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Politics : Politics for Pros- moderated
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To: skinowski who wrote (623174)1/25/2017 3:22:51 AM
From: frankw19001 Recommendation

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Mrjns

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What would have happened had the US government created and distributed enough money during the Great Depression?

It did, and things improved up until I think it was 1938 when Roosevelt went with the more conventional advice and cut the deficit and the unemployment rate started to ratchet up again. So Roosevelt pragmatically changed direction again what with Keynes causing a stir. Of course then the war changed everything and the deficit grew very quickly.

But yeah it did happen.

Would that abort the Depression, or would we have an inflationary blowout, like Germany had in 1923? Probably, the latter.

Germany deliberately caused the hyper inflation so they could screw the Allies on the war reparations payments. So I think if the US had been consistent with its depression deficits but not aiming to create huge inflation, it probably would have worked out OK.

The reason depressions are deflationary is that folk are paying down bank debt, which destroys money. At such a time folk have no interest in taking out loans, which creates money.

The inflation we saw in the seventies wasn't caused by money creation but by labor wanting and getting pay rises leading to businesses raising prices - not a virtuous circle. Labor was in short supply, and it had its historically highest share of GDP and unions were not very forward looking.

This is what led businesses to start outsourcing and their political allies pushing for looser immigration - Globalism - and eventually led to the present situation with labor having its historically lowest share of GDP. And has led to a raft of bad stuff, as you know, all nicely summarized in Trump's inaugural address.
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