I'm pretty sure this is the central tenet to Keynesianism and I'm pretty sure the theory was discredited by the high inflation high unemployment of the 70s. They tried to do exactly what you claim must be done and it didnt work.

Not only that, many countries around the world tried the keynesian experiment and everyone of them failed. My actual reading into this area is admittedly superficial so hopefully someone more knowledgable can fill us in. I recommend watching the PBS documentary Commanding Heights for a good history of the competing theories.