Monday, June 25, 2007

Keynesian Myth

"One of the myths of the inter-war years is that laissez-faire capitalism made a mess of things until Keynes, with his great book, The General Theory of Employment, Interest and Money (1936), introduced 'Keynesianism'--another word for government interference--and saved the world. In fact Keynes' Tract [on Monetary Reform (1923)], advocating 'managed currency' and a stabilized price-level, both involving constant government interference, coordinated internationally, was part of the problem... For most of the Twenties... [d]omestically and internationally, [Strong and Norman] constantly pumped more money into the system, and whenever the economy showed signs of flagging they increased the dose." - Paul Johnson, A History of the American People p.729

What really got us out of the Great Depression, of course, was World War II, demonstrating that "War is the health of the State", as Randolph Bourne so eloquently put it.

Plugging right along, I couldn't help but notice another poignant quote:

"The real recovery from the boom atmosphere of the 1920s came only on the Monday after the Labor Day weekend of September 1939 [ten years into the depression and seven years into FDR's presidency], when news of war in Europe plunged the New York Stock Exchange into a joyful confusion which finally wiped out the traces (though not the memory) of October 1929. Two years later, with America on the brink of war itself, the dollar value of production finally passed the 1929 levels for good. If interventionism worked, it took nine years and a world war to demonstrate the fact." - Paul Johnson, A History of the American People p.758

You'd think I knew a little bit about history or something. Emphasis on a little.

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