The US economy as we know it has collapsed. This has happened before, twice, and history is repeating itself again. This is the Third Depression the United States has suffered, and it will be the worst. FULL ARTICLE
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Pretty good article, but a little off base on a few important points. Here’s my version of “corrections”
1. depressions are not created when money disappears. Deflation is simply the result, and the cause of improper monetary policy in the first place – if central banks weren’t inflating like wild, there’d be no deflation.
2. In the great depression, the imaginary wealth wasn’t created by speculators, it was created by inflation – from the fed. Without an increase of the money supply, booms hardly exist.
3. Recessions, depressions, and lower prices are not the problem themselves, they’re the result of the problems – this is the correction to an inflated economy, a fraudulent economy from fraudulent activity from the federal reserve and the banks.
You forgot to mention the robber baron claim – which is always the way of protecting the real culprit, the government, and blaming their junior partner, the corporate crooks.
Here’s how Tom DiLorenzo puts it:
As common as it is to speak of “robber barons,” most who use that term are confused about the role of capitalism in the American economy and fail to make an important distinction — the distinction between what might be called a market entrepreneur and a political entrepreneur. A pure market entrepreneur, or capitalist, succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, direct or indirect. The key to his success as a capitalist is his ability to please the consumer, for in a capitalist society the consumer ultimately calls the economic shots. By contrast, a political entrepreneur succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors.
And on top of that, usually the free market, not government intervention, gets the blame. Thus, all of the railroad men of the late nineteenth century have gone down in history as “robber barons” although this designation definitely does not apply to James J. Hill. It does apply to his subsidized competitors, who deserve all the condemnation that history has provided them. (Also deserving of condemnation are the politicians who subsidized them, enabling their monopoly and corruption.)
Political entrepreneurs and their governmental patrons are the real villains of American business history and should be portrayed as such. They are the real robber barons.
Scott, I think you make some great points – especially when talking about the harmful results of inflation, and the eventual destruction of the value of the dollar.
But, as far as the robber barons are concerned, I also believe this distracts from the real culprit – the robber barons couldn’t have done what they did without either direct government subsidy, or government protection. And, there were actual entrepreneurs that helped America flourish like no other nation in history during that time – they were real heroes.
By the way, the DiLorenzo quotes – and some further elaboration on his points – can be found in his Mises article, “The Truth About the Robber Barons” I think it’s a worthy read.
I’ll respond to points made in comments because some of you have made the same arguments/criticisms.
First off, you cannot blame the government, or even the Federal Reserve, for the rise of share prices during the roaring twenties, or the early twenty first century. If stock X sells for ten dollars one year, and fifty dollars the next, either the stock has increased earnings by %500, or the buyer believes earnings will rise to that level. The old adage of “find another sucker” is still true.
After the market crash of 1929, stock X was worth ten dollars again, so forty dollars worth of value, or money, was gone. If you bought Citigroup two years ago at near $80 per share, and your shares are now worth around three dollars, you have lost 77 dollars. Money has disappeared.
Since there was less money in circulation and fewer people could afford to buy things, prices declined, thus deflation.
Now we had a choice last September to allow the banks to fold on their derivatives. If the bailouts had not passed banks would have declared bankruptcy because the counter-parties to derivatives contracts would have destroyed the system. Money would have disappeared, and bank cards wouldn’t work, there would have been chaos, bank runs, ect.
Instead the government and Federal Reserve are creating dollars to keep the banking system afloat. But money, or wealth has still disappeared. In effect the printing presses will make Citigroup worth $80 a share again, but that eighty dollars will be worth much less because of the inflation.
We will have hyperinflation in this country like Argentina, or the Weimar Republic.
As for the opinion that “Robber Baron” is defined inappropriately, I think that is beyond the scope of this essay. The term has entered modern parlance as a turn of the century American capitalist.
The boom in the 1920’s had the same culprit as the boom in the 1990’s and early parts of this decade – easy money policies of the federal reserve.
Artificially low interest rates will always create a boom…and most importantly, a false growth. That growth must be corrected, and that’s what a recession and a depression is.
5 comments ↓
Pretty good article, but a little off base on a few important points. Here’s my version of “corrections”
1. depressions are not created when money disappears. Deflation is simply the result, and the cause of improper monetary policy in the first place – if central banks weren’t inflating like wild, there’d be no deflation.
2. In the great depression, the imaginary wealth wasn’t created by speculators, it was created by inflation – from the fed. Without an increase of the money supply, booms hardly exist.
3. Recessions, depressions, and lower prices are not the problem themselves, they’re the result of the problems – this is the correction to an inflated economy, a fraudulent economy from fraudulent activity from the federal reserve and the banks.
You forgot to mention the robber baron claim – which is always the way of protecting the real culprit, the government, and blaming their junior partner, the corporate crooks.
Here’s how Tom DiLorenzo puts it:
As common as it is to speak of “robber barons,” most who use that term are confused about the role of capitalism in the American economy and fail to make an important distinction — the distinction between what might be called a market entrepreneur and a political entrepreneur. A pure market entrepreneur, or capitalist, succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, direct or indirect. The key to his success as a capitalist is his ability to please the consumer, for in a capitalist society the consumer ultimately calls the economic shots. By contrast, a political entrepreneur succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors.
And on top of that, usually the free market, not government intervention, gets the blame. Thus, all of the railroad men of the late nineteenth century have gone down in history as “robber barons” although this designation definitely does not apply to James J. Hill. It does apply to his subsidized competitors, who deserve all the condemnation that history has provided them. (Also deserving of condemnation are the politicians who subsidized them, enabling their monopoly and corruption.)
Political entrepreneurs and their governmental patrons are the real villains of American business history and should be portrayed as such. They are the real robber barons.
Scott, I think you make some great points – especially when talking about the harmful results of inflation, and the eventual destruction of the value of the dollar.
But, as far as the robber barons are concerned, I also believe this distracts from the real culprit – the robber barons couldn’t have done what they did without either direct government subsidy, or government protection. And, there were actual entrepreneurs that helped America flourish like no other nation in history during that time – they were real heroes.
By the way, the DiLorenzo quotes – and some further elaboration on his points – can be found in his Mises article, “The Truth About the Robber Barons” I think it’s a worthy read.
Okay people:
I’ll respond to points made in comments because some of you have made the same arguments/criticisms.
First off, you cannot blame the government, or even the Federal Reserve, for the rise of share prices during the roaring twenties, or the early twenty first century. If stock X sells for ten dollars one year, and fifty dollars the next, either the stock has increased earnings by %500, or the buyer believes earnings will rise to that level. The old adage of “find another sucker” is still true.
After the market crash of 1929, stock X was worth ten dollars again, so forty dollars worth of value, or money, was gone. If you bought Citigroup two years ago at near $80 per share, and your shares are now worth around three dollars, you have lost 77 dollars. Money has disappeared.
Since there was less money in circulation and fewer people could afford to buy things, prices declined, thus deflation.
Now we had a choice last September to allow the banks to fold on their derivatives. If the bailouts had not passed banks would have declared bankruptcy because the counter-parties to derivatives contracts would have destroyed the system. Money would have disappeared, and bank cards wouldn’t work, there would have been chaos, bank runs, ect.
Instead the government and Federal Reserve are creating dollars to keep the banking system afloat. But money, or wealth has still disappeared. In effect the printing presses will make Citigroup worth $80 a share again, but that eighty dollars will be worth much less because of the inflation.
We will have hyperinflation in this country like Argentina, or the Weimar Republic.
As for the opinion that “Robber Baron” is defined inappropriately, I think that is beyond the scope of this essay. The term has entered modern parlance as a turn of the century American capitalist.
…
The boom in the 1920’s had the same culprit as the boom in the 1990’s and early parts of this decade – easy money policies of the federal reserve.
Artificially low interest rates will always create a boom…and most importantly, a false growth. That growth must be corrected, and that’s what a recession and a depression is.
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