In a post that is entirely too long, someone calling himself Tyler Durden writes:
The primary difference between today and the 1930s, when the U.S. experienced its last systemic crisis, has been the response by policymakers. Having the benefit of hindsight, policymakers acted swiftly to avoid the mistakes of the Great Depression by applying Keynesian solutions.
What we did this time, that we failed to do last time, was prevent the collapse of the banks and private debt. Our debt lingers. But excessive accumulation of debt was the underlying cause of the crisis. So along with debt, unemployment lingers. Recovery remains impossible.
The Depression hit in 1929. Maynard's book came out seven years later.
By the time The General Theory was published, a lot of debt was already gone. Keynes didn't have to deal with that. He didn't have to say Get rid of the debt first. The debt spike was a thing of the past.
We don't have that luxury. Isn't it obvious?
2 comments:
Another difference is that we now have income support programs and deposit guarantees. Without the income support programs we would see the bread lines again and without deposit guarantees we would see bank runs. It is less about the feds policies than the fiscal policies we enacted post depression.
Fair enough, Greg. Income supports and deposit guarantees we did not have until the Depression taught us we needed 'em.
But income supports and deposit guarantees are not the reason that recovery remains impossible. It is the other thing we did -- preventing the collapse of the financial system -- that preserved the burden of debt, making recovery impossible.
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