To extricate us from the Great Depression, President Roosevelt started to spend taxpayer's money like crazy with the New Deal. Deficit spending did finally start to work.
However, 1937 saw another recession due, in part, to the government efforts at the time to balance the budget by slowing spending, the Federal Reserve's efforts to slow money supply growth by raising interest rates in 1935 and early 1936 and, of-course, the new anti-business regulations that pervaded the period. It all happened too soon and the recovery halted.
Yet many are clamoring for these things to be done again - already.
Do you think the government and the Fed will make these same mistakes again?
I do not think so. So far, they have not repeated the mistakes in this Great Recession like in 1929-1932 when they did not provide money supply growth like the have done today, for example.
Yes, it is painful to watch the soaring government debt and soaring money supply but I do believe it is necessary. Inflation and recovery (economic, not necessarily stock markets) may be years away and with unemployment so high still (9.4%; normal is nearer 5%) and productive capacity at 68% (normal is 78-82%). There should be plenty of slack to avoid inflation in the short-term.
By the way, the Fed raising interest rates is not the only way to begin the exit from this Great Recession. Programs like their buying US Treasuries and mortgage-debt are planning to end next month, in March, after reaching $1.25 trillion.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.