Policy Makers and Legislators are Forging Eerie Parallels Between The Great Depression and the Current Affordable Mortgage Depression

Misguided economic intervention by the Government put the “Great” in The Great Depression.  Initiatives designed to stabilize the economy through protectionism, compensation controls, stimulus spending, efforts to boost employment, increased Federal regulation and expanding control over industrial production failed completely.  The only material impact this meddling had on the economy was to make the downturn longer and more destructive.  I know of no credible source which would deny this historical reality.

According to a study by UCLA economists Harold Cole and Lee Ohanian, the New Deal’s “ill-conceived stimulus policies” extended the Depression by seven years.

Curiously it is the disastrous failure of this public policy intervention which has been invoked to justify much of the present Government’s activist role in solving our current economic downturn. 

• Ben Bernanke believes that he learned from the mistakes of the Great Depression and has made resisting the forces of deflation at all costs his “religion”.

• The Obama Administration has asserted as justification for its extraordinarily aggressive stimulus that the Government did not do enough, fast enough, to resolve either the Great Depression or the almost 20-year long Japanese malaise. 

Waxman-Markey

On Friday (6/26/09) the Democrats narrowly passed historic climate and energy legislation the intent of which is to transform the country’s economy and industrial landscape at the arbitrary whim of the political class.

This is not a good thing.  Such legislation would be a destructive burden during the best of times.  This happens to be the worst economic environment since the 1930s. 

The closest parallel to Cap-and-Trade legislation in U.S. history is not coincidentally The National Industrial Recovery Act (NIRA) of 1933. 

"The NIRA forced manufacturing industries into government mandated cartels and empowered a massive federal bureaucracy to dictate production and pricing standards covering two million employers and 22 million workers.  The Supreme Court eventually ruled the act unconstitutional, but the damage had been done.  Industrial production dropped 25% in the six months after the law had passed." 

While not nearly as onerous, Cap-and-Trade is the same kind of misguided, disastrously timed Government intervention that worsened and lengthened the Great Depression.  It is not possible to burden the economy with arbitrarily invented expenses and increase the cost of energy and industrial output for end-consumers without destroying jobs, restraining growth, impairing competitiveness and lowering the standard of living.

The Affordable Mortgage Depression was always going to last the better part of a decade.  The slow moving Housing Market and the structural impediments to a recovery made this an inevitable reality.  But the Government’s relentless, self-destructive policies have created the real and increasingly likely scenario that the economic malaise could drag on for years longer than required due to disastrous public policy and intrusive, command-economy directives.


A Perspective on Government Intervention During The Great Depression: