The Myth of Free-Market Capitalism: The Case of Freddie Mac and Fannie Mae

[Len Colby]

Here's an excerpt of his speech to the CFR where he references the 1994 Mexican debt crisis. He states clearly that he has been dealing with crisis and after crisis for three years.

"We have been working on this for three years at some level of intensity or another, going back to the Naples G-7 meeting in the aftermath of the Mexican financial crisis. I have done everything I could do personally to reach out across the country, and indeed across the world, for any new ideas from any source". [One of the sources Clinton was listening to was Lyndon LaRouche.]

Further

• So I want to encourage you, if you think we're right, to support us. But if you have any ideas, for goodness sake, share them, because I agree with what Pete said: this is the biggest financial challenge facing the world in a half-century. And the United States has an absolutely inescapable obligation to lead, and to lead in a way that's consistent with our values and our obligation to see that what we're doing helps lift the lives of ordinary people here at home and all around the world [it appears that the President agree's with Lyndon LaRouche, eh?]

Then he drops the real bomb

• Above all, we must accelerate our efforts to reform the international financial system. Today I have asked Secretary Rubin and Federal Reserve Board Chairman Greenspan to convene a major meeting of their counterparts within the next 30 days to recommend ways to adapt the international financial architecture to the 21st century. [did this meeting ever take place?][Clinton spent his remaining days in office fighting a political lynching and a multitude of legal witch hunts].

In other words your claim that Clinton, “threatened to change the current IMF floating exchange rate system, going back to the FDR Bretton Woods system” was as I suspected a false one.

He made his aims clear and they were nothing to make bankers lose any sleep over:

Therefore, I believe the industrial world's chief priority today, plainly, is to spur growth. It seems to me there are six immediate steps we should take to help contain the current financial turmoil around the world, and then two longer-term projects in which we must be involved.

To take the immediate first, we must work with Japan, Europe, and other nations to spur growth. Second, we will expand our efforts to enable viable businesses in Asia to emerge from crippling debt burdens so they can once again contribute to growth and job creation. Third, we've asked the World Bank to double its support for the social safety net in Asia to help people who are innocent victims of financial turmoil. Fourth, we'll urge the major industrial economies to stand ready to use the $15 billion in IMF emergency funds to help stop the financial contagion from spreading to Latin America and elsewhere. Fifth, our Ex-Im Bank, under the leadership of Jim Harmon, will intensify its efforts to generate economic activity in the developing world immediately, in the next three months. And sixth, Congress must live up to its responsibility for continued prosperity by meeting our obligations to the International Monetary Fund.

What proof have you supplied to refute my statements? Nothing that I can see

Once again I am at a loss to understand what you are going on about. “Refute your statements”??? Nothing in Clinton’s speech, let alone those snippets, indicated that he intended to revert to fixed exchange rates, if you think otherwise you are more delusional than I imagined.

Tell ya what ,why don't you write to the former President and ask him. Let him tell you what his intentions were.

Since you are the one reading things into his speech that he didn’t state perhaps you should drop him a line.

I already know the answer.

Yes because your guru told you what to think.

Unless you you actually supply evidence Clinton intended to do what you claim were done.

[Terry Mauro]

Here's an excerpt of his speech to the CFR where he references the 1994 Mexican debt crisis. He states clearly that he has been dealing with crisis and after crisis for three years.

"We have been working on this for three years at some level of intensity or another, going back to the Naples G-7 meeting in the aftermath of the Mexican financial crisis. I have done everything I could do personally to reach out across the country, and indeed across the world, for any new ideas from any source". [One of the sources Clinton was listening to was Lyndon LaRouche.]

Further

• So I want to encourage you, if you think we're right, to support us. But if you have any ideas, for goodness sake, share them, because I agree with what Pete said: this is the biggest financial challenge facing the world in a half-century. And the United States has an absolutely inescapable obligation to lead, and to lead in a way that's consistent with our values and our obligation to see that what we're doing helps lift the lives of ordinary people here at home and all around the world [it appears that the President agree's with Lyndon LaRouche, eh?]

Then he drops the real bomb

• Above all, we must accelerate our efforts to reform the international financial system. Today I have asked Secretary Rubin and Federal Reserve Board Chairman Greenspan to convene a major meeting of their counterparts within the next 30 days to recommend ways to adapt the international financial architecture to the 21st century. [did this meeting ever take place?][Clinton spent his remaining days in office fighting a political lynching and a multitude of legal witch hunts].

In other words your claim that Clinton, “threatened to change the current IMF floating exchange rate system, going back to the FDR Bretton Woods system” was as I suspected a false one.

He made his aims clear and they were nothing to make bankers lose any sleep over:

Therefore, I believe the industrial world's chief priority today, plainly, is to spur growth. It seems to me there are six immediate steps we should take to help contain the current financial turmoil around the world, and then two longer-term projects in which we must be involved.

To take the immediate first, we must work with Japan, Europe, and other nations to spur growth. Second, we will expand our efforts to enable viable businesses in Asia to emerge from crippling debt burdens so they can once again contribute to growth and job creation. Third, we've asked the World Bank to double its support for the social safety net in Asia to help people who are innocent victims of financial turmoil. Fourth, we'll urge the major industrial economies to stand ready to use the $15 billion in IMF emergency funds to help stop the financial contagion from spreading to Latin America and elsewhere. Fifth, our Ex-Im Bank, under the leadership of Jim Harmon, will intensify its efforts to generate economic activity in the developing world immediately, in the next three months. And sixth, Congress must live up to its responsibility for continued prosperity by meeting our obligations to the International Monetary Fund.

What proof have you supplied to refute my statements? Nothing that I can see

Once again I am at a loss to understand what you are going on about. “Refute your statements”??? Nothing in Clinton’s speech, let alone those snippets, indicated that he intended to revert to fixed exchange rates, if you think otherwise you are more delusional than I imagined.

Tell ya what ,why don't you write to the former President and ask him. Let him tell you what his intentions were.

Since you are the one reading things into his speech that he didn’t state perhaps you should drop him a line.

I already know the answer.

Yes because your guru told you what to think.

Unless you you actually supply evidence Clinton intended to do what you claim were done.

You've made this promise before, now try keeping it.

[John Simkin]

Did FDR's New Deal policy bring the US out of the depression or did it in fact, as many argue, actually POSPONE the recovery and actually HARM those it was designed to promote...the poor and the low wage worker?

Maybe you could explain who these "many" people were. Maybe you could give us the name of just one respectable historian or economist who argued this. It definitely was not the American electorate who went onto re-elect him in 1936, 1940 and 1944.

Define "respectable".

FDR taxed the hell out of EVERYONE, the poor and the low wage hit hardest. Thats an undisputed FACT. Excessive taxation reduces private economic activity. If you slow PRIVATE economic activity you slow the rate of recovery. Thats the true legacy of FDR.

wasn't for FDR, AND his legacy, you'd more than likely be shootin' squirrel (instead of digital photos) for supper this evening....

The United States would not have defeated the Nazi's if not for the industrial machine built up by FDR. He returned the USA to our "American System" roots. FDR's grandfather had been a close collaborator of Alexander Hamilton. FDR studied the philosophy of the founding father's during his battle with polio and returned to politics a changed man.

How could FDR tax everyone to hell? There was a reported 25% unemployment rate at the time he took office. Who did he tax, Joe Kennedy? Old man Kennedy was working for the other side.

FDR did NOT build an "industrial machine" he dang near KILLED it. What ende dthe depression was the END of WWII and the return to a rational system, and the removal of many of FDR's facist policies.

Who did he tax? EVERYONE! Jim Powell author of FDR's Folly writes "Federal excise taxes on beer, wine, cigarettes, soft drinks, chewing gum, radios and other things purchased by millions of ordinary people, generated more revenue than the federal personal income tax and the federal corporate income tax combined."

And "According to the standard reference work HISTORICAL STATISTICS OF THE UNITED STATES FROM COLONIAL TIMES TO THE PRESENT, in 1936 the federal government collected $674.4 million from the personal income tax, $753 million from the corporate income tax and $1.5 billion from excise taxes.

Finally "So FDR's New Deal was mainly financed on the backs of the middle class and poor people who bought things subject to the federal excise tax. To hear one of FDR's "Fireside Chats," Americans had to pay a federal excise tax on a radio and a federal excise tax on the electricity needed to run it."

It seems that Bush has come under tremendous pressure from the electorate when he decided to nationalize Fannie Mae and Freddie Mac. It was thought that this action would destroy the Republicans in the November elections. This was why Bush refused to bail out Lehman Brothers, the fourth-largest investment bank in the US. However, the new policy did not last too long and today the US Federal Reserve has announced an $85bn (£48bn) rescue package for AIG, the country's biggest insurance company, to save it from bankruptcy. AIG will get an $85bn loan, in return for an 80% public stake in the firm.

Bush had no option but to do this. If he hadn't there would have been totally meltdown on the markets. The reason is that AIG insures deals and investments across the globe. Were the company to fail, many banks and investment funds in the US and around the world would lose their insurance cover at a time when defaults on payments are likely to rise. If AIG went, so would other leading banks in the US. Is Bush the new FDR?

[Craig Lamson]

Did FDR's New Deal policy bring the US out of the depression or did it in fact, as many argue, actually POSPONE the recovery and actually HARM those it was designed to promote...the poor and the low wage worker?

Maybe you could explain who these "many" people were. Maybe you could give us the name of just one respectable historian or economist who argued this. It definitely was not the American electorate who went onto re-elect him in 1936, 1940 and 1944.

I've seen stats that state that over 30% of history and econ profs argue this point. As a "histororian" one whould have thought you would have known this, but I guess not.

But lets start with James D. Hamilton, Professor of Economics at the University of California, San Diego

http://www.econbrowser.com/archives/2007/0...ew_deal_an.html

"January 10, 2007

The New Deal and the Great Depression

Like the folks writing at Mahalanobis, Marginal Revolution and Free Exchange, I was rather surprised to see Berkeley Professor Brad DeLong claim, "A normal person would not argue that the New Deal prolonged the Great Depression." Since Brad is a smart guy, I think it might be time for me to acknowledge my freakiness.

I divide the U.S. Great Depression (1929-1939) into three episodes: (1) the initial downturn (1929-30), catastrophic free fall (1931-32), and slow recovery (1933-39). I believe there were different factors in play in each.

The initial downturn does not strike me as all that remarkable. Had the economy begun to recover in the middle of 1930, as the steady appreciation in stock prices from December 1929 through April 1930 suggested that it might, that episode would not look that different from any of a number of other historical business downturns. The same kinds of forces that produce a typical economic downturn can offer a quite satisfactory account of what happened in 1929-30. Among these, a monetary contraction in 1928-29 likely contributed to that downturn, as did an exogenous drop in consumption and investment spending.

What really distinguished this episode from a typical downturn was not the severity of the initial decline, but the fact that, unlike a typical business cycle, things began to deteriorate quite dramatically after 1930. In my opinion, one of the reasons for that is the collapse of the money supply, which led the economy into a ferocious deflation. I've argued that the gold standard contributed to that, and certainly each country is observed to begin to recover from the Great Depression as soon as it suspended gold convertibility. I also believe that the bank panics played an important role in propagating that second phase, and am quite happy to grant Daniel Gross that New Deal financial innovations such as the FDIC and FSLIC were unambiguously helpful in correcting some of those problems.

After 1933, the economy began to grow again, with real GDP increasing at an average compound rate of 6.7% per year from 1933-1939. However, although growth over this period was strong, the unemployment rate stayed high, and there surely remained substantial excess production capabilities. So, in my mind, the third part of the question of "What caused the Great Depression?" is to explain why did the recovery take as long as it did after the contractionary monetary forces were removed?

What is supposed to help the economy recover is that a substantial pool of unemployed workers should result in a fall in wages and prices that would restore equilibrium in the labor market, as long as the government just keeps the money supply from falling (which, as just noted, the Fed failed most spectacularly at doing during 1931-32). And yet, in the midst of quite significant unemployment, between 1933 and 1934, average hourly earnings increased by over 25% in sectors such as iron and steel, furniture, and cement, and over 50% at lumber mills. How could that be?

Those numbers, by the way, come from a paper by UCLA Professors Harold Cole and Lee Ohanian that appeared in the Journal of Political Economy in 2004. And their answer to the question is that the persistence of so many unemployed workers was due in no small part to the National Industrial Recovery Act of 1933 and the National Labor Relations Act of 1935.

Cole and Ohanian noted that many in the Roosevelt Administration believed that the severity of the Depression was due to excessive business competition that led to wages and prices that were too low. I actually agree, in a perverse sense, with part of that diagnosis-- I see the rapid deflation of 1929-33 as quite destabilizing. But I'm inclined to believe that the way to fix that would have been through a monetary and fiscal expansion rather than trying to lift nominal wages and prices back up by sheer government fiat.

The purpose of the NIRA and NLRA was to promote labor and trade practice provisions so as to limit the extent of competition between firms and competition between workers. Among the NIRA codes that Cole and Ohanian highlight include minimum prices below which firms were not allowed to sell their products, restrictions on productive capacity and the amount that could be produced, and limitations on the workweek. Cole and Ohanian concluded on the basis of model simulations that these kinds of New Deal policies might have accounted for 60% of the persistence in the output gap.

Outside of manufacturing, the Agricultural Adjustment Act of 1933 and Soil Conservation and Domestic Allotment Act of 1936 -- paying farmers not to grow wheat-- were designed with the specific goal of reducing agricultural production in order to raise agricultural prices. State regulatory commissions like the Texas Railroad Commission ordered oil producers to cut back production in an effort to increase oil prices.

The notion that if we can just create more monopoly power for every single sector of the economy, encouraging every sector to produce less so they can raise their wages and prices, that we will then somehow make everybody richer, is so spectacularly wrong-headed that I would be just as dumbfounded to find that Brad De Long believes it as he seems to be by those of us who maintain that some aspects of New Deal policy surely did make the recovery from the Great Depression slower.

I openly confess to believing that government policies that were explicitly designed to limit manufacturing, agricultural, and mining output may indeed have had the effect of limiting manufacturing, agricultural, and mining output."

[Craig Lamson]

Did FDR's New Deal policy bring the US out of the depression or did it in fact, as many argue, actually POSPONE the recovery and actually HARM those it was designed to promote...the poor and the low wage worker?

Maybe you could explain who these "many" people were. Maybe you could give us the name of just one respectable historian or economist who argued this. It definitely was not the American electorate who went onto re-elect him in 1936, 1940 and 1944.

Define "respectable".

FDR taxed the hell out of EVERYONE, the poor and the low wage hit hardest. Thats an undisputed FACT. Excessive taxation reduces private economic activity. If you slow PRIVATE economic activity you slow the rate of recovery. Thats the true legacy of FDR.

What I meant was an academic historian or economist instead of some evangelical preacher or right-wing talk show host.

Well then by the inverse perhaps we should also exclude godless, socialist internet "historians" as well.

[Craig Lamson]

FDR did NOT build an "industrial machine" he dang near KILLED it. What ende dthe depression was the END of WWII and the return to a rational system, and the removal of many of FDR's facist policies.

Who did he tax? EVERYONE! Jim Powell author of FDR's Folly writes "Federal excise taxes on beer, wine, cigarettes, soft drinks, chewing gum, radios and other things purchased by millions of ordinary people, generated more revenue than the federal personal income tax and the federal corporate income tax combined."

And "According to the standard reference work HISTORICAL STATISTICS OF THE UNITED STATES FROM COLONIAL TIMES TO THE PRESENT, in 1936 the federal government collected $674.4 million from the personal income tax, $753 million from the corporate income tax and $1.5 billion from excise taxes.

Finally "So FDR's New Deal was mainly financed on the backs of the middle class and poor people who bought things subject to the federal excise tax. To hear one of FDR's "Fireside Chats," Americans had to pay a federal excise tax on a radio and a federal excise tax on the electricity needed to run it."

It is difficult to discuss these issues with something who thinks FDR was a fascist. Maybe you could define what you mean by this term as we are clearly using different dictionaries.

Fascism:

"A system of government marked by centralization of authority under a dictator, stringent socioeconomic controls, suppression of the opposition through terror and censorship, and typically a policy of belligerent nationalism and racism."

Lets see how that fits FDR. Dictator? YEP! As close as we have ever had in the US. Stringent socioeconomic controls? Oh yea. Suppression of the opposition through terror and censorship? The opposition..business. Yes again. Policy of belligerent nationalism and racism? Subsititute class for race and OH YEA once again

FDR= rascist

The Economic Depression was triggered by the Wall Street Crash in October 1929 and created the worst depression in American history. Herbert Hoover, a Republican was president at the time. He, like you, believed in a laissez-faire approach. It was a disastrous decision and was to keep the Republicans out of office for 20 years.

Sheesh! Is THIS how you write as a "historian"? This is not history but rather propaganda.

The Great Depression was triggered by the FED's MONATARY POLICY! Hoover was President at the time, at least you got that one right. He did NOT bleielve in laiissez-faire, as evidenced inthe policies he put into effect before his term was up. In fact the New Deal was at very least just an extention of Hoovers policies. The Smoot-Hawley Tariff is a perfect example. In fact FRD ran against Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions of people on the dole. He accused the president of “reckless and extravagant” spending, of thinking “that we ought to center control of everything in Washington as rapidly as possible,” and of presiding over “the greatest spending administration in peacetime in all of history.” (1)

And lets not forget the Revenue Act of 1932 which doubled income and other taxes. Laissez-fair....right.

It was soon clear to almost everyone that the economy would only recover if the government intervened. This was also true of Congress but Hoover vetoed a bill that would have created a federal unemployment agency and also opposed a plan to create a public works programme. As a result, by the time of the 1932 presidential election the US had an unemployment rate of 24.9%.

ALMOST EVERYONE? LOL! You just can't control yourself can you John. You imply that the RESULT of the vetos was the unemployment rate of 24.9% What pap..or is that propaganda?

Roosevelt's first act as president was to deal with the country's banking crisis. Since the beginning of the depression, a fifth of all banks had been forced to close. As a consequence, around 15% of people's life-savings had been lost. By the beginning of 1933 the American people were starting to lose faith in their banking system and a significant proportion were withdrawing their money and keeping it at home. The day after taking office as president, Roosevelt ordered all banks to close. He then asked Congress to pass legislation which would guarantee that savers would not lose their money if there was another financial crisis.

Wonderful John, you got something else right...

On 9th March 1933, Franklin D. Roosevelt called a special session of Congress. He told the members that unemployment could only be solved "by direct recruiting by the Government itself." For the next three months, Roosevelt proposed, and Congress passed, a series of important bills that attempted to deal with the problem of unemployment. The special session of Congress became known as the Hundred Days and provided the basis for Roosevelt's New Deal.

As a result unemployment in the US gradually came down. Here are the official statistics for the period: 1933 (24.9); 1934 (21.7); 1935 (20.1); 1936 (16.9) and 1937 (14.3).

Attempted is the right term. You failed to mention that part of FDR'd plan was to hobble capitalism, which he did with relish. Take the National Industrial Recovery Act, which has been estimated to have incresed the cost of doing business by 40%. What a great way to boost employment! /s This was later deemed unconstitutional in 1935 and renewed business activity and spending further reduced the unemployment rolls.

As you point out, to do this FDR had to increase taxation. Someone had to pay for the government spending on public works. However, it was the rich, rather than the poor, who were complaining about this because those on low incomes were far better off in employment paying taxes than being unemployed and not paying taxes.

The poor were not complaining? Surely you can offer a cite to back that one up..right John? Did FDR's policies actually move people from unemployment to work faster or slower? Thats the question John. Its quite clear that his policies hampered the recovery efforts by private enterprise. So were the prople actually "better off" as youi put it or worse? I'll take worse.

The Democratic Party relied on the rich to provide it with funds. Therefore, Roosevelt was under great pressure to reduce government expenditure. He started to do this in 1937 and as a result unemployment began to grow again and in 1938 it rose to 19.0%.

Really? Could it just have been his renewed assult on business that brought on the 37 depression? Things like the Wagner Act? New, tighter rules for the stock market? Heavy NEW taxes on business?

As you say, the outbreak of the Second World War, brought an end to unemployment and by 1944 the rate had fallen to 1.2% of the adult population. The reason for this is that government expenditure increased dramatically during this period. This had to be paid for by the government increasing taxation. However, during wars, the electorate do not complain about this because they realise the country is fighting for survival.

No, I said the depression ended AFTER the end of WWII. Don't misquote me to continue your propaganda.

(1)http://www.fee.org/publications/the-freeman/article.asp?aid=3489

[Craig Lamson]

Did FDR's New Deal policy bring the US out of the depression or did it in fact, as many argue, actually POSPONE the recovery and actually HARM those it was designed to promote...the poor and the low wage worker?

Maybe you could explain who these "many" people were. Maybe you could give us the name of just one respectable historian or economist who argued this. It definitely was not the American electorate who went onto re-elect him in 1936, 1940 and 1944.

Define "respectable".

FDR taxed the hell out of EVERYONE, the poor and the low wage hit hardest. Thats an undisputed FACT. Excessive taxation reduces private economic activity. If you slow PRIVATE economic activity you slow the rate of recovery. Thats the true legacy of FDR.

wasn't for FDR, AND his legacy, you'd more than likely be shootin' squirrel (instead of digital photos) for supper this evening....

The United States would not have defeated the Nazi's if not for the industrial machine built up by FDR. He returned the USA to our "American System" roots. FDR's grandfather had been a close collaborator of Alexander Hamilton. FDR studied the philosophy of the founding father's during his battle with polio and returned to politics a changed man.

How could FDR tax everyone to hell? There was a reported 25% unemployment rate at the time he took office. Who did he tax, Joe Kennedy? Old man Kennedy was working for the other side.

FDR did NOT build an "industrial machine" he dang near KILLED it. What ende dthe depression was the END of WWII and the return to a rational system, and the removal of many of FDR's facist policies.

Who did he tax? EVERYONE! Jim Powell author of FDR's Folly writes "Federal excise taxes on beer, wine, cigarettes, soft drinks, chewing gum, radios and other things purchased by millions of ordinary people, generated more revenue than the federal personal income tax and the federal corporate income tax combined."

And "According to the standard reference work HISTORICAL STATISTICS OF THE UNITED STATES FROM COLONIAL TIMES TO THE PRESENT, in 1936 the federal government collected $674.4 million from the personal income tax, $753 million from the corporate income tax and $1.5 billion from excise taxes.

Finally "So FDR's New Deal was mainly financed on the backs of the middle class and poor people who bought things subject to the federal excise tax. To hear one of FDR's "Fireside Chats," Americans had to pay a federal excise tax on a radio and a federal excise tax on the electricity needed to run it."

It seems that Bush has come under tremendous pressure from the electorate when he decided to nationalize Fannie Mae and Freddie Mac. It was thought that this action would destroy the Republicans in the November elections. This was why Bush refused to bail out Lehman Brothers, the fourth-largest investment bank in the US. However, the new policy did not last too long and today the US Federal Reserve has announced an $85bn (£48bn) rescue package for AIG, the country's biggest insurance company, to save it from bankruptcy. AIG will get an $85bn loan, in return for an 80% public stake in the firm.

Bush had no option but to do this. If he hadn't there would have been totally meltdown on the markets. The reason is that AIG insures deals and investments across the globe. Were the company to fail, many banks and investment funds in the US and around the world would lose their insurance cover at a time when defaults on payments are likely to rise. If AIG went, so would other leading banks in the US. Is Bush the new FDR?

Uh John, the FED makes it own decisions and Bush really has no say in the matter as the decision is not his. Wanna try again?

FDR's legacy is the hurting of American business not helping them.

[Terry Mauro]

Did FDR's New Deal policy bring the US out of the depression or did it in fact, as many argue, actually POSPONE the recovery and actually HARM those it was designed to promote...the poor and the low wage worker?

Maybe you could explain who these "many" people were. Maybe you could give us the name of just one respectable historian or economist who argued this. It definitely was not the American electorate who went onto re-elect him in 1936, 1940 and 1944.

Define "respectable".

FDR taxed the hell out of EVERYONE, the poor and the low wage hit hardest. Thats an undisputed FACT. Excessive taxation reduces private economic activity. If you slow PRIVATE economic activity you slow the rate of recovery. Thats the true legacy of FDR.

wasn't for FDR, AND his legacy, you'd more than likely be shootin' squirrel (instead of digital photos) for supper this evening....

The United States would not have defeated the Nazi's if not for the industrial machine built up by FDR. He returned the USA to our "American System" roots. FDR's grandfather had been a close collaborator of Alexander Hamilton. FDR studied the philosophy of the founding father's during his battle with polio and returned to politics a changed man.

How could FDR tax everyone to hell? There was a reported 25% unemployment rate at the time he took office. Who did he tax, Joe Kennedy? Old man Kennedy was working for the other side.

FDR did NOT build an "industrial machine" he dang near KILLED it. What ende dthe depression was the END of WWII and the return to a rational system, and the removal of many of FDR's facist policies.

Who did he tax? EVERYONE! Jim Powell author of FDR's Folly writes "Federal excise taxes on beer, wine, cigarettes, soft drinks, chewing gum, radios and other things purchased by millions of ordinary people, generated more revenue than the federal personal income tax and the federal corporate income tax combined."

And "According to the standard reference work HISTORICAL STATISTICS OF THE UNITED STATES FROM COLONIAL TIMES TO THE PRESENT, in 1936 the federal government collected $674.4 million from the personal income tax, $753 million from the corporate income tax and $1.5 billion from excise taxes.

Finally "So FDR's New Deal was mainly financed on the backs of the middle class and poor people who bought things subject to the federal excise tax. To hear one of FDR's "Fireside Chats," Americans had to pay a federal excise tax on a radio and a federal excise tax on the electricity needed to run it."

It seems that Bush has come under tremendous pressure from the electorate when he decided to nationalize Fannie Mae and Freddie Mac. It was thought that this action would destroy the Republicans in the November elections. This was why Bush refused to bail out Lehman Brothers, the fourth-largest investment bank in the US. However, the new policy did not last too long and today the US Federal Reserve has announced an $85bn (£48bn) rescue package for AIG, the country's biggest insurance company, to save it from bankruptcy. AIG will get an $85bn loan, in return for an 80% public stake in the firm.

Bush had no option but to do this. If he hadn't there would have been totally meltdown on the markets. The reason is that AIG insures deals and investments across the globe. Were the company to fail, many banks and investment funds in the US and around the world would lose their insurance cover at a time when defaults on payments are likely to rise. If AIG went, so would other leading banks in the US. Is Bush the new FDR?

Uh John, the FED makes it own decisions and Bush really has no say in the matter as the decision is not his. Wanna try again?

FDR's legacy is the hurting of American business not helping them.

What FDR legacy? The Glass Steagall Act, Hill Burton Act, Bretton Woods ? The FDR legacy has been done away with over the past 40 years. Look at the financial system, it's blowing apart as a result of doing away with the FDR legacy.

[John Simkin]

I've seen stats that state that over 30% of history and econ profs argue this point. As a "histororian" one whould have thought you would have known this, but I guess not.

I would like to see your source for this. The stats show that unemployment increased rapidly under Hoover and declined dramatically under Roosevelt. According to your economist, James D. Hamilton, this was just the normal economic cycle at work and that Hoover was just unlucky. However, he does not address the reason why the depression took place. It is like saying that the current economic crisis has nothing to do with the policies of deregulation of the money market and the encouragement of debt.

While Hamilton refuses to blame Hoover for the unemployment he does blame Roosevelt for not reducing it fast enough. If you have another 30% of economists who do share the views of Hamilton, no wonder you are in deep trouble.

[Terry Mauro]

I've seen stats that state that over 30% of history and econ profs argue this point. As a "histororian" one whould have thought you would have known this, but I guess not.

I would like to see your source for this. The stats show that unemployment increased rapidly under Hoover and declined dramatically under Roosevelt. According to your economist, James D. Hamilton, this was just the normal economic cycle at work and that Hoover was just unlucky. However, he does not address the reason why the depression took place. It is like saying that the current economic crisis has nothing to do with the policies of deregulation of the money market and the encouragement of debt.

While Hamilton refuses to blame Hoover for the unemployment he does blame Roosevelt for not reducing it fast enough. If you have another 30% of economists who do share the views of Hamilton, no wonder you are in deep trouble.

James D. Hamilton has a similiar profile and background to the notorious Myron Scholes. They both live in the un real world of statistical analysis. Scholes won the Nobel Prize in economics for his Black-Scholes formula. Scholes formula was used by hedge funds in the trading of derivatives. Scholes became notorious in 1998 when his formula was responsible for taking down "Long Term Capital Management" after the Russian GKO crisis.

Hamilton is not fit to be an economist and he certainly doesnt understand FDR or the American System.

http://en.wikipedia.org/wiki/Myron_Scholes

[J. Raymond Carroll]

Hamilton is not fit to be an economist and he certainly doesnt understand FDR or the American System.

http://en.wikipedia.org/wiki/Myron_Scholes

Diamond and Kashyap on the Recent Financial Upheavals

By Steven D. Levitt

As an economist, I am supposed to have something intelligent to say about the current financial crisis. To be honest, however, I haven’t got the foggiest idea what this all means. So I did what I always do when something related to banking arises: I knocked on the doors of my colleagues Doug Diamond and Anil Kashyap, and asked them for the answers. What they told me was so interesting and insightful that I begged them to write their explanations down for a broader audience. They were kind enough to take the time to do so. In what follows, they discuss what has happened in the financial sector in the last few days, why it happened, and what it means for everyday people.

http://freakonomics.blogs.nytimes.com/2008...l-upheavals/?em

[John Simkin]

Hamilton is not fit to be an economist and he certainly doesnt understand FDR or the American System.

http://en.wikipedia.org/wiki/Myron_Scholes

Diamond and Kashyap on the Recent Financial Upheavals

By Steven D. Levitt

As an economist, I am supposed to have something intelligent to say about the current financial crisis. To be honest, however, I haven’t got the foggiest idea what this all means. So I did what I always do when something related to banking arises: I knocked on the doors of my colleagues Doug Diamond and Anil Kashyap, and asked them for the answers. What they told me was so interesting and insightful that I begged them to write their explanations down for a broader audience. They were kind enough to take the time to do so. In what follows, they discuss what has happened in the financial sector in the last few days, why it happened, and what it means for everyday people.

http://freakonomics.blogs.nytimes.com/2008...l-upheavals/?em

The article is good on the current crisis but says little about how the US financial markets got into this mess. I would highly recommend the articles of Larry Elliott on why it happened:

http://www.guardian.co.uk/profile/larryelliott

Nor is he being wise after the event. See his book, The Gods That Failed: How Blind Faith in Markets Has Cost Us Our Future , that was published in June 2008:

http://www.amazon.co.uk/Gods-That-Failed-M...1631&sr=1-1

http://www.guardian.co.uk/profile/larryelliott

[Daniel Speight]

It now looks like the opposite of “big government” was “lazy government”. When even the most reliant on “market forces” politicians in the US and UK are nationalizing banks right, left and center we have to suspect policies based on this idea have failed.

Those who can still stand up and support laissez faire capitalism can only offer a return to a standard of living from a hundred years ago, acceptance of mass unemployment and starvation. Mind you if you can believe in this you can probably believe in creationism too. There is no science in either.

BTW for UK history buffs I seem to remember that a major influence on Maggie’s economic ideas before she became prime minister was fellow cabinet member Enoch Powell, an exponent of laissez faire, before Heath dumped him over the “rivers of blood” speech. Why do people follow these nuts?

[Craig Lamson]

I've seen stats that state that over 30% of history and econ profs argue this point. As a "histororian" one whould have thought you would have known this, but I guess not.

I would like to see your source for this. The stats show that unemployment increased rapidly under Hoover and declined dramatically under Roosevelt. According to your economist, James D. Hamilton, this was just the normal economic cycle at work and that Hoover was just unlucky. However, he does not address the reason why the depression took place. It is like saying that the current economic crisis has nothing to do with the policies of deregulation of the money market and the encouragement of debt.

While Hamilton refuses to blame Hoover for the unemployment he does blame Roosevelt for not reducing it fast enough. If you have another 30% of economists who do share the views of Hamilton, no wonder you are in deep trouble.

I read those stats over a year ago and I'm not able to locate them. When I do I'll post the source.

"According to your economist, James D. Hamilton, this was just the normal economic cycle at work and that Hoover was just unlucky."

No, thats not what he said at all. He said " The same kinds of forces that produce a typical economic downturn can offer a quite satisfactory account of what happened in 1929-30. Among these, a monetary contraction in 1928-29 likely contributed to that downturn, as did an exogenous drop in consumption and investment spending." and what followed was ATYPICAL. I can't seem to find ANYTHING in his article that makes any claim about Hoover at all, let alone him being being 'lucky". Is this yet another example of your "spin" on "history"?

John says: "However, he does not address the reason why the depression took place."

Exactly how did you miss this in Hamiltons article and the seven paragraphs were he gos on to explain exaclty WHY he thinks the depression took place? Sheesh.

"So, in my mind, the third part of the question of "What caused the Great Depression?" is to explain why did the recovery take as long as it did after the contractionary monetary forces were removed?"

John says: "It is like saying that the current economic crisis has nothing to do with the policies of deregulation of the money market and the encouragement of debt."

Or perhaps he has a better view of the event than you and your bias, and your misunderstanding of todays problems, that like the very slow recovery of the 30's are also rooted in the failed notion of socialism.

I'll take the economists like Hamilton any day over your brand. They will lead the way to a better tomorrow. Yours will cling to the failed policies of history.

Edited September 22, 2008 by Craig Lamson

[Craig Lamson]

Hamilton is not fit to be an economist and he certainly doesnt understand FDR or the American System.

http://en.wikipedia.org/wiki/Myron_Scholes

And yet you continue to pimp the words of a college dropout....

Keep drinking the kook...er..koolaid Terry

Edited September 22, 2008 by Craig Lamson