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The Meaning of Independence Day

Ayn Rand Center for Individual Rights

Second American Revolution–Tea Party Celebrations–Washington Fair–July 4, 2009–An Open Invitation To The American People

American People’s Plan = 6 Month Tax Holiday + FairTax = Real Hope + Real Change!–Millions To March On Washington D.C. Saturday, July 4, 2009!

Independents Lead The The Second American Revolution Surge–Independence Day–Saturday July 4, 2009 In Washington D.C.–Tea Party Time–On To Washington–Dare You To Move!

Please Spread The Message of Liberty

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Let Freedom Ring

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switchfoot-dare you to move(live)

God Bless the USA – Lee Greenwood

“Permanent mass unemployment destroys the moral foundations of the social order. The young people, who, having finished their training for work, are forced to remain idle, are the ferment out of which the most radical political movements are formed. In their ranks the soldiers of the coming revolutions are recruited.”

~Ludwig von Mises, Socialism, page 440

Background Articles and Videos

How The Government Measures Unemployment

“…People with jobs are employed.
People who are jobless, looking for jobs, and available for work are unemployed.
People who are neither employed nor unemployed are not in the labor force.

“…To summarize, employed persons are:
− All persons who did any work for pay or profit during the survey reference
week.
− All persons who did at least 15 hours of unpaid work in a family-owned
enterprise operated by someone in their household.
− All persons who were temporarily absent from their regular jobs because
of illness, vacation, bad weather, industrial dispute, or various personal
reasons, whether or not they were paid for the time off.
Unemployed persons are:
− All persons who did not have a job at all during the survey reference
week, made at least one specific active effort to find a job during the prior
4 weeks, and were available for work (unless temporarily ill).
− All persons who were not working and were waiting to be called back to a
job from which they had been laid off (they need not be looking for work
to be classified as unemployed). …”

“…Yes, there is only one official definition of unemployment, and that was discussed above.
However, some have argued that this measure is too restricted, and that it does not
adequately capture the breadth of labor market problems. For this reason, economists at
BLS developed a set of alternative measures of labor underutilization. These measures
are published every month in the Employment Situation news release. They range from a
very limited measure that includes only those who have been unemployed (as officially
defined) for 15 weeks or more to a very broad one that includes total unemployed (as
officially defined), all persons marginally attached to the labor force, and all individuals
employed part time for economic reasons.

Because of the complexities of the American economic system and the wide variety of
job arrangements and jobseeking efforts, the definitions of employment and
unemployment must be specific to ensure uniformity of reporting at any given time and
over any period of time. When all of the details are considered, definitions may seem
rather complicated. The basic concepts, however, remain little changed: People with
jobs are employed, people who do not have jobs and are looking for jobs are
unemployed, and people who meet neither labor market test are not in the labor force.
The qualifying conditions are necessary to cover the wide range of labor force patterns
and to provide an objective set of standards for consistent treatment of cases.
Where can people find the data?
Each month, summary statistics on unemployment and employment are published in a
news release titled The Employment Situation.
Detailed information also is published in tables online and in a periodical called
Employment and Earnings.
On an irregular basis, special labor force topics are addressed in articles published in the
Monthly Labor Review, in a series of briefs called Issues in Labor Statistics, in a variety
of special reports, and in other BLS publications. …”

http://stats.bls.gov/cps/cps_htgm.pdf

Table A-12. Alternative measures of labor underutilization (Percent)

 Not seasonally adjusted                   Seasonally adjusted                 

                          Measure                                                                                                         

                                                            May      Apr.     May      May      Jan.     Feb.     Mar.     Apr.     May
                                                            2008     2009     2009     2008     2009     2009     2009     2009     2009  

  U-1 Persons unemployed 15 weeks or longer, as a percent
       of the civilian labor force.......................    1.8      4.5      4.6      1.8      3.0      3.4      3.7      4.0      4.5  

  U-2 Job losers and persons who completed temporary
       jobs, as a percent of the civilian labor force....    2.6      5.6      5.8      2.8      4.5      5.0      5.4      5.7      6.2  

  U-3 Total unemployed, as a percent of the civilian
       labor force (official unemployment rate)..........    5.2      8.6      9.1      5.5      7.6      8.1      8.5      8.9      9.4  

  U-4 Total unemployed plus discouraged workers, as a
       percent of the civilian labor force plus
       discouraged workers...............................    5.5      9.0      9.5      5.8      8.0      8.5      8.9      9.3      9.8  

  U-5 Total unemployed, plus discouraged workers, plus
       all other marginally attached workers, as a
       percent of the civilian labor force plus all
       marginally attached workers.......................    6.1      9.8     10.3      6.4      8.8      9.3      9.8     10.1     10.6  

  U-6 Total unemployed, plus all marginally attached
       workers, plus total employed part time for
       economic reasons, as a percent of the civilian
       labor force plus all marginally attached workers..    9.4     15.4     15.9      9.8     13.9     14.8     15.6     15.8     16.4  

   NOTE:  Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and
 are available for a job and have looked for work sometime in the recent past.  Discouraged workers, a subset of the marginally attached,
 have given a job-market related reason for not looking currently for a job.  Persons employed part time for economic reasons are those
 who want and are available for full-time work but have had to settle for a part-time schedule.  For more information, see "BLS
 introduces new range of alternative unemployment measures," in the October 1995 issue of the Monthly Labor Review.  Updated population
 controls are introduced annually with the release of January data.

http://www.bls.gov/news.release/empsit.t12.htm

Employment Situation

Table of Contents

• Employment Situation Summary
• Employment Situation Frequently Asked Questions
• Employment Situation Technical Note
• Table A-1. Employment status of the civilian population by sex and age
• Table A-2. Employment status of the civilian population by race, sex, and age
• Table A-3. Employment status of the Hispanic or Latino population by sex and age
• Table A-4. Employment status of the civilian population 25 years and over by educational attainment
• Table A-5. Employed persons by class of worker and part-time status
• Table A-6. Selected employment indicators
• Table A-7. Selected unemployment indicators, seasonally adjusted
• Table A-8. Unemployed persons by reason for unemployment
• Table A-9. Unemployed persons by duration of unemployment
• Table A-10. Employed and unemployed persons by occupation, not seasonally adjusted
• Table A-11. Unemployed persons by industry and class of worker, not seasonally adjusted
• Table A-12. Alternative measures of labor underutilization
• Table A-13. Persons not in the labor force and multiple jobholders by sex, not seasonally adjusted
• Table B-1. Employees on nonfarm payrolls by industry sector and selected industry detail
• Table B-2. Average weekly hours of production and nonsupervisory workers (1) on private nonfarm payrolls by industry sector and selected industry detail
• Table B-3. Average hourly and weekly earnings of production and nonsupervisory workers (1) on private nonfarm payrolls by industry sector and selected industry detail
• Table B-4. Average hourly earnings of production and nonsupervisory workers (1) on private nonfarm payrolls by industry sector and selected industry detail, seasonally adjusted
• Table B-5. Indexes of aggregate weekly hours of production and nonsupervisory workers (1) on private nonfarm payrolls by industry sector and selected industry detail
• Table B-6. Indexes of aggregate weekly payrolls of production and nonsupervisory workers (1) on private nonfarm payrolls by industry sector and selected industry detail
• Table B-7. Diffusion indexes of employment change
• HTML version of the entire news release
• Access to historical data for the “A” tables of the Employment Situation Release
• Access to historical data for the “B” tables of the Employment Situation Release

http://stats.bls.gov/news.release/empsit.toc.htm

Series Id:           LNS13000000
Seasonal Adjusted
Series title:        (Seas) Unemployment Level
Labor force status:  Unemployed
Type of data:        Number in thousands
Age:                 16 years and over

America’s Greatest Depression Fighter

(No, it wasn’t Franklin Delano Roosevelt)

by Jim Powell

“…A depression not only harms millions of people. It leads to intense political pressure for more government spending, higher taxes and other assaults on economic liberty. So it’s important to get through a depression as quickly as possible. Which U.S. president ranks as the best depression fighter?

Not the fabled Franklin Delano Roosevelt, who came to power in 1933, since the Great Depression persisted until the federal government conscripted some 12 million men into the armed forces. Biographers and political historians hail FDR’s charismatic personality, his “Fireside Chats” and his political genius, but his tripling of taxes, his laws making it more expensive for employers to hire people, his anti-discounting laws, his large-scale destruction of food, the 700 industrial cartels he enforced, the monopolies he established, the frivolous antitrust lawsuits he authorized against big employers – these and other measures throttled recovery and prolonged unemployment averaging 17%.

America’s greatest depression fighter was Warren Gamaliel Harding. An Ohio senator when he was elected president in 1920, he followed Woodrow Wilson who got America into World War I, contributed to the deaths of 116,708 Americans, built up huge federal bureaucracies, imprisoned dissenters and incurred $25 billion of debt, for which he has been much praised by historians.

Harding inherited the mess, in particular the post-World War I depression – almost as severe, from peak to trough, as the Great Contraction from 1929 to 1933, that FDR inherited and prolonged. Richard K. Vedder and Lowell E. Gallaway, in their book Out of Work (1993), noted that the magnitude of the 1920 depression “exceeded that for the Great Depression of the following decade for several quarters.” The estimated gross national product plunged 24% from $91.5 billion in 1920 to $69.6 billion in 1921. The number of unemployed people jumped from 2.1 million in 1920 to 4.9 million in 1921. …”

“…Federal spending was cut from $6.3 billion in 1920 to $5 billion in 1921 and $3.2 billion in 1922. Federal taxes were cut from $6.6 billion in 1920 to $5.5 billion in 1921 and $4 billion in 1922. Harding’s policies started a trend. The low point for federal taxes was reached in 1924. For federal spending, in 1925. The federal government paid off debt, which had been $24.2 billion in 1920, and it continued to decline until 1930.

Conspicuously absent was business-bashing that became a hallmark of FDR’s speeches. Absent, too, were New Deal–type big government programs to make it more expensive for employers to hire people, to force prices above market levels, to promote cartels and monopolies. Frederick Lewis Allen wrote, “Business itself was regarded with a new veneration. Once it had been considered less dignified and distinguished than the learned professions, but now people thought they praised a clergyman highly when they called him a good business man.”

With Harding’s tax cuts, spending cuts and relatively non-interventionist economic policy, the gross national product rebounded to $74.1 billion in 1922. The number of unemployed fell to 2.8 million – a reported 6.7% of the labor force – in 1922. So, just a year and a half after Harding became president, the Roaring 20s were underway! The unemployment rate continued to decline, reaching a low of 1.8% in 1926 – an extraordinary feat. Since then, the unemployment rate has been lower only once in wartime (1944), and never in peacetime.

“The seven years from the autumn of 1922 to the autumn of 1929,” wrote Vedder and Gallaway, “were arguably the brightest period in the economic history of the United States. Virtually all the measures of economic well-being suggested that the economy had reached new heights in terms of prosperity and the achievement of improvements in human welfare. Real gross national product increased every year, consumer prices were stable (as measured by the consumer price index), real wages rose as a consequence of productivity advance, stock prices tripled. Automobile production in 1929 was almost precisely double the level of 1922. It was in the twenties that Americans bought their first car, their first radio, made their first long-distance telephone call, took their first out-of-state vacation. This was the decade when America entered ‘the age of mass consumption.’”

Warren Harding made additional contributions to liberty. In 1922, he nominated George Sutherland to the Supreme Court – and Sutherland went on to become one of the greatest champions of liberty who ever served there. The next year, Harding nominated Pierce Butler. These were to be two of the “Four Horsemen of Reaction” who, during the 1930s, courageously struck down FDR’s early New Deal legislation that had been suppressing recovery….”

“…Harding suffered a stroke and died in San Francisco on August 2, 1923. “At the time of his death, no president was more popular and admired,” John W. Dean wrote in his biography of Harding. Harding’s body was returned to Washington on a funeral train. According to Dean, “This trip, reported in every newspaper in the land, resulted in a public outpouring of sentiment the likes of which had not been experienced by the nation since the death of Abraham Lincoln, and would not occur again until the death of Franklin Roosevelt. An estimated 9 million people from factories and farms, schools and shops, in the cities and in the fields, spontaneously appeared along the railroad tracks to silently – and often in tears – pay last respects to a president they admired, a friend they’d lost.”

Unfortunately, Harding’s stunning success as a depression fighter was overshadowed by the Teapot Dome scandal that engulfed his administration after he died. This resulted from “progressive” era conservation policies in which the government owned land known to have petroleum reserves, at Teapot Dome, Wyoming and Elk Hills, California. Since the beginnings of recorded history, government involvement in the economy has always led to corruption, and Secretary of the Interior Albert Fall accepted bribes for leases enabling private companies to extract the oil. If the reserves had been privately owned, there wouldn’t have been a scandal….”

http://www.lewrockwell.com/orig4/powell-jim4.html

What was the unemployment rate during the Great Depression?

“…The unemployment rate for the years 1923-29 was 3.3 percent. In 1931 it jumped to 15.9, in 1933 it was 24.9 percent. It then steadily decreased until 1941 when it stood at 9.9%. In 1942, after U.S. entry into World War II, the rate dropped to 4.7%.

(Source: http://www.bls.gov/opub/cwc/cm20030124ar03p1.htm)

“…When trying to compare historical and contemporary employment and unemployment rates, it is important to note that US employment and unemployment figures (and there are multiple official employment and unemployment figures for the same time period, just as there are multiple official rates of inflation, depending on exactly what is being looked at) are now calculated differently than they were during the 1930s and 1940s. In general, current unemployment numbers would be between 5% and 10% higher if calculated in the same way as in the past; conversely, the numbers from the 1930s and 1940s would be 5% – 10% lower if calculated using our contemporary methods. One, but not the only, major change is that workers are no longer considered “unemployed” if they become discouraged after being unable to find a job and stop searching. These workers disappear from the numbers.

Employment and unemployment figures are also difficult to compare, since they are typically calculated differently. For example, official employment and unemployment numbers may go up at the same time, which is illogical if we think that these numbers are based on the same formula. …”

http://wiki.answers.com/Q/What_was_the_unemployment_rate_during_the_Great_Depression

Great Depression

by Gene Smiley

“…A worldwide depression struck countries with market economies at the end of the 1920s. Although the Great Depression was relatively mild in some countries, it was severe in others, particularly in the United States, where, at its nadir in 1933, 25 percent of all workers and 37 percent of all nonfarm workers were completely out of work. Some people starved; many others lost their farms and homes. Homeless vagabonds sneaked aboard the freight trains that crossed the nation. Dispossessed cotton farmers, the “Okies,” stuffed their possessions into dilapidated Model Ts and migrated to California in the false hope that the posters about plentiful jobs were true. Although the U.S. economy began to recover in the second quarter of 1933, the recovery largely stalled for most of 1934 and 1935. A more vigorous recovery commenced in late 1935 and continued into 1937, when a new depression occurred. The American economy had yet to fully recover from the Great Depression when the United States was drawn into World War II in December 1941. Because of this agonizingly slow recovery, the entire decade of the 1930s in the United States is often referred to as the Great Depression. …”

“…It is commonly argued that World War II provided the stimulus that brought the American economy out of the Great Depression. The number of unemployed workers declined by 7,050,000 between 1940 and 1943, but the number in military service rose by 8,590,000. The reduction in unemployment can be explained by the draft, not by the economic recovery. The rise in real GNP presents similar problems. Most estimates show declines in real consumption spending, which means that consumers were worse off during the war. Business investment fell during the war. Government spending on the war effort exceeded the expansion in real GNP. These figures are suspect, however, because we know that government estimates of the value of munitions spending, to name one major area, were increasingly exaggerated as the war progressed. In fact, the extensive price controls, rationing, and government control of production render data on GNP, consumption, investment, and the price level less meaningful. How can we establish a consistent price index when government mandates eliminated the production of most consumer durable goods? What does the price of, say, gasoline mean when it is arbitrarily held at a low level and gasoline purchases are rationed to address the shortage created by the price controls? What does the price of new tires mean when no new tires are produced for consumers? For consumers, the recovery came with the war’s end, when they could again buy products that were unavailable during the war and unaffordable during the 1930s. …”

http://www.econlib.org/library/Enc/GreatDepression.html

U.S. Labor Force Trends

“…

http://findarticles.com/p/articles/mi_qa3761/is_200806/ai_n28083118/

List of recessions in the United States

Recessions and other Economic Crises

Name	Dates	Duration	Time since start of previous entry	Causes	References
Panic of 1797	1797–1800	&0000000000000003.0000003 years	–	The effects of the deflation of the Bank of England crossed the Atlantic Ocean to North America and disrupted commercial and real estate markets in the United States and the Caribbean. Britain’s economy was greatly affected by developing disflationary repercussions because it was fighting France in the French Revolutionary Wars at the time.	[9] [5]
Depression of 1807	1807–1814	&0000000000000007.0000007 years	&0000000000000010.00000010 years	The Embargo Act of 1807 was passed by the United States Congress under President Thomas Jefferson. It devastated shipping-related industries. The Federalists fought the embargo and allowed smuggling to take place in New England.	[10][11][5]
Panic of 1819	1819–1824	&0000000000000005.0000005 years	&0000000000000012.00000012 years	The first major financial crisis in the United States featured widespread foreclosures, bank failures, unemployment, and a slump in agriculture and manufacturing. It also marked the end of the economic expansion that followed the War of 1812.	[12][13][5]
Panic of 1837	1837–1843	&0000000000000006.0000006 years	&0000000000000018.00000018 years	A sharp downturn in the American economy was caused by bank failures and lack of confidence in the paper currency. Speculation markets were greatly affected when American banks stopped payment in specie (gold and silver coinage).	[14][5]
Panic of 1857	1857–1860	&0000000000000003.0000003 years	&0000000000000020.00000020 years	Failure of the Ohio Life Insurance and Trust Company burst a European speculative bubble in United States railroads and caused a loss of confidence in American banks. Over 5,000 businesses failed within the first year of the Panic, and unemployment was accompanied by protest meetings in urban areas.	[15][5]
Panic of 1873	1873–1879	&0000000000000006.0000006 years	&0000000000000016.00000016 years	Economic problems in Europe prompted the failure of the Jay Cooke & Company, the largest bank in the United States, which burst the post-Civil War speculative bubble. The Coinage Act of 1873 also contributed by immediately depressing the price of silver, which hurt North American mining interests.	[16][5]
Long Depression	1873–1896	&0000000000000023.00000023 years	–	The collapse of the Vienna Stock Exchange caused a depression that spread throughout the world. It is important to note that during this period, the global industrial production greatly increased. In the United States, for example, industrial output increased fourfold.	[17][5]
Panic of 1893	1893–1896	&0000000000000003.0000003 years	&0000000000000020.00000020 years	Failure of the United States Reading Railroad and withdrawal of European investment led to a stock market and banking collapse. This Panic was also precipitated in part by a run on the gold supply.	[18][5]
Panic of 1907	1907–1908	&0000000000000001.0000001 year	&0000000000000014.00000014 years	A run on Knickerbocker Trust Company deposits on October 22, 1907, set events in motion that would lead to a severe monetary contraction.	[19][5]
Post-World War I recession	1918–1921	&0000000000000003.0000003 years	&0000000000000011.00000011 years	Severe hyperinflation in Europe took place over production in North America. It was a brief but very sharp recession and was caused by the end of wartime production, along with an influx of labor from returning troops. This in turn caused high unemployment.	[20][5]
Great Depression	1929–1933	&0000000000000043.00000043 months	&0000000000000021.00000021 months	Stock markets crashed worldwide, and a banking collapse took place in the United States. Although sometimes dated as lasting until the Second World War, the US economy was growing again by 1933, and technically the U.S. was not in recession from 1933 to 1937	[21][5]
Recession of 1937	1937–1938	&0000000000000013.00000013 months	&0000000000000050.00000050 months	The Recession of 1937 is only considered minor when compared to the Great Depression, but is otherwise among the worst recessions of the 20th century.	[22]
Recession of 1945	Feb-Oct 1945	&0000000000000008.0000008 months	&0000000000000080.00000080 months	The decline in government spending at the end of World War II led to an enormous drop in Gross Domestic Product making this technically a recession. The Post War years were unusual in a number of ways and this era has little in common with other recessions.	[23]
Recession of 1948	Nov 1948–Oct 1949	&0000000000000011.00000011 months	&0000000000000037.00000037 months	The 1948 recession was a relatively brief cyclical economic downturn, the mildness of which led to confidence in the notion that the Post War-era would be a period of stronger growth.	[24]
Recession of 1953	July 1953–May 1954	&0000000000000010.00000010 months	&0000000000000045.00000045 months	After a post-Korean War inflationary period, more funds were transferred into national security. The Federal Reserve changed monetary policy to be more restrictive in 1952 due to fears of further inflation.	[25][26][5]
Recession of 1958	Aug 1957–April 1958	&0000000000000008.0000008 months	&0000000000000039.00000039 months	Monetary policy was tightened during the two years preceding 1957, followed by an easing of policy at the end of 1957. The budget balance resulted in a change in budget surplus of 0.8% of GDP in 1957 to a budget deficit of 0.6% of GDP in 1958, and then to 2.6% of GDP in 1959.	[27][5]
Recession of 1960-1	April 1960–Feb 1961	&0000000000000010.00000010 months	&0000000000000024.00000024 months	After President Kennedy’s 30 January 1961 call for increased government spending to improve the Gross National Product and to reduce unemployment, the 1960-61 recession ended in February.[28]
Recession of 1969-70	Dec 1969–Nov 1970	&0000000000000011.00000011 months	&0000000000000106.000000106 months	The relatively mild 1969 recession is thought to have been mostly caused by the Federal Reserve raising interest rates to hold down inflation.	[5]
1973 oil crisis1973–1974 stock market crash	Nov. 1973– March 1975	&0000000000000016.00000016 months	&0000000000000036.00000036 months	A quadrupling of oil prices by OPEC coupled with high government spending due to the Vietnam War led to stagflation in the United States.	[29][5]
1980 recession	Jan-July 1980	&0000000000000006.0000006 months	&0000000000000058.00000058 months	The NBER considers a short recession to have occurred in 1980, followed by a short period of growth and then a deep recession. Unemployment remained relatively elevated inbetween recessions. The early ’80s are sometimes referred to as a “double dip” or “w-shaped” recession.	[5]
Early 1980s recession	July 1981–Nov 1982	&0000000000000016.00000016 months	&0000000000000012.00000012 months	The Iranian Revolution sharply increased the price of oil around the world in 1979, causing the 1979 energy crisis. This was caused by the new regime in power in Iran, which exported oil at inconsistent intervals and at a lower volume, forcing prices to go up. Tight monetary policy in the United States to control inflation led to another recession. The changes were made largely because of inflation that was carried over from the previous decade due to the 1973 oil crisis and the 1979 energy crisis.	[30][31][5]
Early 1990s recession	July 1990–March 1991	&0000000000000008.0000008 months	&0000000000000092.00000092 months	Industrial production and manufacturing-trade sales increased in early 1991.	[32][5]
Early 2000s recession	Mar-Nov 2001	&0000000000000008.0000008 months	&0000000000000120.000000120 months	The collapse of the dot-com bubble, the September 11th attacks, and accounting scandals contributed to a relatively mild contraction in the North American economy.	[33][5]
Late 2000s recession	Dec 2007-current	ongoing	&0000000000000073.00000073 months	The collapse of the housing market led to bank collapses in the US and Europe, causing the amount of available credit to be sharply curtailed, resulting in huge liquidity and solvency crises. In addition, record oil prices and food prices, stock markets crashed globally, and several high profile banking, automotive, and manufacturing giants collapsed in the United States	[34][35]

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

Economic Depressions: Their Cause and Cure

by Murray N. Rothbard

“…Thus, the Misesian theory of the business cycle accounts for all of our puzzles: The repeated and recurrent nature of the cycle, the massive cluster of entrepreneurial error, the far greater intensity of the boom and bust in the producers’ goods industries.

Mises, then, pinpoints the blame for the cycle on inflationary bank credit expansion propelled by the intervention of government and its central bank. What does Mises say should be done, say by government, once the depression arrives? What is the governmental role in the cure of depression? In the first place, government must cease inflating as soon as possible. It is true that this will, inevitably, bring the inflationary boom abruptly to an end, and commence the inevitable recession or depression. But the longer the government waits for this, the worse the necessary readjustments will have to be. The sooner the depression-readjustment is gotten over with, the better. This means, also, that the government must never try to prop up unsound business situations; it must never bail out or lend money to business firms in trouble. Doing this will simply prolong the agony and convert a sharp and quick depression phase into a lingering and chronic disease. The government must never try to prop up wage rates or prices of producers’ goods; doing so will prolong and delay indefinitely the completion of the depression-adjustment process; it will cause indefinite and prolonged depression and mass unemployment in the vital capital goods industries. The government must not try to inflate again, in order to get out of the depression. For even if this reinflation succeeds, it will only sow greater trouble later on. The government must do nothing to encourage consumption, and it must not increase its own expenditures, for this will further increase the social consumption/investment ratio. In fact, cutting the government budget will improve the ratio. What the economy needs is not more consumption spending but more saving, in order to validate some of the excessive investments of the boom.

Thus, what the government should do, according to the Misesian analysis of the depression, is absolutely nothing. It should, from the point of view of economic health and ending the depression as quickly as possible, maintain a strict hands off, “laissez-faire” policy. Anything it does will delay and obstruct the adjustment process of the market; the less it does, the more rapidly will the market adjustment process do its work, and sound economic recovery ensue.

The Misesian prescription is thus the exact opposite of the Keynesian: It is for the government to keep absolute hands off the economy and to confine itself to stopping its own inflation and to cutting its own budget.

If Coolidge made 1929 inevitable, it was President Hoover who prolonged and deepened the depression, transforming it from a typically sharp but swiftly-disappearing depression into a lingering and near-fatal malady, a malady “cured” only by the holocaust of World War II. Hoover, not Franklin Roosevelt, was the founder of the policy of the “New Deal”: essentially the massive use of the State to do exactly what Misesian theory would most warn against – to prop up wage rates above their free-market levels, prop up prices, inflate credit, and lend money to shaky business positions. Roosevelt only advanced, to a greater degree, what Hoover had pioneered. The result for the first time in American history, was a nearly perpetual depression and nearly permanent mass unemployment. The Coolidge crisis had become the unprecedentedly prolonged Hoover-Roosevelt depression.

Ludwig von Mises had predicted the depression during the heyday of the great boom of the 1920s – a time, just like today, when economists and politicians, armed with a “new economics” of perpetual inflation, and with new “tools” provided by the Federal Reserve System, proclaimed a perpetual “New Era” of permanent prosperity guaranteed by our wise economic doctors in Washington. Ludwig von Mises, alone armed with a correct theory of the business cycle, was one of the very few economists to predict the Great Depression, and hence the economic world was forced to listen to him with respect. F. A. Hayek spread the word in England, and the younger English economists were all, in the early 1930s, beginning to adopt the Misesian cycle theory for their analysis of the depression – and also to adopt, of course, the strictly free-market policy prescription that flowed with this theory. Unfortunately, economists have now adopted the historical notion of Lord Keynes: That no “classical economists” had a theory of the business cycle until Keynes came along in 1936. There was a theory of the depression; it was the classical economic tradition; its prescription was strict hard money and laissez-faire; and it was rapidly being adopted, in England and even in the United States, as the accepted theory of the business cycle. (A particular irony is that the major “Austrian” proponent in the United States in the early and mid-1930s was none other than Professor Alvin Hansen, very soon to make his mark as the outstanding Keynesian disciple in this country.)

What swamped the growing acceptance of Misesian cycle theory was simply the “Keynesian Revolution” – the amazing sweep that Keynesian theory made of the economic world shortly after the publication of the General Theory in 1936. It is not that Misesian theory was refuted successfully; it was just forgotten in the rush to climb on the suddenly fashionable Keynesian bandwagon. Some of the leading adherents of the Mises theory – who clearly knew better – succumbed to the newly established winds of doctrine, and won leading American university posts as a consequence.

But now the once arch-Keynesian London Economist has recently proclaimed that “Keynes is Dead.” After over a decade of facing trenchant theoretical critiques and refutation by stubborn economic facts, the Keynesians are now in general and massive retreat. Once again, the money supply and bank credit are being grudgingly acknowledged to play a leading role in the cycle. The time is ripe – for a rediscovery, a renaissance, of the Mises theory of the business cycle. It can come none too soon; if it ever does, the whole concept of a Council of Economic Advisors would be swept away, and we would see a massive retreat of government from the economic sphere. But for all this to happen, the world of economics, and the public at large, must be made aware of the existence of an explanation of the business cycle that has lain neglected on the shelf for all too many tragic years. …”

http://www.lewrockwell.com/rothbard/rothbard183.html

1929 – The Great Wall Street Crash & Depression: Part 1 of 6

1929 – The Great Wall Street Crash & Depression: Part 2 of 6

1929 – The Great Wall Street Crash & Depression: Part 3 of 6

1929 – The Great Wall Street Crash & Depression: Part 4 of 6

1929 – The Great Wall Street Crash & Depression: Part 5 of 6

1929 – The Great Wall Street Crash & Depression: Part 6 of 6

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