Tuesday, September 30, 2008

What Should the Federal Government Do?

One of the best discussions of the Great Depression (to my mind) is historian Paul Johnson's in Modern Times (see especially chapter 7, "Degringolade"). This might be a good time for us all to read it or re-read it.

Here is a key passage:

“Business downturns serve essential purposes. They have to be sharp. But they need not be long because they are self-adjusting. All they require on the part of governments, the business community and the public is patience. The 1920 recession had adjusted itself within a year. There was no reason why the 1929 recession should have taken longer, for the American economy was fundamentally sound. . . .If the recession had been allowed to adjust itself, as it would have done by the end of 1930 on any earlier analogy, confidence would have returned and the world slump need never have occurred" (Paul Johnson, Modern Times, 240).

I agree with Johnson

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