Tuesday, April 10, 2012
Bet you didn't know I was still alive...
Wednesday, March 9, 2011
a little taste of what i do:
To what extent did the policies of the booming 1920’s contribute to the depression? Was the depression inevitable, or could it have been avoided? Why or why not?
The great depression could have been avoided if the government had stayed out and let the business cycle run its course. People believe that the free markets have failed, but really it is the failure of government that generated the chronic economic problems. The government's economic policies caused and elongated the depression.
The Federal Reserve messes with the money supply and interest rates. This causes businesses to mistake decreasing interest rates for an increase in private savings- when interest rates go down, it makes sense that more people are saving. When this happens, it means that the public is willing to wait for goods, because they are saving enough money to have interest rates go down. But in reality, the Federal Reserve is lowering rates artificially- there really is no increased saving going on.
The Federal Reserve also expands credit. People take this cheap money and start to consume more, which adds fuel to the fire of expansion.
Because businesses see low interest rates, they believe that the public is willing to wait for goods and services. They make erroneous business decisions- expanding their businesses, perhaps by increasing their work force.
This misallocation of capital is what fuels the bubble and following depression/ recession. During this period, businesses realize their mistakes and cease inefficient allocation of scarce resources. Thus we see that the recession is necessary to return the market to the level of greatest achievable efficiency.
So, yes, given the circumstances, a recession and the following depression were inevitable. However, given a free- market situation, such depressions would not occur because of the decreased amount of government intervention.
Do you see any similarities with the economic problems faced by the US today and those of the 1920’s or Great Depression? Why or why not?
I see a direct correlation with the Great Depression and our recession. There are many similarities between the economic problems of today and the 20s. One of the most obvious is the acceleration from a mild recession in the late '20s to the Great Depression of the '30s, just like the recession turned into the so-called “Great Recession” we are living through today.
Both problems started with economic meltdowns in specific sectors. In the '20s, it was the financial industry that suffered first, and in about 2006, the Housing Bubble catalyzed the economic problems that continue in our country.
One major similarity is the efforts of the government in relation to the crisis. Both Hoover and Bush enacted policies that prolonged the depression by further toying with the business cycle. However, their predecessors, Roosevelt and Obama, made Hoover's and Bush's policies look mild.
Furthermore, Obama and Roosevelt both campaigned with promises to end the recessions. However, their policies comprised of immense spending did nothing to solve the problem, only lengthen it.
In conclusion, I would just like to add that attempting to cure a recession with more government spending and market intervention is like naively telling a drunk that he can be cured with the additional consumption of alcohol. It will prolong the hangover for a little while, but will eventually worsen the effects and not cure the hangover. It is the alcohol that causes drunkenness, just as it is the government's intervention that causes the Boom and Bust business cycle as we know it.
Tuesday, March 1, 2011
chaos is my new middle name.
Saturday, February 19, 2011
Thursday, February 17, 2011
The Week Isn't Even Over Yet...
- spent hours at my laptop