Why Academics Remain Hopeless
I have always been a logical thinker. The teacher got very angry when I was in 4th grade and connected the dots concluding what she said was pure nonsense. Since she could not explain herself, the school called my father. He had to come down and plead with them not to expel me. So I founded Princeton Economics on the assumption nothing was ever known until we proved it was a LAW as in physics. I have never been a fan of personal opinion ever since 4th grade. Humans are fallible after all.
I tended to prefer the real sciences and regarded economics as merely suitable for a bunch of drunks to argue about nonsense at the local pub that ranked up there with the great debates of whether aliens populated the earth. In school I readJohn Kenneth Galbraith’s Great Crash and found it to be more political propaganda than fact. Nowhere in the book was there any mention about the 1931 Sovereign Debt Crisis.
Galbraith popularized the nonsense that stocks traded at 10 cents on the dollar. Very few stocks could be margined at that and the bulk were not even marginable at all. The stock brokers sold foreign government debt issued in small denominations directly to the public. Those bonds were listed on the NYSE and went the way of dinosaurs. You would think that might have been more important than stocks since it wiped out massive savings that led to a run on banks with over 3,000 failures. But what the hell. We can’t actually show how government screwed up. How could the academics advocate socialism?
Clearly, the academics were intent upon following Marx down that path to total government control where we now find ourselves, they filtered out anything that reflected the crisis was caused by government had to be hidden from public view. Kind-of how the Vietnamese never attacked us at Ton-kin Gulf when the truth came out any more than Iraq had weapons of mass destruction. North Korea DOES. So how come the US didn’t invade? Because they have them!
How could ALL the history books omit such a monumental fact? Talk about REALconspiracies – that’s one. It was truly criminal. Free Speech is not the freedom to omit anything you disagree with. If you hide the input to create a predetermined output, you get the destruction of society and total absurd nonsense. Unfortunately, this stuff still infects the talking heads on TV and myopic analysis that only looks at domestic issues.
In my opinion, those academics that have steered policies into the hand of government because they think society would be better off, are guilty as Marx, Stalin, and Mao. They have killed far more innocent souls and destroy the future of Western Society including your pension on a grand scale far beyond what any scientist who participated in creating the atomic bomb.
The economic policies of the 1930s have been so distorted it is sickening. The general consensus has been Marxist to the core advocating government is capable and should manipulate society. This has been a continuing source of myth and confusion. Many people believe that capitalism actually caused the Great Depression and that President Franklin Roosevelt helped to end it. Even theHistory Channel did a special on Roosevelt making the outrageous statement that his New Deal resulted in “recovery and reform” while creating “millions of jobs.” The WPA came in during 1935 and unemployment remained high until World War II began.
BTW, Roosevelt’s “ideas” were actually taken from and early march on Washington following the Panic of 1893. It was at that time proposed that the government should create PUBLIC WORKS to provide employment for those who were out of work. A leader came forward with this idea of creating PUBLIC WORKS to create employment which later became Roosevelt’s WPA (Workers Projects Administration) on April 8th, 1935. This leader was Jacob S. Coxley (1854-1951) who was an Ohio businessman that organized a march upon Washington that began on March 25th, 1894.
This was also a protest also againstAUSTERITY and served as the model for the book Wizard of Oz following the Yellow Brick Road – Gold Standard, that was imposing massive DEFLATION, and the Wizard was Congress. By the 1930s, it lost its political meaning and became a children’s movie in 1939. L. Frank Baum who wrote the book, was a participant in Coxley’s March.
Nevertheless, if you repeat a lie enough times, it obviously becomes fact. So trying to explain that the Great Depression was a worldwide event that began in Austria falls on deaf ears in the USA. Like drunk arguing absurd nonsense in a pub, far too often people argue it was speculation that led to the Great Depression. Even those constantly touting the stock market will fall again to 10 cents on the dollar are only focused on speculation and remain clueless as to the real cause of the event.
Then there are those who try to argue the other side claiming it was the misguidedDOMESTIC federal policies that caused the downturn, which began in 1929. They then assert the government prevented the economy from fully recovering for a decade because of Roosevelt. Others point to the austerity policies of the Federal Reserve exactly as we see in Germany and creating a shortage in money when that collapsed demand.
Congress, Hoover and Roosevelt all attacked the economy on many fronts. Hoover began the investigation of the stock market on a phone that there was a conspiracy to sink his administration. Hoover wrote in his memoirs (CHAPTER 11, pg 129):
“The reaction from these exposures, of course, paved the way for drastic legislation in the Roosevelt administration. That legislation has perhaps hampered honest business. But when representative government becomes angered, it will burn down the barn to get a rat out of it.”
Indeed, the SEC has constantly investigated, crowned the bankers with immunity so they are now known as the UNTOUCHABLES, and also seek more and more power with each crisis they failed to ever prevent. Their stories and excuses are endless.
One of the Greatest myths was about Roosevelt’s New Deal and his Brains Trust. Yes, he gathered academics who became known as the The Brains Trust, a term coined by reporter James Kieran of a New York Times. They were gathered to assist FDR during the 1932 presidential campaign but initially were three socialist professors from Columbia University – Raymond Moley, Rexford Guy Tugwell, and Adolph A. Berle, Jr. However, within a few months, Basil (“Doc”) O’Connor, Samuel I. Rosenman, and Hugh Johnson would join the group. These men would quickly help FDR develop an economic socialist plan regulating banks and stock activity on a grand scale. They also argued for the WPA public works programs for people living in both urban and rural areas.
Moley was a professor of government and law who recruited the group. However, he actually argued that a FLAT tax on all citizen’s pay, a sales tax, and a FLAT tax on the specific amount of any salary, was the ONLY way to rebuild the economy. Tugwell shaped much of the administration’s agricultural policy, believing that the key to easing some of the depression’s hardships lay in the ability of the federal government to address the growing imbalance between wages and prices in part caused by the rise in the dollar and collapse in commodity prices into 1932. However, Berle actually rejected the idea of any planned economy, but suggested a “new economic constitutional order” should include a larger federal role in the balancing of the economy.
During their first one hundred days in office, the Brains Trust helped Roosevelt enact fifteen major laws. One of the most important initiatives was the Banking Act of 1933, which put an end to the banking panic. After the Brains Trust defended its reform-recovery program in 1933, it disbanded to make room for other advisers and lawyers capable of legislative draftsmanship. However, they actually argued against the devaluation of the dollar against gold. It was George Warren who really reversed the economy.
Myth and fact never seem to meet regardless of the period of time. Roosevelt’s Brain Trust never advocated the socialistic system we have today nor did they advocate perpetually borrowing. These events grew without direction and more and more academics began to believe their own bullshit calling this the age of New Economics where they would eliminate the business cycle forever. Of course, Paul Volcker in his Rediscovery of the Business Cycle has shown that this nonsense has proven to be complete false.
The 1930s were an era of aggressive governmental activist policies that hurt, rather than helped the economy. Roosevelt did not listen to his famous Brain Trust because they were insane only concerned about supporting bondholders as is the case in Germany right now. Government interventions reduced the flexibility that markets needed to adjust to shocks and return to growth just as Japan succeeded in creating a 23 years economic depression by trying to support the economy.
The real gross domestic product fell sharply and protectionism rose because politicians did not understand currency flows or values. Real economic output only regained its 1929 level in 1936 after the devaluation of the dollar, but that is in nominal terms, which was followed by a swan dive into 1938.
Others are confused by the post-World War I recovery that was rapid following thesharp contraction into 1921 where real output fell 9 percent in 1921 with unemployment rising to nearly 12%. They see the quick rebound and then compare that to Roosevelt to discredit his policies. All of this on both sides is justWRONG. It is the result of domestic myopic vision where nobody looks at anything outside of the domestic economy. Whatever happens there, must have been caused by someone in Brooklyn or someplace.
Until we begin an UNBIASED global perspective in our analysis, we are still barking up the wrong tree and will NEVER see a solution. This is also why most analysts who just try to forecast a single market ultimately fail. They cannot see the world around them
David Miliband in England announced he was stepping down after losing the Labour leadership to his brother no less. However, his written victory speech that was never delivered has gained interest. He wrote:
“Step one is to recognise what is obvious: that we did not abolish the business cycle. We should never have claimed it. You can’t in a market economy. And public spending plans cannot depend on it. Nor can you write your own fiscal rules and then be the judge and jury for how they are calculated and when they are met.”
Of course they are just words of a politician. It would be nice just for once if the light really parted through the clouds and sanity could rule instead of manipulation.