Government Spending Didn’t End the Great Depression

We can’t be surprised by Obama & Co (aka George W. Bush) for wanting spend our way out of a recession. After all, we’ve been beaten over the head with the notion (myth) that massive federal spending and WWII allowed America to escape the Great Depression. When you look back on your public education text books, you’ll find most of them making the claim that massive government spending by FDR is what pulled America out of the Depression; most importantly spending on war. There are even those who suggest that FDR knew about Pearl Harbor and did nothing so that the US had a reason to enter the war. However, that’s not really what I want to focus on in this blog.

When you compare the “Great Depression” to the “Great Recession”, you see an awful lot of similarities: double-digit unemployment, reduced manufacturing, bank failures, calls for protectionism, the rise of Napoleon Hill and personal development, denial, and deflation…

WAIT… There’s no deflation going on in the “Great Recession”! The Federal Reserve has done a tremendous job at ensuring that there is no deflation. By devaluing the dollar beyond recognition, The Fed has all but ensured the USD won’t rise in value. Still, this isn’t why I wanted to write this blog.

The myth that massive government spending is what pulled America out of the Great Depression is perhaps the most dangerous economic myth we have ever pushed on ourselves. If we look at the massive amounts of debt America is taking on each year regardless of a Democrat of Republican in the White House and in control of Congress, it’s quite clear that massive government spending does not lead to economic prosperity. In fact, it is quite clear that irresponsible government actions and spending lead to economic turmoil. But what can we expect from a government filled with people who were raised to believe that FDR’s massive government spending was for the best?

When we look at our text books and look at the options chosen by our government and central banks, there are no surprises. They took all the textbook actions: try to stimulate spending, try to stimulate investment in the stock market, save the banks, and avoid tariffs. Of course, the excuse for the continued down economy??? Things would have been much worse if we didn’t take these actions!

There are no surprises. Our political and economic “leaders” have all been taught from the same textbooks. The actions and results are easily predictable given the circumstances. And when we look at the massive amount of social programs that a capitalist country like the United States has taken on, it further clarifies exactly how we got here.

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