Thank you for your insights. You’re right: “brief” inaccurately describes the ’20s boom; I accept the correction and have changed the wording to “robust.”

Thanks. Not to digress further, but you’d be hard pressed to find another decade in human history where the condition of the average individual entering the decade was so different from the end of the period (9/1/29). Horses were giving way to cars (also affecting public health in a positive way, getting all that horseshit out of the streets). Gas gave way to electric. Indoor plumbing became not for the rich, but for everyone. Same for electricity in the home. Common use of the telephone. Vast uptake in the ownership of radios. First large scale movement of women into the workforce. Women’s suffrage. Yadayadayada. I could go on for an hour.

Not all economics courses in this country get taught by monocausal monetarists, but if I found myself in such a class, I would of course protect my grade by appeasing the professor’s ideological biases.

Let’s get all the issues out the table. You’d not find very many, if any, I don’t think, professors blaming Harding and Coolidge policies for the Great Depression. Not even FDR did, choosing to put the onus on Wall Street financiers (I’ll skewer that idea later on.) So please, I know that ideological biases require leftists to discredit any and all instances where a supply-side approach seemed to have worked……but that’s ideology. Economics is far more transactional than that. What worked at one moment of time in history to accomplish X might not work the next time it’s tried to accomplish X. We would all do better if people were less “Keynesian”, less “Austrian”, and less “monetarist”, and instead say “what do we know about the cause of THIS problem, and what mix of strategies might work THIS time?”.

Hoover largely continued Harding & Coolidge’s economic policies, even retaining their Treasury Secretary, Andrew Mellon (served 1921–32).

He did indeed. And although he replaced Mellon with Morganthau, so did FDR:

When it was all over, I once made a list of New Deal ventures begun during Hoover’s years as Secretary of Commerce and then as president. . . . The New Deal owed much to what he had begun.1 — FDR advisor Rexford G. Tugwell

Far from being a bystander, Hoover actively intervened in the economy, advocating and implementing polices that were quite similar to those that Franklin Roosevelt later implemented. Moreover, many of Hoover’s interventions, like those of his successor, caused the Great Depression to be “great” — that is, to last a long time.

I’ve always thought it a bit odd to credit, for example, FDR with the idea of the WPA while that massive piece of concrete called the Hoover Dam is staring you in the face. :-)

And of course, Morganthau was quotable, and famously said:

We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration we have just as much unemployment as when we started! And an enormous debt to boot!


Never in the history of the world has there been a situation so bad that the government can’t make it worse.

Ah, those were the days. We should have more Democrats like Morganthau, don’t you agree? :-)

As a historian, I find the monetarist explanation incomplete.

Sure. So did Friedman, for that matter. He said that the GD was primarily a monetarist phenomenon, not entirely a monetarist phenomenon. Big difference. This view is also taken by economic historians such as Geisst and Ahamed. Obviously, there were several other policy matters that you allude to that exacerbated the situation, specifically (1) tax increases, (2) Smoot-Hawley, and (3) the dislocations in Europe caused by the central banks related to WW1 war reparations, which were in many ways responsible for the rise of Hitler. :-(

What’s important to understanding the GD is that monetary policy tightened when it should have loosened, under the theory that the weaker institutions would be flushed out, leaving the stronger ones in their place, with no regard or consideration to what this would do to the common man, employment, or the economy in the interim. This is why Dr. Bernanke did precisely the opposite, with TARP, TALF, and QE after the 2008 recession. The monetary lessons of the GD were quite clear to him.

Underregulation of banks, businesses & the stock market created conditions conducive to a disastrous bubble… consider, for example, the utter madness of buying stock on margin.

Several issues here, more clarification than disagreement.

  1. First is that many economists believe that the events of 1929 were nothing more than a severe correction that wouldn’t have turned into the GD if not for a host of other errors made at the Fed and the White House. I am inclined to agree in part. Certainly the markets have responded vigorously to similar implosions in the past. However, the problems of Europe had taken on a life of their own which were not so easily solved.
  2. Second is that I am not convinced that underregulation or banks or businesses was a major player; this seems to have been the political explanation based on the desire to place blame, rather than an economic explanation based on fact. More on this below. Obviously, you’re quite correct about the regulation of the stock market. No institution that can bring down an economy should escape regulatory oversight.
  3. Third point is that for our entire history up to that point we were running a laissez faire economy. While I blame economists and politicians for doing things that screw things up; it always seems to be to be asking too much of them if we expect them to predict the future and then blame them if they don’t.

Ultimately, recovery from the Great Depression required (1) A World War requiring massive public investment where (2) 50,000 of our valorous but often least employable young men were killed, and (3) a subsequent rebuilding effort for which we were the only supplier to an entire continent. Nothing like a captive economic market to fix a recession. :-)

That’s one way to end a recession, I suppose. Hopefully, we never have to repeat either the depression nor the recovery.

But, now, I’ve written a tome, and I need to explain why. Here’s why:

This is the book which ultimately became the best explanation of the Great Depression, and in part resulted in Milton Friedman winning a Nobel Prize.

Key point: It was published in 1963, 34 years ex post facto the crash of 1929.

Why so long? Well, here’s the problem, and it’s a problem we’re now repeating as we analyze the events of 2008.

Political parties are the first entities who try “explain” a negative economic occurrence. They do so with hired economists whose purpose is to create a defensible narrative of the economic event which will result in greater political power for the party signing their paycheck. Thus, they are no more credible than climate scientists working for Exxon.

If successful, frighteningly, their narrative becomes accepted as fact, and laws and regulations are passed by Congress to address the economic issues laid out in the narrative.

There’s only one problem. The narrative was never designed to be wholly factual. It was written to be defensible. There’s rather enormous difference between the two. And this difference then gets codified into law, addressing problems which may or may not actually exist and setting up new regulatory structures and limitations in the economy that are not immune from the laws of unintended consequences. That’s bad.

And that in fact is what happened in the matter of the Great Depression. FDR’s people created a narrative which blamed the easiest punching bag in the economy, which were the big banks and rich financiers. Unfortunately, as history subsequently proved…..almost all the big banks and rich financiers closed their market positions in the spring of 1929 due to the unsustainable valuations in the market. They were already out long before the events of September 1929.

Yet, the narrative persisted, leading to substantial regulations in to the financial sector, some of which were apropos, many of which were not, and had as a partial effect a continuation of the GD. And, because political parties really really SUCK at admitting they were wrong… took 34 years for the narrative to dissipate, and a better explanation to surface, thanks to Dr. Friedman.

And now we’re repeating the error with the events of 2008, with the prevailing narratives being ones created by politicians, trying to assign blame to the “other guys”.

Long story short? Fact matters. Anyone with a political objective in mind needs to not be involved in explaining economic dislocations, because their explanation is likely to obfuscate the actual events, and risks extending the recovery.

My $.02.

Data Driven Econophile. Muslim, USA born. Been “woke” 2x: 1st, when I realized the world isn’t fair; 2nd, when I realized the “woke” people are full of shit.

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