Recessions, Hayak, Keynes and the beginning of monetarism - Cassel

[bendog]

Interesting read for macroeconomics fans.

Who anticipated the Great Depression? | Econbrowser

 

[Avorysuds]

Not really... The OP sounds ignorant seeing as Austrian economics got us out of the 1920's depression in record time, followed by the Progressive failure in the 1930's.

IF ww2 had not happened, and the rest of the world was in ruins putting US goods at a historic (never to be seen before or after) high... That depression would have simply got worse and worse.

What I'm saying is, the OP claims Keynes economics can get us out of a depression, yet it failed... And the OP claimed that Austrian economies can't get us out of a depression yet it in fact did, quickly... It's as if the OP in your link hates basic history.

 

[TakeAStepBack]

Moreover, the author claims that Ausrian scholars never touch upon solutions for recession, only that of their cause, but that's simply inaccurate and goes to show, that what main stream economic commontators consider Austrian, and the depth at which they submerse themselves in the area, lacks considerably.

 

[bendog]

the only Austrian who got anybody out of the recession was Adolf Hitler.

 

[Avorysuds]

the only Austrian who got anybody out of the recession was Adolf Hitler.

And Harding, but whatever...

And Hitler was a progressive by policy, proving how un-sustainable that kind of governing really is.

 

[bendog]

the only Austrian who got anybody out of the recession was Adolf Hitler.

And Harding, but whatever...

well, that wasn't the subject I responded to .... but whatever.

Still, you snarkely make a helpful point. Not all economic theory will work in every fiscal/social situation. In the 20's Mellon's approach worked, in the 30's it nearly destroyed the world economy.

 

[TakeAStepBack]

the only Austrian who got anybody out of the recession was Adolf Hitler.

And Harding, but whatever...

well, that wasn't the subject I responded to .... but whatever.

Still, you snarkely make a helpful point. Not all economic theory will work in every fiscal/social situation. In the 20's Mellon's approach worked, in the 30's it nearly destroyed the world economy.

That's because central planning is a failed idea economically. It is not with any certainty that these ideas worked or failed for their particular merits. Human action is complex, extremely non-static and isn't always rational, or irrational. There is no invisible force guiding markets to equilibrium. The only true approach to not being subject to blame and failure of central planning, is to allow for the maximum amount of economic freedom and interefere essentially never. Until we resign to this truth, we'll continue to fight over who has the better approach, debate when one works over another in planning theory, etc...

 

[Avorysuds]

the only Austrian who got anybody out of the recession was Adolf Hitler.

And Harding, but whatever...

well, that wasn't the subject I responded to .... but whatever.

Still, you snarkely make a helpful point. Not all economic theory will work in every fiscal/social situation. In the 20's Mellon's approach worked, in the 30's it nearly destroyed the world economy.

What are you talking about? Progressive policy did destroy us in the 30's... It gave us a lost fucking generation. Progressives are handed accountability regardless if they agree with it or not. You can't lead for 12 years and dump it all on someone else when nothing works.

 

[TakeAStepBack]

And Harding, but whatever...

well, that wasn't the subject I responded to .... but whatever.

Still, you snarkely make a helpful point. Not all economic theory will work in every fiscal/social situation. In the 20's Mellon's approach worked, in the 30's it nearly destroyed the world economy.

What are you talking about? Progressive policy did destroy us in the 30's... It gave us a lost fucking generation. Progressives are handed accountability regardless if they agree with it or not. You can't lead for 12 years and dump it all on someone else when nothing works.

Sure you can. it's been going on for decades and most people aren't any the wiser. You see it right on this board caonstantly. the cries and whining about how unfair capitalism is, how it leads to inequality, etc..etc..etc.. Yet, we do not have capitalism.

 

[iamwhatiseem]

Sure you can. it's been going on for decades and most people aren't any the wiser. You see it right on this board caonstantly. the cries and whining about how unfair capitalism is, how it leads to inequality, etc..etc..etc.. Yet, we do not have capitalism.

It is amazing to me that so many intelligent people do not take that half second of thought to realize that we do not have a free market system. Nor do was have a capitalist system.
We have a hodgepodge of centrally-controlled monetary systems, a corporatist heavily-heavily oligopolistic financial market. And a heavily-heavily corporatist oligarchy for a government.
We are very far from a free market system.

 

[bendog]

And Harding, but whatever...

well, that wasn't the subject I responded to .... but whatever.

Still, you snarkely make a helpful point. Not all economic theory will work in every fiscal/social situation. In the 20's Mellon's approach worked, in the 30's it nearly destroyed the world economy.

That's because central planning is a failed idea economicalluy. It is not with any certainty that these ideas worked or failed for their particular merits. Human action is complex, extremely non-static and isn't always rational, or irrational. There is no invisible force guiding markets to equilibrium. The only true appraoch to not being subject to blame and failure of central planning, is to allow for the maximum amount of economic freedom and interefere essentially never. UNtil we resign to this truth, we'll continue to fight over who has the better appraoch, debate when one works over another in planning theory, etc...

Actaully, that has nothing to do with anything. Moreover, you appear to not distinguish between Keynes and monetarism. The difference in the two recessions of the 20's involved global demand and the effect of the gold standard on monetary supply. Harding's recession had its roots in America's expansion for WWI, and was more or less a domestic issue. The Great Depression was a worldwide fall in demand facilitated by reductions in currency in Europe and N. America.

Neither Friedman nor Cassel favored central planning. However, nationalizing entire economies did create full employment towards the end of th 30s, not to suggest we should want to do that again.

 

[Avorysuds]

well, that wasn't the subject I responded to .... but whatever.

Still, you snarkely make a helpful point. Not all economic theory will work in every fiscal/social situation. In the 20's Mellon's approach worked, in the 30's it nearly destroyed the world economy.

That's because central planning is a failed idea economicalluy. It is not with any certainty that these ideas worked or failed for their particular merits. Human action is complex, extremely non-static and isn't always rational, or irrational. There is no invisible force guiding markets to equilibrium. The only true appraoch to not being subject to blame and failure of central planning, is to allow for the maximum amount of economic freedom and interefere essentially never. UNtil we resign to this truth, we'll continue to fight over who has the better appraoch, debate when one works over another in planning theory, etc...

Actaully, that has nothing to do with anything. Moreover, you appear to not distinguish between Keynes and monetarism. The difference in the two recessions of the 20's involved global demand and the effect of the gold standard on monetary supply. Harding's recession had its roots in America's expansion for WWI, and was more or less a domestic issue. The Great Depression was a worldwide fall in demand facilitated by reductions in currency in Europe and N. America.

Neither Friedman nor Cassel favored central planning. However, nationalizing entire economies did create full employment towards the end of th 30s, not to suggest we should want to do that again.

I can't talk with someone who calls FDR's minor recession a "Great Depression" and Harding Epic Depression and recession....

For the record that's how you come across... You lack honesty, this there is no point is "debate" with you. Harding had a depression, no a recession, he fixed it but cutting spending and letting markets clear malinvestment, a very supported Austrian fix to recession/depression... FDR failed despite claims that massive spending would work, at no point did it ever work nor did it end the Great depression.

During Harding/Coolidge UE was down around 1 fucking %... The great FDR was doing awesome at around 24%...

 

[oldfart]

Moreover, the author claims that Ausrian scholars never touch upon solutions for recession, only that of their cause, but that's simply inaccurate and goes to show, that what main stream economic commontators consider Austrian, and the depth at which they submerse themselves in the area, lacks considerably.

It's been awhile since I read ABCT but as I recall the gist is that depressions are the result of market forces and no government policy can help. The government should sit on the sidelines as the market does its work of "destruction". This is exactly the Andrew Mellon policy. If I have missed something, let me know what it is.

 

[TakeAStepBack]

This might help...maybe.
https://mises.org/store/Causes-of-the-Economic-Crisis-Digital-Book-P10491.aspx

The Causes of the Economic Crisis by Ludwig Von Mises

 

[bendog]

Well, I'd go this far. When a recession is mostly the result of excess economic production, caused by an overly optimistic view of future demand, then cutting monetary supply and govt expenditures and allowing interest rates to rise .... is not going to be that harmful, and possibly could hasten the recovery ... though there's no evidence the recession of 1920-21 was any shorter than a typical recession. 18 mos of so. Or three of four quarters.

When an economy is suffering deflation caused by a reduction in monetary supple, i.e. not enough dollars tomorrow to purchase today's production, it's a totally different econonmic scenario. The link I posted, from econobrowser which is a jewel, only dealt with the latter, and made no attempt to discuss the recession of 20-21. The connections to that were by other posters who are enamoured with the Austrian school being the bees knees.

 

[TakeAStepBack]

Well, I'd go this far. When a recession is mostly the result of excess economic production, caused by an overly optimistic view of future demand, then cutting monetary supply and govt expenditures and allowing interest rates to rise

In a general sense, we've never seen this happen outside of what I've said above. That inflationary monetary policy (central planning policy of easy money and credit) distorts the allocation of resources, leads to malinvestment and creates pricing boons (this is the boom time). What follows, is the inevitable correction of the distortion. If it's even allowed to happen. The latest example finds us piling on everything we can to protect the boom and alleviate the correction. Which never happened. More of the same policy was employed, which will, without any doubt create another business cycle even more destructive than the last.

When an economy is suffering deflation caused by a reduction in monetary supple, i.e. not enough dollars tomorrow to purchase today's production, it's a totally different econonmic scenario.

This is the other side of the very coin I just described above.

 

[Bombur]

Not really... The OP sounds ignorant seeing as Austrian economics got us out of the 1920's depression in record time, followed by the Progressive failure in the 1930's.

IF ww2 had not happened, and the rest of the world was in ruins putting US goods at a historic (never to be seen before or after) high... That depression would have simply got worse and worse.

What I'm saying is, the OP claims Keynes economics can get us out of a depression, yet it failed... And the OP claimed that Austrian economies can't get us out of a depression yet it in fact did, quickly... It's as if the OP in your link hates basic history.

Not all recessions are made the same. I don't know too many "progressives" that think the US should have decreased the money supply like it did in the Great Depression. I also don't know anyone but Austrians that think Austrian economics had much to do with the 1920's recovery.

 

[bendog]

Well, I'd go this far. When a recession is mostly the result of excess economic production, caused by an overly optimistic view of future demand, then cutting monetary supply and govt expenditures and allowing interest rates to rise

In a general sense, we've never seen this happen outside of what I've said above. That inflationary monetary policy (central planning policy of easy money and credit) distorts the allocation of resources, leads to malinvestment and creates pricing boons (this is the boom time). What follows, is the inevitable correction of the distortion. If it's even allowed to happen. The latest example finds us piling on everything we can to protect the boom and alleviate the correction. Which never happened. More of the same policy was employed, which will, without any doubt create another business cycle even more destructive than the last.

When an economy is suffering deflation caused by a reduction in monetary supple, i.e. not enough dollars tomorrow to purchase today's production, it's a totally different econonmic scenario.

This is the other side of the very coin I just described above.

Yes, but we've seen the exact same scenario of banking/credit calamity before 1913, and post-1913, and pre-Jackson and post Jackson, so your focus on "central planning" seems unsupported by history, at least to me. If we go back to the Dutch Tulip crisis, there was no central planning, yet a boom and bust. 1920-21 was a bit different from other scenarios because banking was NOT involved; rather, societies stopped slaughtering each other, resulting in less demand for what the US produced, thus, analgozing from that seems ... dangerous, to me.

I'd agree that debt is a real danger. But, to use the mellon approach in 2008, the holders of debt obligations would have seen the obligations shrink to worthless. That would have a consequence of "dollars disappearing," which is the cause of deflation. Moreover, the Chinese held the obligations ... and our dollars. If the solution to a banking crisis is just to remove say 5-10% of the dollars, we need a different solution unless we want 1932 again, which was the point of the original post, and link.

Governmental debt as a % of gnp continues to shrink and will do so for several more years even without reforming entitlements. Household debt only NOW is picking back up, and that is in response as much to stagnant wages as some irrational enthusiasm.

Household borrowing picks up as economy recovers - latimes.com

So, the "debt problem" seems to me to be more a result of a broken political solution to ensure the middle class gains from increased production, as opposed to capital, and an inability to keep entitlements in line with tax revenue, than it is a result of a central bank.

 

[TakeAStepBack]

1920-21 was a bit different from other scenarios because banking was NOT involved;

Nonsense, it is widely understood and accepted that the federal reserve helped create, and then later resolve the 20-21 recession through the discount rate. Which shot up drastically from 1919 to June of 1920. A total of 3.5% increase in less than 2 years. This sparked a harsh contraction.