MrVicchio

FDR and the Federal Government attempted to "fix" the economy in the 1930's . This hurt the economy, and made it last even long. Why are people so eager to have the government come in and fix this problem?

FDR's Policies Prolonged Depression by 7 Years, UCLA Economists Calculate / UCLA Newsroom

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Iriemon

Year - GDP - GDP$2000 - % chng real GDP
1929 103.6 865.2
1930 91.2 790.7 -8.6%
1931 76.5 739.9 -6.4%
1932 58.7 643.7 -13.0%
1933 56.4 635.5 -1.3% <-FDR elected, New Deal
1934 66.0 704.2 +10.8%
1935 73.3 766.9 +8.9%
1936 83.8 866.6 +13.0%
1937 91.9 911.1 +5.1%
1938 86.1 879.7 -3.4%
1939 92.2 950.7 +8.1%
1940 101.4 1,034.1 +8.8%

Source: BEA.gov

Average real GDP change 1933-1940: +7.3%

I'd love to hear the authors explain why they think the New Deal prolonged the great depression, when according to GDP data by the BEA, GDP grew an average of 7.4% from 1933-1940, which is extremely robust growth. (Growth continued, even stronger, thru WWII until 1946 when there was a post war slump.)

Despite horrendous losses to the economy in 1930-32 before the New Deal legislation was passed; by 1936, three years after the New Deal, real GDP was back up to its 1929 level.

Overall, the economy didn't falter after the New Deal was passed. It kicked ass.

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ARealConservative

GDP is worthless. FDR spent a ton of money, and government spending is a factor in GDP.

Hoover Institution - Policy Review - The Fed's "Depression" and the Birth of the New Deal

Pilots For 911 Truth

So, you use two (2) Neoclassical Economists who rely on "growth with innovation", to prove that FDR's 'deal' was bad for America an extended the recovery by at least 7 years.

That's rich. Especially, when Neoclassical Economy relies on the very thing that FDR's 'deal' put back into play, innovation. So, both Harold L. Cole and Lee E. Ohanian are now arguing against themselves! What kind of sense does that make.

Their theory of how you obtain and sustain economic growth, would require top down investing (Trickle Down) in an attempt to generate more productivity while at the same time (they claim) increasing the capital per worker ratio. The problem, is that using their own model, you can clearly see that capital per worker actually decreases which in turn reduces the amount of capital necessary to sustain the model and eventually reduces production. Again, they argue against themselves - and for what purpose? What are they proving?

In their model, there would be no standard of living increases. So, only the rich get richer and the working class is honored to stay behind and feed the bogus model that excludes their efforts as being worthy of proper compensation.

These two are just another example of why Top Down theory does not work. No matter how you look at it. America's economy is best run from the bottom-up, where The People have very strong purchasing power. That helps to keep inflation in check, inventories low, employment high, unemployment low, nominal GDP growth YoY and respectable CPI and PPI hanging out within a margin of good reflexive range.

But, don't confuse what FDR did with what this current President of proposing. What FDR did was exactly as I stated, several of his plans revived the bottom-side of our economy and THAT is what ultimately floated all boats long term. You simply cannot pull money out of the spark plug of a free market economy (the consumer) and expect to produce anything other than debt bubbles. Just stop and think about it: When the consumer has increased discretionary capital, companies are less likely to go into debt and will therefore have less debt service to account for in their balance sheets. With less debt service to account for, they are better candidates for short-term financing.

It is a grow-slowly theory (bottom up) and you don't make break-neck profits immediately, but you will have a much more stable economic base from which genuine innovation can be funded by a larger number of contributors to the economy.

Trickle Down by any other name, is still Trickle Clown. And, it still does not work. The problem in Government right now, is that we no longer have as many people in office with the heart of FDR. If we did, we would innovate our way out of this mess, instead of trying to rob Peter to pay Paul while sticking the bill with the American People.

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John1234

That is sort of what i am expecting to happen.
A Depression extended and amplified by Government bailouts.

I do not think it will get extremely bad or last for that many years, but either way, i think it is coming.

It just seems to me that everyone and everything owes too much.
And there are too many different problems.

Then again, I do not know a damned thing about the economy.

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Iriemon

I hear you. It frequently messes up conservative tax cut and economic theories by doing the opposite of what they claim it will do.

Sure the government spent a lot, that helped the country came out of the depression.

ARealConservative

nice circular reasoning.

Forced savings from WW2 coupled with being the last power to enter the war brought us out of the depression.

People were forced into financial responsibility.

John1234

Btw, what happens if your mortgage lender goes under but you are up to date on your mortgage?

Does your money then go to the government?

Pilots For 911 Truth

The current Recession won't be extended by the bail-out if there even is one at this point. The current Recession is structural. I keep saying that but it does not seem to be sinking in around here.

We have a ton of economic indicators (structural reporting of the economy) that have been off the mark since 2003. When this President took office, we had a functional multi-billion dollar budget surplus and a theoretical (projected) $5 Trillion surplus (depending). That was very strong and our national economic indicators showed it as being such. Like it or not, these national report (economic indicators) move Wall Street and the Currency Markets, as well as foreign investment in our economy. When they look bad, the whole world knows it, not just the stock & bond markets here, and foreign capital has a tendency to stay away and the USD goes down against other major currencies.

This is a structural recession and that is why it has broken all the rules for "x" number of quarters of GDP growth as the defining element of its existence. You can have certain sectors of our economy propping up GDP numbers without having good systemic national growth as a whole. We've had that for many years in this country and it has provided some air cover for those who wanted to talk the economy out of recession - namely Wall Street talking heads.

As far as I am concerned, we've been in one form of recession or another since 2002, when this President proceeded to squander the budget surplus left to his Administration on a silver platter. All he had to do was control spending and not allow things to get out of control. The European and Japanese economies with their structural problems were primed to allow the USD to continue strengthening and especially to allow for strong U.S. export numbers over the past 8 years. We blew that opportunity, as the Fed killed the dollar (USD) by yanking down rates too soon and too fast trying to fix a structural problem with our economy.

It is like nobody in this Administration understands anything about economics, these days. And, now, these same economic hacks want $700 billion in bail-out money that won't do a darn thing to increase Consumer discretionary spending power?

I say, no! We've already spent way too much in Iraq, and these guys want more financial blood from the American People. That's sick. And, the fact that we are sitting here letting it happen, is even sicker still.

chevydriver1123

I think I can explain why;

When times become desperate people will turn to anything and anyone for a solution as of course in this case it would be the government. People that believe in the free market such as you and I realize that this problem can be fixed with time but some want a right now solution.

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