If its true that we need our great and benevolent government to step in and save us from any economic downturn, that they caused by the way, then why did the recession of 1920 only last until the middle of 1921 when neither the Federal Reserve nor the federal government stepped in to spend our way out of it?
Government spending can only hurt the economy, not help it. Read Bastiat's That Which is Seen, and That Which is Not Seen.
The 1920 recession was totally different than 1929, or 2008.
The 1920 recession was a post war recession, as industry de-tooled from the production of WWI and tooled back up for domestic production. It was not a recession characterized by massive asset price deflations, bank failures, panic and fear with the associate hoarding of money. 1920 was very minor and as industry tooled back into domestic production, the economy went back on its way.
1929 was a totally different creature. The crashing stock market wiped out huge sums of wealth and panic gripe the nations as runs made on banks caused them to fail. People hoarded their money, didn't spend, and to maintain the gold standards, the Fed had to raise interest rates in 1930 making credit even tighter. A spiral of fear ensued as more fear and panic led to less credit, less spending, less production, and then more unemployment starting another round of the downward cycle.
Other than foolishly raise tarriffs and the Fed raising the intererst rates, the Govt did marginal intervention for three years as the spiral continued, wiping out 40% of economic production and putting 25% of the labor force out of work.
2008 is a lot more like 1929 than 1920. This is no postwar retooling recession, but a financial catastrophe caused by wholesale miscalculation of riks associated with mortgage investments. Like the great depression, it has caused a major freeze in the credit markets, and without the financial bailout, would have brought down the biggest financial institutions that unfortunately dominate the financial markets which would have lead to a catastrophe that would cost a lot more than the money being spent now.
Risking our financial system and economy on a misplaced comparison to a completely different type of economic phenonema would be foolishly risky, from what I see of it.
