The Final Collapse of the Economy

[Abu]

Davidmlamb #135
corporate greed undermining the common good. That is the root of the economic collapse of both 1929 and 2008.

False. Some never learn.

Of course greed exists in the world and needs Catholic teaching and personal action to overcome it. But from post #98:
What happened When No Stimuli Were Applied in the 1920 Crash In The U.S.A.?
After inflating the money supply during and after World War I, the U.S. Federal Reserve began raising the discount rate (to the banks) and the economy slowed. By the middle of 1920 production had slumped, falling by 21% over the following 12 months – conditions were worse than after the first year in the yet to come Great Depression of 1930. The federal government and federal Reserve refrained from using any Keynesian macroeconomic tools – public works spending, government deficits, inflationary monetary policy – resulting in a drastic cleaning up of credit weakness, a drastic reduction in the costs of production and the free play of private enterprise, through keeping spending and taxation low and reducing the public debt.

Thus was the rally in business production and employment that started in August 1921 soundly based, there was a quick rebound, and quite vigorous growth.[Dr Thomas E Woods Jr., *Meltdown, Regnery 2009, p 94-5].

“Harding’s handling of the Depression of 1920-21 is the primary reason why he is universally denigrated by devotees of Big Government. Upon taking office, Harding inherited an economy that was reeling from dislocations caused by World War I. In a few months, wholesale prices collapsed by more than 40 percent. Production plunged over 20 percent. Unemployment zoomed from under 3 percent to over 11 percent. 1920-21 saw the most rapid, severe economic downturn our country has ever experienced.” In We Could Use a Man Like Warren Harding Again, adjunct faculty member, economist, and contributing scholar with The Center for Vision & Values at Grove City College – Dr. Mark W. Hendrickson – points out that President Harding’s “response was to restrain government and let the free market make the necessary adjustments. He didn’t ‘do nothing,’ as President Obama implied when touting his ‘stimulus’ plan; rather, he cut taxes and slashed federal spending 10-20 percent per year. Prices were allowed to fall, supply and demand readjusted, and by 1922 the depression was over. During the next few years, unemployment dove while production soared 60 percent. Harding presided over one of the greatest economic success stories in American history.”
[By Dr. Mark W. Hendrickson, August 12, 2009
We Could Use a Man Like Warren Harding Again]

If Coolidge made 1929 inevitable, it was President Hoover who prolonged and deepened the depression, transforming it from a typically sharp but swiftly-disappearing depression into a lingering and near-fatal malady, a malady “cured” only by the holocaust of World War II. Hoover, not Franklin Roosevelt, was the founder of the policy of the “New Deal”: essentially the massive use of the State to do exactly what Misesian theory would most warn against — to prop up wage rates above their free-market levels, prop up prices, inflate credit, and lend money to shaky business positions. Roosevelt only advanced, to a greater degree, what Hoover had pioneered. The result for the first time in American history, was a nearly perpetual depression and nearly permanent mass unemployment. The Coolidge crisis had become the unprecedentedly prolonged Hoover-Roosevelt depression

Economist Larry Kudlow and Wall Street Journal editorial board member Steve Moore point to the Carter-era Community Reinvestment Act of 1977 (CRA) that purported to prevent denying mortgages to black borrowers - by pressuring banks to make home loans in “low and moderate-income neighborhoods.” Under the act, banks were to be graded on their attentiveness to the “credit needs” of “predominantly minority neighborhoods.” The higher a bank’s rating, the more likely that regulators would say yes when the bank sought to open a new branch or undertake a merger or acquisition. (30/3/2008)

The debacle of the Government Sponsored Enterprises (GSEs), Fannie May and Freddie Mac, that bought loans from the Banks and often bundled them as mortgage–backed securities for sale to investors, enabled the banks to issue more mortgages, fuelling the inflation of home prices by artificially diverting resources into mortgage lending. These are known as sub-prime mortgage securities. Adjustable rate mortgages, fueled by people speculating in house purchases, and artificially low interest rates created by the Federal Reserve, were a major factor in defaults as prices fell in 2006.

Federal intervention creating a feeling of prosperity stimulates the boom-bust cycle, resulting in an inevitable crash. The free market is always blamed for that crash. These artificial booms, wrote economist Henry Hazlitt, must end "in a crisis and a slump, and . . .worse than the slump itself may be the public delusion that the slump has been caused, not by the previous inflation, but by the inherent defects of ‘capitalism.’ " (What You Should Know About Inflation, 2nd ed., Van Nostrand, 1965, 18).

The same political establishment now blamed the banks and Wall Street for the subprime mortgage crisis.
More intervention cannot solve previous interventions which have distorted free enterprise

 

[myriad1]

well, it looks like our government dug the economic hole a little deeper today:

Today, Obama signed a 10 year commitment to keep troops in Afghanistan until 2024.

we spend a billion or two every week there…

if the Republicans don’t shoot us in the foot, the Democrats will.

 

[ACCT]

False. Some never learn.

Of course greed exists in the world and needs Catholic teaching and personal action to overcome it. But from post #98:
What happened When No Stimuli Were Applied in the 1920 Crash In The U.S.A.?
After inflating the money supply during and after World War I, the U.S. Federal Reserve began raising the discount rate (to the banks) and the economy slowed. By the middle of 1920 production had slumped, falling by 21% over the following 12 months – conditions were worse than after the first year in the yet to come Great Depression of 1930. The federal government and federal Reserve refrained from using any Keynesian macroeconomic tools – public works spending, government deficits, inflationary monetary policy – resulting in a drastic cleaning up of credit weakness, a drastic reduction in the costs of production and the free play of private enterprise, through keeping spending and taxation low and reducing the public debt.

Thus was the rally in business production and employment that started in August 1921 soundly based, there was a quick rebound, and quite vigorous growth.[Dr Thomas E Woods Jr., *Meltdown,

Regnery 2009, p 94-5].

“Harding’s handling of the Depression of 1920-21 is the primary reason why he is universally denigrated by devotees of Big Government. Upon taking office, Harding inherited an economy that was reeling from dislocations caused by World War I. In a few months, wholesale prices collapsed by more than 40 percent. Production plunged over 20 percent. Unemployment zoomed from under 3 percent to over 11 percent. 1920-21 saw the most rapid, severe economic downturn our country has ever experienced.” In We Could Use a Man Like Warren Harding Again, adjunct faculty member, economist, and contributing scholar with The Center for Vision & Values at Grove City College – Dr. Mark W. Hendrickson – points out that President Harding’s “response was to restrain government and let the free market make the necessary adjustments. He didn’t ‘do nothing,’ as President Obama implied when touting his ‘stimulus’ plan; rather, he cut taxes and slashed federal spending 10-20 percent per year. Prices were allowed to fall, supply and demand readjusted, and by 1922 the depression was over. During the next few years, unemployment dove while production soared 60 percent. Harding presided over one of the greatest economic success stories in American history.”
[By Dr. Mark W. Hendrickson, August 12, 2009
We Could Use a Man Like Warren Harding Again]

If Coolidge made 1929 inevitable, it was President Hoover who prolonged and deepened the depression, transforming it from a typically sharp but swiftly-disappearing depression into a lingering and near-fatal malady, a malady “cured” only by the holocaust of World War II. Hoover, not Franklin Roosevelt, was the founder of the policy of the “New Deal”: essentially the massive use of the State to do exactly what Misesian theory would most warn against — to prop up wage rates above their free-market levels, prop up prices, inflate credit, and lend money to shaky business positions. Roosevelt only advanced, to a greater degree, what Hoover had pioneered. The result for the first time in American history, was a nearly perpetual depression and nearly permanent mass unemployment. The Coolidge crisis had become the unprecedentedly prolonged Hoover-Roosevelt depression

Economist Larry Kudlow and Wall Street Journal editorial board member Steve Moore point to the Carter-era Community Reinvestment Act of 1977 (CRA) that purported to prevent denying mortgages to black borrowers - by pressuring banks to make home loans in “low and moderate-income neighborhoods.” Under the act, banks were to be graded on their attentiveness to the “credit needs” of “predominantly minority neighborhoods.” The higher a bank’s rating, the more likely that regulators would say yes when the bank sought to open a new branch or undertake a merger or acquisition. (30/3/2008)

The debacle of the Government Sponsored Enterprises (GSEs), Fannie May and Freddie Mac, that bought loans from the Banks and often bundled them as mortgage–backed securities for sale to investors, enabled the banks to issue more mortgages, fuelling the inflation of home prices by artificially diverting resources into mortgage lending. These are known as sub-prime mortgage securities. Adjustable rate mortgages, fueled by people speculating in house purchases, and artificially low interest rates created by the Federal Reserve, were a major factor in defaults as prices fell in 2006.

Federal intervention creating a feeling of prosperity stimulates the boom-bust cycle, resulting in an inevitable crash. The free market is always blamed for that crash. These artificial booms, wrote economist Henry Hazlitt, must end "in a crisis and a slump, and . . .worse than the slump itself may be the public delusion that the slump has been caused, not by the previous inflation, but by the inherent defects of ‘capitalism.’ " (What You Should Know About Inflation, 2nd ed., Van Nostrand, 1965, 18).

The same political establishment now blamed the banks and Wall Street for the subprime mortgage crisis.
More intervention cannot solve previous interventions which have distorted free enterprise

 

[ACCT]

Business cannot afford the luxury of throwing money at problems and hoping for the best. Additionally, business cannot afford the luxury of pretending that a problem does not exist by redefining the problem. Only governments can afford such luxuries. The only way that you can improve government services is to make it private.

 

[ACCT]

There are a lot greater “socialist policies” in Europe, Canada, and the rest of the free world than in the United States. Yet even Greece is better off for the working class than we are now. The Euro remains stronger than the dollar as does the British pound. So your implication that “socialist policies” is the root of our economic woes is bogus.

Roosevelt was a hero which is why he was re-elected 4X and if you ask elderly working class retirees more than 90% of the time they will tell you they are greatful to Roosevelt for creating the Social Security System. The problem with Social Security is the rich collect it. There should be a means test to receive it based on private retirement income and assets. That would fix the Social Security and Medicare system over night. Social Security was meant for exactly what it spells out SOCIAL-SECURITY. The rich do not need SOCIAL SECURITY because they are already SOCIALLY SECURE! Social Security is a tax that pays a PUBLIC benefit. It is not a savings account nor was it ever meant to be. Social Security by your standards is “Socialism.”

David

**
Socialist Platform of 1928**

Yes, Social Insecurity was the first major piece of socialism. This is the taxation plank of the Socialist party platform of 1928:

“Increase of taxation on high income levels, of corporation taxes and inheritance taxes, the proceeds to be used for **old age pensions **and other forms of social insurance.”

According to Milton Friedman, the highest personal income tax rate in 1928 was 28%. In 1978 it was 70%. Perhaps if tax rates were the same as 1928 people would not cheat on their taxes.

This country was not founded on income taxes. Income taxes were unconstitutional until Congress passed the Sixteenth Amendment.

By the way, the Euro is toast! The sociaslist governments of Greece, Portugal, Italy, Ireland and Spain are at the top of the debt crisis. The dollar will be next.

 

[Ridgerunner]

well, it looks like our government dug the economic hole a little deeper today:

Today, Obama signed a 10 year commitment to keep troops in Afghanistan until 2024.

we spend a billion or two every week there…

if the Republicans don’t shoot us in the foot, the Democrats will.

Maybe we’ll really be there for ten years. But when the bulk of the troops pull out, our contingent will have to be in the areas controlled by the Northern Alliance; that is, unless we destroy them or weaken them fatally before leaving. And we might well do that. After all, we’re giving all kinds of weapons, willy-nilly to people who supposedly are the “armed forces” of Afghanistan.

 

[Ridgerunner]

There are a lot greater “socialist policies” in Europe, Canada, and the rest of the free world than in the United States. Yet even Greece is better off for the working class than we are now. The Euro remains stronger than the dollar as does the British pound. So your implication that “socialist policies” is the root of our economic woes is bogus.

Roosevelt was a hero which is why he was re-elected 4X and if you ask elderly working class retirees more than 90% of the time they will tell you they are greatful to Roosevelt for creating the Social Security System. The problem with Social Security is the rich collect it. There should be a means test to receive it based on private retirement income and assets. That would fix the Social Security and Medicare system over night. Social Security was meant for exactly what it spells out SOCIAL-SECURITY. The rich do not need SOCIAL SECURITY because they are already SOCIALLY SECURE! Social Security is a tax that pays a PUBLIC benefit. It is not a savings account nor was it ever meant to be. Social Security by your standards is “Socialism.”

David

Just a cursory look at the situation of working people in Greece discloses that the unemployment rate is 21%. Further, the average income is lower and taxes are higher. Not exactly a “workers’ paradise”. That’s true of just about every European country to one degree or another, with the exception of Germany. But over the last few decades, even the German unemployment rate has been higher than ours. It is only recently that it has changed and we have gone to a “European level” of unemployment. Quite likely that will remain unchanged as long as the current administration is in power in the U.S.

Roosevelt knew the SS program was a fraud, and admitted it. He knew very well that it was a “pay as you go” arrangement, not a “savings for retirement” formula.

I agree that SS should be means tested.

 

[myriad1]

The only reason that Obama committed for another 10 years was to win votes in November from the undecided group. What a tragedy.

that’s a billion dollars a week that could have been spent on domestic programs.

 

[Ridgerunner]

The only reason that Obama committed for another 10 years was to win votes in November from the undecided group. What a tragedy.

that’s a billion dollars a week that could have been spent on domestic programs.

It strikes me as a political thing, but we won’t be there for 10 years, unless it is in some enclave that’s friendly.

 

[JimG]

The only reason that Obama committed for another 10 years was to win votes in November from the undecided group. What a tragedy.

that’s a billion dollars a week that could have been spent on domestic programs.

Or that could be used to reduce the deficit. But there’s no constituency for that.

 

[ACCT]

There are a lot greater “socialist policies” in Europe, Canada, and the rest of the free world than in the United States. Yet even Greece is better off for the working class than we are now. The Euro remains stronger than the dollar as does the British pound. So your implication that “socialist policies” is the root of our economic woes is bogus.

Roosevelt was a hero which is why he was re-elected 4X and if you ask elderly working class retirees more than 90% of the time they will tell you they are greatful to Roosevelt for creating the Social Security System. The problem with Social Security is the rich collect it. There should be a means test to receive it based on private retirement income and assets. That would fix the Social Security and Medicare system over night. Social Security was meant for exactly what it spells out SOCIAL-SECURITY. The rich do not need SOCIAL SECURITY because they are already SOCIALLY SECURE! Social Security is a tax that pays a PUBLIC benefit. It is not a savings account nor was it ever meant to be. Social Security by your standards is “Socialism.”

David

Payroll taxes for Social Inscurity and Medicare are the cruelest tax of all! It comes right off the top! Payroll taxes are the biggest hit of all. If Congress really wants to help the working poor, they could eliminate payroll taxes. Mention that to Congress and watch them “crayfish.”

 

[ACCT]

There are a lot greater “socialist policies” in Europe, Canada, and the rest of the free world than in the United States. Yet even Greece is better off for the working class than we are now. The Euro remains stronger than the dollar as does the British pound. So your implication that “socialist policies” is the root of our economic woes is bogus.

Roosevelt was a hero which is why he was re-elected 4X and if you ask elderly working class retirees more than 90% of the time they will tell you they are greatful to Roosevelt for creating the Social Security System. The problem with Social Security is the rich collect it. There should be a means test to receive it based on private retirement income and assets. That would fix the Social Security and Medicare system over night. Social Security was meant for exactly what it spells out SOCIAL-SECURITY. The rich do not need SOCIAL SECURITY because they are already SOCIALLY SECURE! Social Security is a tax that pays a PUBLIC benefit. It is not a savings account nor was it ever meant to be. Social Security by your standards is “Socialism.”

David

Another failed socialist program, besides Social Insecurity, from the socialist platform of 1928 is the minimum wage.

The minimum wage causes unemployment among unskilled workers and teenagers. There is over 50 years of solid economic research to support this statement.

I was willing to hire young and unskilled workers; however it was illegal to pay them what they were worth in the marketplace. The government makes it illegal to pay wages that are below the minimum wage.

The minimum wage is a floor on wages that causes a surplus of young and unskilled workers if the minimum wage is above what employers are willing to pay (the equilibrium wage). Why should I hire unskilled and teenage workers when I can hire skilled and older workers for the same minimum wage?

 

[myriad1]

Power corrupts and absolute power corrupts absolutely

Power and greed will test the mettle of any business person. Exxon is the perfect example of our businesses must work within an ethically based governed society just as any other component.

An author who recently wrote a book about Exxon’s corruption was interviewed by Terry Gross, the moderator of NPR’s program, “Fresh Air.” Here is the interview if anyone is interested in hearing his take on Exxon:

npr.org/player/v2/mediaPlayer.html?action=1&t=1&islist=false&id=151842205&m=151842370

Exxon is worst case scenario of bad business ethics. The lack of good business ethics is the reason that we must have governments who regulate them and construct boundaries. Without boundaries, business would trample on the human rights of its customers, vendors, and its workers in its love of money and power.

If we did not have business regulation, we would be working seven days a week for next to nothing and our small children would be working too. We would quickly become a two-tiered society like so many throughout history.

Multinational corporations will try to run the world if our governments are weak. Let’s hope that our governments become stronger and better.

 

[ACCT]

Power corrupts and absolute power corrupts absolutely

Power and greed will test the mettle of any business person. Exxon is the perfect example of our businesses must work within an ethically based governed society just as any other component.

An author who recently wrote a book about Exxon’s corruption was interviewed by Terry Gross, the moderator of NPR’s program, “Fresh Air.” Here is the interview if anyone is interested in hearing his take on Exxon:

npr.org/player/v2/mediaPlayer.html?action=1&t=1&islist=false&id=151842205&m=151842370

Exxon is worst case scenario of bad business ethics. The lack of good business ethics is the reason that we must have governments who regulate them and construct boundaries. Without boundaries, business would trample on the human rights of its customers, vendors, and its workers in its love of money and power.

If we did not have business regulation, we would be working seven days a week for next to nothing and our small children would be working too. We would quickly become a two-tiered society like so many throughout history.

Multinational corporations will try to run the world if our governments are weak. Let’s hope that our governments become stronger and better.

The greatest threat to our freedom is the concentration of power in the hands of government. The role of government is to be an** umpire, NOT as a partner or participant in business. The U.S. socialist government is out-of-control and is solely responsible for the final collapse of the economy.
**
Milton Friedman’s conclusion in his book, Free to Choose.

“The two ideas of human freedom and economic freedom working together came to their greatest fruition in the United States…We have been forgetting the basic truth that the greatest threat to human freedom is the concentration of power, whether in the hands of government or anyone else. We have persuaded ourselves that it is safe to grant power, provided it is for good purposes.”

“We are again recognizing the dangers of an over-governed society, coming to understand that good objectives can be perverted by bad means, that reliance on the freedom of people to control their own lives in accordance with their own values is the surest way to achieve the full potential of a great society.”

“With respect to education, I pointed out that government was playing three major roles: (1) legislating compulsory schooling, (2) financing schooling, (3) administering schools. I concluded that there was some justification for compulsory schooling and the financing of schooling, but 'the actual administration of educational institutions by the government, the ‘nationalization,’ as it were, of the bulk of the ‘education industry’ is much more difficult to justify on [free market] or, so far as I can see, on any other grounds.’ Yet finance and administration "could readily be separated. Governments could require a minimum of schooling financed by giving the parents vouchers redeemable for a given sum per child per year to be spent on purely educational services. . . . Denationalizing schooling," I went on, "would widen the range of choice available to parents. . . . If present public expenditure were made available to par! Parents regardless of where they send their children, a wide variety of schools would spring up to meet the demand. . . . Here, as in other fields, competitive enterprise is likely to be far more efficient in meeting consumer demand than either nationalized enterprises or enterprises run to serve other purposes.”

 

[ACCT]

The concept is simple. How much gold could you own if gold were $250,000 per troy ounce? The quantity of gold is finite. All the gold mined since the dawn of civilization would fit into a high school gymnasium. All of the platinum in the world would fit into one room of your house. The supply of rhodium is even more limited. You could not back up with a dump truck to pick up rhodium. You would need to go in with one of those little coffee teaspoons!

There is no limit to the amount of currency plus credit/debt in the world. Man invented the concept of money and credit/ debt to facilitate trade. What would be the price of gold, or any other resource, if you liquidated all of the currency plus credit/debt in the world?

Money is not an economic resource. Money is just a claim on those economic resources. Once people stop accepting government monopoly money for real assets, the game is over.________________________________________

 

[ACCT]

**The dollar is unconstitutional! ** Only gold and silver are constitutional. Gold is the ultimate asset. It is the purest form of money, and the oldest, most durable wealth-preserving asset on the planet. Governments can’t debase it. It has no debts … no board of directors … no politicians or central bankers that can mess with its value. That’s why gold has survived every economy history has ever witnessed, and preserved investors’ purchasing power over a span of some 5,000 years.

 

[exoflare]

**The dollar is unconstitutional! ** Only gold and silver are constitutional. Gold is the ultimate asset. It is the purest form of money, and the oldest, most durable wealth-preserving asset on the planet. Governments can’t debase it. It has no debts … no board of directors … no politicians or central bankers that can mess with its value. That’s why gold has survived every economy history has ever witnessed, and preserved investors’ purchasing power over a span of some 5,000 years.

But then what happens when the government decides to confiscate/ban all gold? It seems out there now, but by the time the dollar gets so worthless to the point of Weimar Republic proportions it won’t sound like such a remote possibility anymore.

 

[ACCT]

But then what happens when the government decides to confiscate/ban all gold? It seems out there now, but by the time the dollar gets so worthless to the point of Weimar Republic proportions it won’t sound like such a remote possibility anymore.

God is calling us to change our lifestyle. Buy silver rounds that have the Miraculous Medal on it. Get out of the city and into the country where you can grow some of your own food. Get back to the soil and as far away from this failed socialist economy as possible.

Bottom line: We will not survive without Jesus.

 

[Matilda_Bennett]

This thread is now closed. Thanks to all who participated.