What most people don’t know about our 250-year-old history, part I

When we approach the 250 of our country^one Birthday, there is no better time to think about where we have been and how we got here. Yet Americans are surprisingly ignorant about our past. One reason: so much bad history is the popular culture seny of bad historians, a few bad economists, and some talented writers such as Charles Dickens and Upton Sinclair, who did not understand the history or economy at all.

To solve this problem, I strongly recommend The triumph of economic freedom: the seven myths of American capitalism disprove By Phil Gramm and Donald J. Boudreaux. Gramm is a former American senator and Boudreaux is a professor of economics at George Mason University. Together they have been combed by scientific literature and furious dismantled myths about our economic history – myths that are routinely taught at high schools and colleges throughout the country.

In this essay I will tackle two serious economic decline: the great depression and the more recent major recession.

The Great Depression

There are five myths here, starting with the claim that depression was caused by capitalism and greed. In other words, it is the idea that the worst economic decline in the history of our country took place because of too much individual freedom and too little government.

The authors, on the other hand, write,

What failed in the 1930s was no capitalism. What failed was the US government. In his behavior of monetary, tax and regulatory policy, it changed what a normal recession would have been into a depression that became the most traumatic economic experience in the history of our nation.

The worst failure was that of the Federal Reserve System, founded to be a lender in the last resort, causing banks to offer liquidity in times of a credit crisis. In fact, the Fed was there, so a third of the banks of the nation could go bankrupt.

A second myth is the idea that Herbert Hoover kept in the early stages of depression and did nothing. Hoover was even a very activist president. In response to the economic decline, he increased taxes, increased expenses, he signed the Davis-Bacon Act (for higher wages for federal construction projects) and the SOOT-HAWLEY Tariff Act. Like much of Franklin Roosevelt’s policy, most of what Hoover made things worse, did not make it better.

A third myth is that Roosevelt’s policy has saved us from depression. In fact, they almost certainly ensured that the depression extended for 12 years – longer than in another industrialized country except France. The authors write:

The White House and the Congress blocked the operation of the price system, hindered trade and threatened the holiness of private ownership. And the courts would ultimately vote this unprecedented attack on the American market economy rubber.

A fourth myth is that Roosevelt united the public in times of crisis. Roosevelt was in fact a distributor, not unity. He pushed successful industrialists that oppose his policy as “economic royalists” who formed an “economic autocracy.” In fact, it is probably not an exaggeration to say that Roosevelt has charged the rich in the United States as Hitler at the same time invested the Jews in Germany.

Historian Henry W. Brands from the University of Texas says that “Roosevelt came close to demagogy, not only from Father Coughlin and the late Huey Long, but also from the fascists of Europe.”

The final myth is the idea that it cost the enormous increase in government spending during the Second World War to pull us out of depression. If that was really true, when the war ended and government spending were quickly withdrawn, we should have been back in depression.

In the four years after the end of the Second World War, government spending fell by 75 percent. The federal deficit fell by more than 50 percent and then defeated in a small surplus.

Nevertheless, income, output and economic well -being continued to rise.

The Great Recession

After the great depression, the large recession – from 2007 to 2009 – was the most serious economic decline in our country. It included a sharp fall in house prices, accompanied by a peak in a mortgage standard, especially with subprime loans. The Federal National MortGage Association (Fannie Mae) and the Federal Home Loan MortGage Corporation (Freddie Mac)-two companies sponsored by the government to support home ownership in receiver.

There are four myths here, starting with the claim that the recession was caused by too much greed and risks of the private sector and too little government supervision. If there is something, the opposite is true. Subprime -lending actually became a goal of the federal government -enchanting under the Clinton government, mainly due to the expansion of the Reinvestment Act Community (CRA). The authors explain:

With the help of new extensive CRA -Requirements, banking regulations started to put pressure on banks to provide subprime loans. Guidelines converted into mandates, because each bank received a letter figure when providing Cra -Loingen. Banks could not even open ATMs or branches, let alone acquire another bank without a passing figure – and achieving a passing digit was no longer over complying with local credit needs. The passing of figures were increasingly achieved by providing subprime loans to home.

By 2008, about half of all outstanding mortgage loans in America was a total of 28 million-high-risk loans.

The second myth is that the crisis was caused by a lack of legal authority. In fact, there were a whole series of federal and state banking, which gave rise to an army of regulators with the power to investigate, use corrective measures and fine and even prisoners.

The problem was that the traditional interest in complying with the needs of the community with good bank practices was canceled by a new federal policy that is designed to make “affordable housing” available to more and more people.

A third myth is that the recession was caused by banking regulation-in it special by the Gramm-Leach-Bliley Act (GELB). GLB has even removed barriers to banking competition, making the financial sector more efficient. But the regulatory authority did not decrease. It increased. The Congressional Budget Office actually scored CAP as increasing legal costs.

As far as CAP is concerned, President Clinton said: “There is no lonely example that it had anything to do with the financial crash.”

The last myth is the idea that the length of the recession was somehow caused by bank practices. In fact, an unusually weak recovery was more likely caused by increased penalties for working and increased subsidies not to work.

During the Obama, the authors say, the “US economy was hit with a tidal wave of new rules and health care rules, financial services, energy and production.” At the same time, there was an explosion in the registration numbers for disability benefits, food vouchers and money welfare.

So why are these facts so important to know?

George Santayana is known for saying: “Those who do not learn from history are doomed to repeat it.” The experiences of the great depression and the big recession are events that no healthy person would not want to experience any again.