Archive for February 10th, 2010

The New Deal and the Dillinger Phenomenon

History has nothing to do with what actually happened in the past. Historian are people who get their reputation by being published and quoted TODAY.

When today was 1938 John Maynard Keynes wrote his General Theory and became the number one economist on earth and progressive historians hailed his work as detailing the true historical causes of business cycles.

Keynes’s explanation was enormously complicated and it was based on a flat-out lie. A fellow doctoral candidate of mine did his dissertation on what Keynes called “classical economists” he said completely misdiagnosed the whole thing. Keynes said, over and over and over, that these “classical economists” advised a balanced budget while the country needed a stimulus.

It turns out that not one of these “classical economists” actually existed in the real world of the 1930s. Every professional economist, every single on, demanded deficit spending AT THAT TIME. In fact, Adolf Hitler had ALREADY used the stimulus by building the Autobahn and other huge public projects and the German Depression, worse than ours, was OVER by 1938.

But no one in 1938 wanted to hear these two facts. They wanted a complicated explanation for what was to them the overwhelming disaster of the age.

When the 1950s was NOW the debate was for or against Big Government. Conservatives took KEYNES’ explanation of what he called “classical” economics as their own doctrine! So conservatives were “anti-Keynesian and liberals were pro-Keynesian. But conservatives were talking about balancing the budget as an eternal principle, the way Keynes said they should.

New Deal history had nothing to do with what actually happened. Readers wanted to read about Big Government versus Small Government.

When NOW was 1970, President Nixon said “We are all Keynesians now,” by which he meant that nobody advocated balancing the budget in the face of depression. He had no idea that everybody intelligent was a Keynesian — in his sense — in the 1930s .

Except the Democrats who nominated Roosevelt. Their 1932 platform denounced the huge national debt Hoover was piling up in an attempt at recovery.

When NOW was 1985 the debate was over REAGAN’S deficits. He cut taxes to stimulate the economy and the Democrats were once again raising hell about his huge deficits.

When NOW was 2000 pretty well all liberals agreed that Reagan’s tax cuts had worked, and their only argument against them was that they were too MUCH. But by 2000 everybody agreed that tax cuts were a true method of reducing recession. Democrats simply preferred keeping taxes as they were and using SPENDING to do the stimulating.

In other words, by the time NOW was 2000, everybody had gone back to REAL economists’ thinking in the 1930s. But before that it was not accepted politically that raising taxes was a way of keeping a depression going.

When NOW is 2010, all the obvious facts about the New Deal are easy to state.

The New Deal consisted of two parts. One part was stimulus, which was deficit spending and major stimulus programs. The other part was a backbreaking regulatory and tax burden on the private sector, including income taxes up to the 91% bracket and putative action against business in general, out of the Marxist textbook, which was aimed at leftist ideology and punishing the villains of the day, businessmen. Which I like to all the Dillinger Phenomenon. John Dillinger, Bonnie and Clyde and the rest were heroes because they robbed banks, the villains of the day.

But it was the Dillinger Phenomenon used by the far left which kept the Depression going. But one can only say this simple fact today. When NOW is 2010 and everybody now recognized that raising taxes depresses the economy.

And it is now accepted that shrinking the money supply, which was done in the 1930s to the extent of cutting it by a third, is a sure way to cause a depression. That was done by the banking industry and the Federal Reserve.

That was not a Conspiracy. It was same blind, drooling stupidity by Experts that caused the collapse of 2008. He who does not learn from history repeats it.

Those who think history is the real past will pay for it.