Product Description
The Great Bust Ahead is a concise, straight to the point short book laying out in stark terms the case for a coming depression of historically unprecedented magnitude. It will be worse than the 1930s, beginning nominally in 2012, but perhaps as early as 2009-2010 and lasting up to thirteen years. Centered on hard fact demographics, the book boldly claims that the data presented are so irrefutable, that the outcome predicted by the book is equally as irrefutable. The compelling proof presented accurately accounts for the detailed trend of the economy from 1920 to today (something never before accomplished), and projects out to 2030. The book is very easy to read and understand, and requires no prior knowledge of economics. Down to earth things the average person can do to prepare for what is coming are covered. A summary of the catastrophic domestic social and international consequences is offered.
October 2007 Update: In 2002 when this book was published, in addition to the massive depression beginning around the end of the decade, it forecast:
1. The economy, as reflected by the DJIA, would resume its upwards march in late 2002 or 2003.
This is exactly what happened.
2. The DJIA would have a snapback to 13,000 to 14,000 and the FTSE to 6,000 to 7,000 by 2004, but delayed possibly by wars/politics/terrorism/scandals.
This is exactly what has happened. Although the full snapback has been delayed for the reasons described, the DJIA has now closed over 14,100 and the FTSE over 6,700.
3. The DJIA returns from 2003 to 2012 would average a historically long-term normal of 7% to 8%. So far, with the delayed full snapback for the reasons described, DJIA actual returns have averaged a more modest 5.8%, as would be expected.
4. Interest rates would increase from 2003 onwards.
This is exactly what has happened.
Customer Reviews:
It is just an indicator!.......2007-09-12
Everyone is forgetting that the book is talking about a correlated indicator for the DJIA. There are many things that drive an economy and make things happen like the weakening dollar, monstrous deficits, the Federal Reserve, cheap credit and the housing market bubble, peak oil, etc. These are some of the things that move the DJIA, NOT just demographics. The fact that the 45-54 age group correlates to the DJIA is very interesting and CAN be used to predict what MAY happen to the DJIA in the long term. Demographics of the 45-54 age groups are a strong force pushing the markets, but not the only thing. Even the author says that some things like "the New Deal, the pill and the NASDAQ" affect the correlation with this indicator. The politicians and Wall Street are not going to lie down and let this monstrous depression happen without a fight. They my not win the War, but where the DJIA goes in the future has not been case in stone. The future highs and lows of the DJIA are still unpredictable.
The book is a high school treatise on this relationship and to the economically ignorant is a real eye opener. Most economists know about this force, but the key is what to do about it and when. The author's advice to get out of the markets by 2010 is silly at best. We are now in September of 2007 and the housing market bubble burst is probably the beginning of the down turn of the markets. Wait until 2010 to protect your assets and you will far less assets to protect. The author's advice to sell your home and rent and plow your money into bonds is simplistic at best. Investing in gold, foreign currencies, TIPS etc. to protect your assets are other stratigies that are not addressed. We are all speeding towards this economic depression, but the answers to when it will happen and what to do about protecting your assets is NOT even close to being addressed by this book. The book is $8.95 and you get what you pay for, "a wakeup call for the economically ignorant". Read the book and move onto a more advanced book for a better in depth discussion on economics and your money like "The Second Great Depression (Paperback) by Warren Brussee (Author)". I do agree that a lot of pain is ahead for the world.
Not Bad But Too Short and Too Extreme.......2007-08-22
Let me start by saying that this is a pretty good book for the price and if you don't know what is going on in the economy. The problem is that the book has very limited data to back up the predictions. If you are going to make huge predictions you had better justify it with a lot of credible data that has been referenced. As well, some of the predictions are just too extreme. However, all of these shortcomings aside, the author provides a nice short treatment on what will most likely occur; just not to the extent he has presented in my opinion. Of course, opinions are like debt in America - everyone has their own!
A much more useful book in my opinion is "Cashing in on the Real Estate Bubble." It not only shows you many different ways to profit from the current bubble collapse, but it also shows a lot of detail about the economy and how to profit from America's overall credit bubble. Cashing in on the Real Estate Bubble
Interesting theory but..........2007-07-09
This book is short and easy to read. The author has an interesting concept that the stock market follows the number of Americans at their peak buying age. His graphs and explanations on modifying factors make everything fit. I agree that some correction of our economy (inflation, recession, or worse) is likely in the future, but I feel other factors (energy issues, our national debt, terrorism, etc.) will come into play that he has not taken into account. I also don't agree with his investment suggestions and feel they may be reckless.
If you're concerned about possible bad times ahead, this is one book that may helpful, but I better liked the reasoning and proposals on what to do in Stephen Leeb's book The Coming Economic Collapse: How You Can Thrive When Oil Costs 200 Dollars a Barrel.
Excellent Read.......2007-05-14
Pros:
1. Brief: to the point, no fluff book(let)
2. Logical: Numbers support theory all along
3. Simple: Easy to understand
4. Value: Could save your shirt
Cons:
1. May sound too negative
2. May not consider all factors into forecasting
Pretty interesting read.......2007-05-12
This book and the argument that it lays out is pretty eye-opening. It shows you, through logical argument, how the demographics of our country will impact our coming future economic health. With these baby-boomers greying and falling from their peak spending years, our country will experience a downshift that will really challenge our concept of prosperity... A must read!
Product Description
By the early 90s, a raging bull market was delivering spectacular returns, causing some to believe that a market collapse and subsequent depression would soon appear. As a result of these fears, some exited the capital markets altogether. Thereafter, the Internet took off causing the market bubble to swell, many high-tech stocks with seemingly limitless valuations. Over the course of its 13-year stretch, the market appreciated by over 600 percent, with average annual returns in excess of 18 percent. And we all remember what happened at the start of the new millennium. Even after the deflation of the Internet bubble, cautious investors who pulled out of the market a decade earlier missed out on spectacular returns since then. Many investors who entered the market near its peak suffered devastating losses. But most who remained invested since the early 90s are still much better off today. While this correction revealed the most recent illusions embedded within the economy, it s only a small part of what will be a larger correction in the coming years. Despite the scandals in corporate America and Wall Street, many investors fail to recognize that the post-bubble period is quite different from the Bull Run in the 90s. But today, the capital markets have been realigned with authenticity, and economics now control the investment cycle rather than hype generated by Wall Street. Accordingly, Wall Street and the U.S. Government can only hide the realities of America s decline for so long. Unfortunately, America entered the free trade paradigm as a losing participant from the start. While America remains as the centerpiece for the global economy, it relies on record debt to maintain its status as the world s strongest consumer marketplace. But this cannot last much longer. America s vulnerable role in the new economy threatens to erode the strength of its empire. Already, America has witnessed a gradual disappearance of its core citizens; the middle class. As well, poverty continues to grow while America s wealthiest quintile increases their wealth. These trends have been masked by record levels of credit-based spending and manipulation of economic data. For over two decades, several nations have benefited at the expense of America s job base and living standards. This led to a long period of excessive consumption relative to productivity. When the economic boom from the post-war period began to lose steam in the 60s, consumption began to exceed productivity, as Americans refused to acknowledge a decline in living standards. Up until the 70s, America fueled this consumption-production disparity using the surplus wealth generated during the post-war boom. During the 80s, America s growing consumption was compounded by massive government spending and a devastating oil crisis. Shortly thereafter, the consumer credit industry grew to meet the demands of a nation experiencing large productivity deficits. And today, America is vastly different than the post-war period. Rather than increases in net wealth, America s growth over the past two decades has been fueled by credit spending which has created the illusion of impressive productivity, while serving to mask declining living standards. As a consequence of these changes, America s financial industry is now one of its biggest and most profitable. Today, America is more dependent on foreign nations than anytime in its history. Declining oil reserves and a foreign-funded credit bubble have positioned the fate of this nation in the hands of the world. Soon, America will face the economic burden of 76 million aging boomers. Beginning in 2011, mandatory expenditures for Medicare, Medicaid and Social Security will start to grow rapidly. By 2025, these expenses will have swelled to unthinkable levels.
Customer Reviews:
Excellent presentation of data, some mistakes.......2007-10-11
The author did an excellent job compiling data that is extremely important to understand if one is to thrive in America in the next 2 decades. There will no doubt be sweeping changes to rectify our current account deficit and aging boomer population. The author shed light on the politics behind Greenspan & Co's delay when our country needs to address these problems now. Other topics include: the .com bubble, real estate / credit bubble, free trade, health care, social security, energy crisis, and education.
Yes there are typos and some minor implications that are incorrect, but I don't believe they affect the overall concepts presented. I have also read "The Dollar Crisis" and find both books to be honest presentations of America's current economic state. I would have enjoyed even more information on developing nations, but the title of the book focuses on America, so be it. Overall, I felt this book was an excellent read that is neither conservative nor extreme but simply a presentation of data and well-thought hypothetical analysis of what is to come for America. Only the typos keep it from getting 5 stars.
Riddled with inaccuracies.......2007-07-30
This book manages to cover all major problems faced by the United States in the next 20-30 years - trade deficit, healthcare crisis, education crisis, etc. - and it does so in a fairly comprehensive way, with large numbers of facts and graphs.
The reason why I can't give it more than 3 stars for this achievement is that the number of mistakes it contains (from misspellings to factual errors) is absolutely incredible. It seems that no one (other than the author) so much as read the book before it went to the printing press.
First of all, there are spelling errors. English is not my native language, yet I've been able to notice one spelling error every 20-30 pages. "Notices in-lue of gold" (p.2). "Right to bare arms" (p.25). "America will loose its technology edge" (p.61), and so on. There are factual errors as well. According to the author, Statue of Liberty was erected on Ellis Island (p.27), Berlin Wall fell "a few years" after 1991 (p.10), and Albert Einstein immigrated into the United States in 1940. He thinks that women who give birth after entering the United States illegally are guaranteed citizenship because their newborns become U.S. citizens (p.32) - but he either does not know or fails to mention that they have to wait for their child to turn 18 before they even have a shot at legalization. He frequently claims (or implies) that Chinese goods are cheaper because Chinese government and Chinese companies do not provide healthcare or retirement benefits to their workers (p.41), when in fact they do. All these problems make me wary of any other claims he makes in his book.
There are many interesting graphs and charts in the book, but at least some of them were "cooked up" by the author from third-party data, so they are not always reliable. One rather puzzling chart is located on p. 113. It is a pie-chart labelled "Factors Driving Rising Costs in Healthcare (2001-2002, in $ billions)". However, pieces of the pie are labelled with percentage values and clearly add up to 100% (e.g. "Increased Consumer Demand, 15%"). Author comments, "Someone explain to me the economics of increased consumer demand leading to a 15% increase in healthcare costs in one year". It's clear that he has no idea what's really shown on the chart.
The book is heavy on portrayal of various weaknesses in modern U.S. economy, but rather light on attempts to predict the future. There is almost no discussion about the impact of American crisis on the rest of the world. Author predicts major revaluation of the dollar, but does not provide any macroeconomic analysis of consequences of this revaluation. He seems to think that collapse will not occur at least until 2012, but he's not very clear why he thinks it won't be triggered by deflation of the real estate bubble.
Overall this is an interesting and comprehensive book that's worth reading for anyone who thinks that U.S. economy is doing well, but it's not scientific or reliable enough to be of real value for an investor.
I recommend "Dollar Crisis" as a complementary treatment of the U.S trade deficit / credit bubble problem.
A chilling but accurate expose of how we came to be in such economic peril as a capitalist nation.......2007-06-10
In writing "America's Financial Apocalypse: How To Profit From The Next Great Depression", the author draws upon his many years of experience and expertise as a business, financial, and investment consultant for two of Wall Street's largest investment firms and elsewhere in private financial markets. Strathis provides an impressively analytical explanation as to how the liberals on the left and the conservatives on the right are working in differing ways to destroy America's fiscal and economic well-being; how the federal government in Washington is dominated by corporations; how China has taken total advantage of America's trading policies to our nation's detriment. Readers will be shocked to learn how America is legally bankrupt; how today the 'American Dream' cannot be achieved by most American citizens; the truth concerning the future of Social Security; the inevitable and looming consequences of the present pension plan crisis; and why most Americans working today will not be able to retire as their parent were able to in the past. "America's Financial Apocalypse" also addresses just how the American government manipulates economic data; how the Bush administration is responsible for the worst economic recovery in American financial history; how the real estate bubble could cause the stock and bond markets to collapse; how America's political and economic fate is in the hands of foreign countries; why the American government is really allied to the Saudi Arabians despite the established identities of the 9/11 attack; the looming global oil crisis; Alan Greenspans dismal performance as a Fed Chairman; the plummeting value of the dollar in the international currency markets; and the continuing rise in value of precious metals and oil. After laying out all of these 'inconvenient truths' about America's economic future, Strathis also lays out how the wise and savvy investor can still profit from an inevitable depression that will collapse America's economy in the very near future. A chilling but accurate expose of how we came to be in such economic peril as a capitalist nation, "America's Financial Apocalypse" is especially recommended reading for its clear and methodical explanation of just how the individual investor can survive what will prove to be the 'Next Great Depression'.
This Book Has NO Comparable!.......2007-04-05
Finally, an insightful, detailed, and massive compilation of America's economy and investment markets. This book is HIGHY recommended.
The reviewer below is actually wrong in his simplistic assumption that deflation is the exact opposite of inflation. While deflation tends to cause a relative increase in buying power, this effect is only when deflation is modest and in the early stages. During a more prolonged period, deflation creates a decline in GDP and therefore purchasing power due to the relative effects on currency exchange rates.
I find it amazing that a person could give such a bad review over one statement that he thinks is wrong (when in fact it is not) despite all of the massive data and extensive coverage of material. If a reader chooses to cherry pick from within a massive resource such as this book, they will miss the forest from the trees.
Hold on there...........2007-04-05
After spending $55+ for this book, I started to leaf through it and promptly came across the following comment: "...rising gold prices usually result from a deflationary economy not an inflationary one, as investors seek to minimize the loss in buying power of their currency." So far as I know, a deflationary environment INCREASES the buying power of one's currency, as prices generally decrease during a deflationary episode. In other words, one can buy more loaves of bread per dollar in the bank. Gold is generally a hedge against inflation or fiat currency collapse, not deflation. Given what seems to me a basic error of this nature, I will be skeptical of other information in the book.
Book Description
This frightening book shows how massive consumer debt will trigger the next depression, starting in 2007. With interest rates increasing, savings rates near zero and debt at its maximum, people will be pushed over their debt limit, causing the depression.
Customer Reviews:
A THESIS OF EXCELLENCE ON HOW DEPRESSIONS HAPPEN.......2007-09-09
A Timeless work of Mastery in that it exposes what will be obvious in a few months to years. Based on concrete fact the conclusions support the facts. A Brilliant Writ which should be in every Economics class from High School to College!
A must read from the young entrepenuer to the MBA.
What the Government wishes to avoid is the harsh reality of impending Depression. After a brief dicussion with the author I can state he is a solid concrete thinker. I have injected thoughts of Taxflation (TM) which are sure to happen. I hope for sequele where the author can expound on defensive manuvers. One which I thought of is the "Roth Shuffle" (T.M.) about to take effect where 401 K's, IRAs and Sep Iras can be converted and taxed up front removing the Draconian "Taxflation" T.M. from future years of the Next Great Depression.
This gives more leverage to the author's well done tables of pension and investment income preserved by TIPS. Don Iden MD,FAAD,FABD,Mayo Clinic Alumnus. 4521 S Staples Street Ste 100 Corpus Christi, TX 78411-2603
Dated and not so great.......2007-03-15
This book doesn't really contain anything I didn't already know from books like "Empire of Debt" by Bonner and Wiggin. The latter is a much more well researched and well written book in addition to being more current. I would recommend it instead if you haven't read it. This book at hand had mediocre writing and some arguments that were crankish, especially the ones regarding investing in the stock market. It has many charts but most of them are rather obvious from the text and often unnecessary. Much of the data tables are things anyone could crank out on a spreadsheet program with ease and are embarrassingly simplistic at times. I do not recommend this book.
Debt on top of debt as we survive on a sort of "flywheel" effect. (but when happens when they call in the loans?).......2006-11-21
Being an Engineer myself, I appreciate his approach to analyzing a problem and breaking it down into parts. I think the data he has pulled together is very relevant, and his conclusion make sense. (I only wish they did not)
The world assigns a certain "value" to everything, and the value we have as a country is that of a consumer. Without our consumption, these fast climbing countries would NOT be able to grow their production capacity. (their own value)
The problem is that we are such poor savers that these "growing" producers are actually loaning us the money to buy their goods! in doing so, they are handing us the rope to hang ourselves!
If and when they build up enough wealth and consumption in their own society that they do not need us.....they will cut off our allowance and expect us to pay them back....then what?
This book has a similar view of our problems as another book I read called "Three Billion New Capitalists", though the author of that book was the Counselor to the Secretary of Commerce under Ronald Reagan. So while that book talked with quite a bit of first-hand knowledge, Mr. Brussee lookst at the same situation by analyzing all the data that is available to each of us...except he pulls it all together and makes sense of it.
I think Mr. Brussee has a more negative outlook for the situation, though I don't think either book paints a rosey picture of how our debt and imbalance of trade is doing anything by killing our value/worth to the world.
Both of the above books are worth the price and I suggest you read both books.
Very worthwhile reading.......2006-11-10
The author offers fairly complelling evidence for his prediction - I have actually checked the Personal Savings Rate [...] and found that his prediction in that area is still holding firm. Recent (Nov '06) news reports also agree that the public debt is reaching unsustainable levels. Now the stock market is going even higher (read over-valued) so we have a situation that appears to be just the scenario that the author paints.
The book is fairly dry but unfortunately the bare facts usually are.
Convincing!.......2006-06-12
Based on clear analysis of economic facts, Brussees conclusions are very convincing. Get ready!
Max Otte, Ph.D.
Professor of International Business
Book Description
Applied Austrian economics doesn't get better than this. Murray N. Rothbard's America's Great Depression is a staple of modern economic literature and crucial for understanding a pivotal event in American and world history.
The Mises Institute edition features, along with a new introduction by historian Paul Johnson, top-quality paper and bindings, in line with the standard set by The Scholars Edition of Human Action.
Since it first appeared in 1963, it has been the definitive treatment of the causes of the depression. The book remains canonical today because the debate is still very alive.
Rothbard opens with a theoretical treatment of business cycle theory, showing how an expansive monetary policy generates imbalances between investment and consumption. He proceeds to examine the Fed's policies of the 1920s, demonstrating that it was quite inflationary even if the effects did not show up in the price of goods and services. He showed that the stock market correction was merely one symptom of the investment boom that led inevitably to a bust.
The Great Depression was not a crisis for capitalism but merely an example of the downturn part of the business cycle, which in turn was generated by government intervention in the economy. Had the book appeared in the 1940s, it might have spared the world much grief. Even so, its appearance in 1963 meant that free-market advocates had their first full-scale treatment of this crucial subject. The damage to the intellectual world inflicted by Keynesian- and socialist-style treatments would be limited from that day forward.
Customer Reviews:
Superb!.......2007-06-04
This book explains the Austrian business cycle theory with regard to the great depression. Buy it for it is the only book existing that really does that.
The only way to put an end to the dreadful business cycle is to adopt a system of 100 percent gold money reserve standard and to abolish the Federal Reserve. In such a system fractional reserve banking is also abolished and the money supply, when implemented, will never contract again.
I, unlike most Austrian economists, do believe also that Milton Friedman's and Ben Bernanke suggestions that the great depression could have been avoided if the Federal Reserve had not let the money supply contract during the years 1929-1932 are correct.
I also, unlike most Austrian economists, do believe that inflation targeting of 2% that many central bankers do today, will and already has brought low inflation rates (low decreases of the purchasing power of money) and a relative stability compared to the situation during the 70s. Inflation targeting should be supported if the alternative is unfettered central banks.
The difference, though, between Murray Rothbard and Milton Friedman and Ben Bernanke is that Murray Rothbard was a true Austrian economist who knew the very cause of the business cycles and therefore also knew the final solution for it that is, as mentioned, to adopt a system of 100 percent gold reserve money standard.
The gold standard was flawed but not because of the reason that it was a gold standard but due to the fact that it was not 100 percent gold money reserve standard. Rothbard supported a 100 percent gold money reserve standard and in such a system the money supply could never contract as banks could meet any withdrawals. The massive amount of bank failures would also, therefore, have been avoided. The cause of the great depression was the Federal Reserve System and fractional reserve banking.
It is true that history is full of examples of depressions prevailing long before the establishment of the Federal Reserve System in 1913, but not any depression was so severe and more importantly, the destructive seeds of fractional reserve banking were still prevalent during all those depressions. In other words, if the U.S. had adopted a 100 percent gold reserve money standard before all mentioned depressions, the money supplies would never have contracted.
Nothing could substitute a 100 percent gold reserve money standard.
I will now in a few words explain the Austrian business cycle theory so you can get a hint of what it is all about.
Recessions and The Great Depression were caused by Government Interventions!
In a purely free market (without Government intervention), the rate of interest is determined by people's "willingness to save and invest" (which is called people's time preferences) for future use, as compared to how much they are "willingly to consume now". If people change their "willingness to save" (time preferences) and want to save more, the additional savings will cause the rate of interest to fall (increased supply of savings), and businesses will borrow and invest these additional savings. When the Central Bank (for example The Federal Reserve) increases the money supply and expands bank credit (which Central Banks does everywhere and all the time and always "out of thin air"), it initially lowers the rate of interest and thereby misleads businessmen to act in a manner as if true savings have increased, which in turn leads businessmen to invests those supposed savings in capital goods. New projects that were not profitable before, will now suddenly with this lower interest rate, be profitable. While this process is working, the economy is in an inflationary boom phase (expansion). Capital goods such as stocks, real estate etc, will be more demanded and invested in, and prices of those will rise faster and more intensely in relation to consumption goods. As these supposed savings have worked their way through the economy, prices of goods, services and wages have generally increased to a height which prices for them would have not reached without these supposed savings.
As mentioned, people's "willingness to save and invest" have not changed (people's time preferences have not changed) for it was only the Central Bank that increased, out of thin air, additional "savings". When supposed savings have worked their way through the economy and are received, finally, in increased wages, people still spend their real wages in the same manner as before. They save/ consume in real terms and in same proportion to each other, as before mentioned increase in supposed savings. Because of this, a lack of savings will occur and the rate of interest will rise. Projects that businessmen have invested in and that seemed to be profitable when the rate of interest was lowered are now revealed to be unprofitable. All those investments are revealed to be malinvestments. Businessmen will stop investing in those projects and lay off workers. Prices of capital goods, real estate, stocks etc, will fall sharply and relatively to the fall in prices of consumer goods. The economy is in a depression phase. When those investments are liquidated, the economy is adjusted to people's "willingness to save and invest" and to consume. The economic structure corresponds to the ratio which people want to save and consume. The economy is now healthy again.
Now then, in the 1920s the Federal Reserve, in the US, increased the money supply and bank credit, which in the 30s resulted in The Great Depression. The same story goes with Japan during the 1980s, which during the 90s, resulted in a depression.
In Sweden we had banks lending out heavily during the late 80s, which also, led to a depression in the 90s.
All business cycles are caused by the same phenomenon. Economic crisis can occur because of other factors such as wars, boycotts, oil prices etc, but pure business cycles have in common the same cause.
I have tried, in a very few words and in a easy manner, to explain Ludwig von Mises business cycle theory, which is also called the Austrian theory of the business cycle. All faults are mine. Friedrich August von Hayek elaborated this theory and received in 1974 the Nobel Prize for this.
Björn Lundahl
Göteborg Sweden
Money, Bank Credit, and Economic Cycles
Real economic history.......2007-04-17
I have read a lot of Murray Rothbard lately and can say this book (like all of Rothbard's others) offers an excellent analysis of economic history as it it not taught in business schools or discussed in the media. Always a joy to read. My only critic of the book is Rothbard's habit of over-using dense economic data that sometimes upsets the flow of reading, hence the 4 stars. I suppose I was reading a book on economics though so I know I shouldn't really complain.
Pornography for Economic Geeks.......2006-07-14
I really enjoyed this book, even though it dedicated itself to a rather dry discussion of the Austrian School of Ecenomics's explanations for the causes of the Great Depression. I have to say that I simply did not understand much of Economics until I started reading Rothbard because he argues that much of the Economic theories that I had such a hard time grasping were hard to understand because they were absurd.
It's definitely something that will allow you to argue with your econ teacher for hours.
Outdated Economic Interpretation and Political Activism. More Recent Works are More Accurate.......2006-06-01
This book is outdated by a few decades. Modern quantitative economic studies have considerably advanced our understanding of the Great Depression. Rothbard was famous for rejecting quantitative measurements in favor of philosophy (political activism) which does not compare to later research. For the economics of the Great Depression, I highly recommend the rigorous "Essays on the Great Depression" by Fed Chairman Ben Bernanke or the old (and slightly outdated) "Monetary History of the United States" by Milton Friedman and Anna Jacobson Schwartz" (which helped Friedman win the Nobel Prize in Economics).
Other excellent books on the economics of the Great Depression include the rigorous 1996 "Golden Fetters" by Barry Eichengreen and Harold James. Another groundbreaking book on the economics of the Great Depression was the 1973 "A World in Depression" by Charles Kindleberger that focused on the international aspects (including the gold standard) and presents a sharply different interpretation than Rothbard, but Bernanke's book is even better.
For a reputable historians view of the Great Depression that is critical but of FDR, read David Kennedy's Pulitzer-Prize winning "Freedom From Fear."
Rothbard argues that the Federal Reserve first created inflation with a loose money policy and started the Depression, which was made worse by Hoover's actions to interfere with the natural correcting mechanisms of the economy. Rothbard is correct about the flawed actions by the Federal Reserve, but he does not properly explain the role of the disastrous gold standard in turning the contraction into the truly catastrophic Great Depression. (No surprise since Rothbard was a staunch believer in the gold standard.) The gold standard was a major cause.
Rothbard also does not adequately cover the effects of the massive collapse of the weakly regulated American financial system while Hoover was president and the subsequent contraction of money caused by the sharp drop in lending activity. Over 10,000 banks failed, which was a catastrophe. The banks were THE financial system of the United States at that time. That banking collapse further restricted the money supply when failed banks could not make any loans and solvent banks refused to make loans for fear of losing money.
The American economy would never have recovered from the massive banking collapse and the constrictive gold standard without intervention. The conventional economic thinking of tariffs, balanced budgets, the gold standard, and weakly regulated financial markets was wrong.
The Republican party had long been the party of tarriffs since the Civil War. The Smoot-Hawley tariff was named after two Republicans and pushed by the Republican leadership. Rothbard puts too much blame on Hoover to protect the Republicans. By the way, this is not meant to reflect on the Republicans of today, who generally oppose tariffs.
The Republican leadership back then staunchly supported a sound currency through a strictly balanced budget and the gold standard, along with high tariffs, which we now know was a disaster.
The Depression could not have ended - and did not end - until the disastrous gold standard was eliminated by FDR. The monetary contracton related to the gold standard and the banking collapse, which contracted loans and more money further, were the main causes.
With no disrespect to Rothbard or his views in general, this outdated dinosaur book on the Great Depession is simply outdated.
Solid.......2006-04-24
Murray Rothbard is one of the clearest writers in modern history, and this theories are well based. I loved every minute of this book, certainly a page turner for any economist.
A warning: This is not a pulp culture book. Instead it focuses on economic theory and government policies
Amazon.com
Rampant speculation. Record trading volumes. Assets bought not because of their value but because the buyer believes he can sell them for more in a day or two, or an hour or two. Welcome to the late 1920s. There are obvious and absolute parallels to the great bull market of the late 1990s, writes Galbraith in a new introduction dated 1997. Of course, Galbraith notes, every financial bubble since 1929 has been compared to the Great Crash, which is why this book has never been out of print since it became a bestseller in 1955.
Galbraith writes with great wit and erudition about the perilous actions of investors, and the curious inaction of the government. He notes that the problem wasn't a scarcity of securities to buy and sell; "the ingenuity and zeal with which companies were devised in which securities might be sold was as remarkable as anything." Those words become strikingly relevant in light of revenue-negative start-up companies coming into the market each week in the 1990s, along with fragmented pieces of established companies, like real estate and bottling plants. Of course, the 1920s were different from the 1990s. There was no safety net below citizens, no unemployment insurance or Social Security. And today we don't have the creepy investment trusts--in which shares of companies that held some stocks and bonds were sold for several times the assets' market value. But, boy, are the similarities spooky, particularly the prevailing trend at the time toward corporate mergers and industry consolidations--not to mention all the partially informed people who imagined themselves to be financial geniuses because the shares of stock they bought kept going up. --Lou Schuler
Book Description
Of Galbraith's classic examination of the 1929 financial collapse, the Atlantic Monthly said:"Economic writings are seldom notable for their entertainment value, but this book is. Galbraith's prose has grace and wit, and he distills a good deal of sardonic fun from the whopping errors of the nation's oracles and the wondrous antics of the financial community." Now, with the stock market riding historic highs, the celebrated economist returns with new insights on the legacy of our past and the consequences of blind optimism and power plays within the financial community.
Customer Reviews:
The Hobo Philosopher.......2007-09-14
This is the best book that I have read so far on the 1929 depression. Galbraith is so easy to read. He has a great sense of humor - dry but great. He is logical, sensible and supports his prejudices with numbers and facts. Anyone who is interested in the 1929 depression should have this on their list as required reading.
Financial Reporting at its finest...........2006-10-05
All writers of market histories should read and absorb Galbraith's short and eminently readable history of the start of the depression. Going beyond popular ideas it gets to the heart of the matter and provides sobering lessons to speculators in today's markets. I give this a hearty 5 stars!
Pretty Good.......2006-08-01
This gives a pretty good examination of the economic crash of 1929 and important events in the preceeding decade.
However, since this was originally published in 1954, there was at least one section in the book where the "rhetorical present" of the author's narration was in the 1950s (in its comparison on the 1929 crash with circumstances extant in the 1950s); however, in this same section, it refers to 'our current situation' in the late 1990s, and then later in the same section, it reverts back to the reference to the 1950s as 'our present.'
Also, the tone of the narration occasionally comes off as elitist when it refers to 'others who aren't intelligent enough to understand this discussion' (my paraphrase-I don't have the time/inclination to cite the exact page number).
All-in-all, though I would encourage the reading of this book for an understanding of the events leading up to and surrounding the 1929 crash and the following depression.
A little brief, but a good intro for me to the Crash.......2006-04-30
I'm not a big expert in the politics and economics of the Great Depression. I do have interests in American history, however, and I felt that this would be a good intro to both Galbraith and the nature of the Crash. For me, the day-to-day specifics of the Crash were a little rushed. I didn't get the full-blown treatment of narrative history that would have enabled me to walk away from this text feeling like a newly born expert in the field. Nor did I walk away with a great desire to learn more about the principal players in the Crash. What I did walk away with was helpful, though. This book is a more a sketch of the psychology of the American market than a history of the Crash. Galbraith strives to show that Americans want to be fooled into believing that speculative gains can lead to fulfillment of dreams of wealth. Of greater importance, this book emphasizes how our political and economic culture does not provide adequate incentives for leaders who wish to dampen our enthusiasm. Yes, there are a few villains in this book. But the greater cause for concern is our tendency to blow up balloons that will inevitably burst.
I hope that sound investing and the Great Crash our taught with great care in our schools, and I would consider this either a passable quick intro or a source for supplementary insights into the nature of how our culture can lead to this kind of market failure.
3 stars
--SD
JKG thinks he funny. He's not........2005-08-29
While I did find the book informative and a good supplement to Robert Sobel's The Great Bull Market: Wall Street in the 1920s, Galbraith interjects his sarcastic view of the participants in the 1920s Bull Market way too much. This makes parts of the book extremely difficult to read. While I persevered to the end, I fouynd Sobel's account as informative and much more enjoyable to read.
Book Description
The 1990s will be a time of political, economic, social, and financial upheaval. But even in a time of crisis, prepared individuals can prosper if they know:
-- the secrets of megapolitics -- how technology will revolutionize economic and social institutions
-- which businesses will thrive and which will fail
-- how to build a financial foundation in a time of economic crisis
Customer Reviews:
Foundational Wisdom To Plan Your Future By..........2006-11-19
I first met James in 1993 when he was giving a lecture at Michigan State University. I was well acquainted with him through his newsletter and economic theories that were more than just that. I have the utmost respect for him and have earnestly recommended THIS book to friends who want to build as solid a financial future as they can.
I purchased and studied this book the year it came out - it is foundational wisdom. Imagine...what would you do on the day that note for our trillion dollar deficit comes due? The day the US goes up for grabs? It is not unfathonable. Why not work on a plan for protecting your wealth that CAN span through the ages?
The Great Reckoning dispells any myths. It is strong medicine for those who believe the gravy train will not end and a plan of action for those who know it is already ending. It helps you to better plan your future, your investments and grow your wealth. I only have RAVES to give for this book - and have referred it to any THINKING friend/associate who wants to better prepare themselves, their family and their finances for the future.
Companion books - it took me YEARS to find Blood In The Streets (it was out of print), written by James and Lord Rees Mogg. Buy it! Also Harry Figgie's Bankruptcy 1995 is a must read. You will be surprised by how many of the steps that OTHER countries have taken to prevent capital flight have already been taken by the US. An eye opener.
And...round it off with The Sovereign Individual. It actually takes one tenet from The Great Reckoning and expands upon it a little more. It is not the tome, like the prior 2. However if you are foreign to the idea of you as your own country, well, explore it in that book.
Great Insight and Durable Wisdom.......2006-02-19
It's been more than 20 years since I read the first edition which (at a time when most Americans believed that the USSR was here forever and Reagan's "Evil Empire" comments were irresponsible) accurately forecast the downfall of the Soviet Empire.
The next edition featured a new chapter, Mohammed Replaces Marx and included an extensive discussion of what we now refer to as asymmetrical warfare. The authors correctly saw Muslim fundamentalists filling the vacuum left by decline of the USSR and East European communist governments. In addition, the authors accurately identified the trends of technology as shifting the ability to manage and inflict large scale terror to small nations and stateless groups which would be difficult to track and which had no territory to defend.
Almost 20 years later it is sobering to realize that the proliferation of WMD, especially nuclear weapons, has far exceeded the pace predicted by most government officials years earlier.
Sadly most readers focused instead on the financial predictions which they saw as the most important to their self interests. Thus they were unprepared for either the fall of the Soviet empire or the continued rise of Muslim fundamentalist based terror, either state sponsored as in the cases of Iran, Iraq and others or that sponsored by leaders such as Bin Laden. Too many Americans still fail to realize that we are in a state of war and have never learned or forgotten the lessons of the early days of WWII when action instead of "Peace In Our Time" appeasement, might have prevented the slaughter to tens of millions of people.
Predicting the future is always a dangerous exercise. It is an interesting exercise to pull the book off the shelf years later and thumb through the early editions. As one author noted, the futurists and economists are always wrong and the science fiction writers usually right. Certainly recent history has shown that the author's predictions are not 100% right, but they understand some of the most important forces shaping the world of tomorrow. As a result the value of their thinking puts them at the top of the list.
It is interesting to note that while most books sell on the used market for a fraction of their original cost, the single copy available through Amazon's resellers is listed at 400%+ of the cost new.
The Great Book on the future.......2006-01-14
This book is not politically correct, and never made the talk show circuit in the US.
I first heard of it on Canadian TV 10 years ago.
What has stayed with me for 10 years, is the notion that the time between great depressions [~60 years] is the length of living memory. That memory is to not invest speculatively with borrowed money.
A window to the future.......2004-06-07
Absolutely prescient...
Although written in the late eighties, it rings a resounding bell today.
In my humble opinion, it's a window on the past, present, and future - a condensation of controversial, yet seminal truths.
It is a must read for any person with an inquiring mind. It is required mental luggage.
Read it!
Maybe timely now to read.......2004-02-04
Who would have expected that the Internet and Telecom bubbles would delay the 'great reckoning?' If this book is correct, we have only a short time to get our financial houses in order. This is a long read and yet a good one.
This is for those who wish to conserve and preserve what they have. Recommendations not to eat in certain restaurants and the like....interesting in light of the food poisonings of late.
Our national and international money woes. Economists, historians, business professional and the clergy would benefit from this book. The recommendations were too soon, so they sounded a little early and the 'cry wolf' scenario seems to creep in. Well, look at where we are today. We can rebound, if it is the right time.
Book Description
Do events of the 1930s carry a message for the 1990s? Lessons from the Great Depression provides an integrated view of the depression, covering the experience in Britain, France, Germany, and the United States. It describes the causes of the depression, why it was so widespread and prolonged, and what brought about eventual recovery.
Peter Temin also finds parallels in recent history, in the relentless deflationary course followed by the U.S. Federal Reserve Board and the British government in the early 1980s, and in the dogged adherence by the Reagan administration to policies generated by a discredited economic theory - supply-side economics.
Peter Temin is Professor of Economics at MIT.
Customer Reviews:
A Compelling Study of the Great Depression: The Gold Standard is Largely to Blame.......2007-07-12
Peter Temin rigorously explains the economics of the Great Depression and the lessons to be learned from the economics of the Great Depression. He explains convincingly that the gold standard was mainly to blame for the Great Depression. It was a Federal Reserve contraction of the money supply that began a recession, and then it was the gold standard that turned it into a catastrophic depression. To be specific, the gold standard imposed a severe tightening of the gold standard, and stubborn efforts by political leaders in several countries to maintain the gold standard strangled the economy further. In America, it was the Republican Party that had long supported the gold standard. It was reestablished when Calvin Coolidge was president.
The countries that left the gold standard quickly, such as Great Britain, recovered the soonest from the Great Depression.
The book praises FDR for abondoning the gold standard. Note that this is an economic history and not a political or social history. This book is for economists or general readers with a strong interest in the period. The analysis fits nicely with monetary economics but used standard equations relating to Keynesian economics.
Peter Temin established himself as one of the greatest economists of the Great Depression. That was his speciality.
Also consider "Essays on the Great Depression" by Ben Bernanke, Chairman of the Federal Reserve and America's top economist.
Taking the long view.......2001-06-02
Temin's account of the Great Depression differs in almost every from the standard texts. Austrian business cycles, monetary tightness etc. are all passed over as the author goes for the big picture....the long view of political history in Europe.
The Great Depression was the direct result, he says, of the breakdown of peace in the first decade of the twentieth century. The international spirit of co-operation that had existed throughout most of the second half of the 19th century evaporated with the European struggles for empire. So when crisis loomed in the late 1920s all the lifeboats were full of holes. Franco-German rivallry, the demise of the British Empire and isolationism in the United States all produced paralysis when leadership was needed most.
When leadership finally did arrive, it came in the form of social democracy and labour market rigidities which put a floor under the markets but extended the depression in ways not dissimilar to Japan in the 1990s.
If you like your economics filled with Keynes and history this is for you. If Friedman or Schumpeter is more to your taste, then this is worth reading just to see what the other side thinks.
Great stuff.
Book Description
“Admirers of FDR credit his New Deal with restoring the American economy after the disastrous contraction of 1929—33. Truth to tell–as Powell demonstrates without a shadow of a doubt–the New Deal hampered recovery from the contraction, prolonged and added to unemployment, and set the stage for ever more intrusive and costly government. Powell’s analysis is thoroughly documented, relying on an impressive variety of popular and academic literature both contemporary and historical.”
–
Milton Friedman, Nobel Laureate, Hoover Institution
“There is a critical and often forgotten difference between disaster and tragedy. Disasters happen to us all, no matter what we do. Tragedies are brought upon ourselves by hubris. The Depression of the 1930s would have been a brief disaster if it hadn’t been for the national tragedy of the New Deal. Jim Powell has proven this.”
–
P.J. O’Rourke, author of Parliament of Whores and Eat the Rich
“The material laid out in this book desperately needs to be available to a much wider audience than the ranks of professional economists and economic historians, if policy confusion similar to the New Deal is to be avoided in the future.”
–
James M. Buchanan, Nobel Laureate, George Mason University
“I found Jim Powell’s book fascinating. I think he has written an important story, one that definitely needs telling.”
–
Thomas Fleming, author of The New Dealers’ War
“Jim Powell is one tough-minded historian, willing to let the chips fall where they may. That’s a rare quality these days, hence more valuable than ever. He lets the history do the talking.”
–David Landes, Professor of History Emeritus, Harvard University
“Jim Powell draws together voluminous economic research on the effects of all of Roosevelt’s major policies. Along the way, Powell gives fascinating thumbnail sketches of the major players. The result is a devastating indictment, compellingly told. Those who think that government intervention helped get the U.S. economy out of the depression should read this book.”
–
David R. Henderson, editor of The Fortune Encyclopedia of Economics and author of The Joy of Freedom
The Great Depression and the New Deal. For generations, the collective American consciousness has believed that the former ruined the country and the latter saved it. Endless praise has been heaped upon President Franklin Delano Roosevelt for masterfully reining in the Depression’s destructive effects and propping up the
country on his New Deal platform. In fact, FDR has achieved mythical status in American history and is considered to be, along with Washington, Jefferson, and Lincoln, one of the greatest presidents of all time. But would the Great Depression have been so catastrophic had the New Deal never been implemented?
In
FDR’s Folly, historian Jim Powell argues that it was in fact the New Deal itself, with its shortsighted programs, that deepened the Great Depression, swelled the federal government, and prevented the country from turning around quickly. You’ll discover in alarming detail how FDR’s federal programs hurt America more than helped it, with effects we still feel today, including:
• How Social Security actually increased unemployment
• How higher taxes undermined good businesses
• How new labor laws threw people out of work
• And much more
This groundbreaking book pulls back the shroud of awe and the cloak of time enveloping FDR to prove convincingly how flawed his economic policies actually were, despite his good intentions and the astounding intellect of his circle of advisers. In today’s turbulent domestic and global environment, eerily similar to that of the 1930s, it’s more important than ever before to uncover and understand the truth of our history, lest we be doomed to repeat it.
Customer Reviews:
An unique read.......2007-07-08
This is a good book for everyone. It gives a perspective that you don't see often in history books about President Franklin D. Roosevelt. Since FDR was a great president, it's easy to write a pro-FDR history book but this book points out the flaws in FDR's policies and how the New Deal did not actually end the Great Depression. Personally, I am a fan of FDR and his policies but he was not perfect, nor were all his programs perfect. I highly recommend this book for anyone interested in reading more about FDR and getting many different perspectives.
Excellent research tool .......2007-06-09
I have researched many sources to learn and document the real facts of FDR's influence on the Great Depression's recovery. This book is the best source yet. It discloses and explains FDR's socialist policies that delayed the recovery and that gave socialism it's stronghold in the USA. Great source to use to discuss with those that think FDR is a saint and who are class warfare believers.
One of the Worst We've Ever Had.......2007-06-09
It is a common trait of human nature to judge people and events within the limited historical scope of their own lifetimes. We tend to think of things in absolutes (e.g. - "It's never been this bad" or "he's the worst president ever,") because we have no historical context in which to properly judge the actual significance of a person or an event that we personally experience. As a result, we tend to take on faith the judgment of "experts" about those people and events that lie outside of our own personal experience. Unless we actually take the time and effort to investigate an historical person or event for ourselves, we will always tend to agree with the "general consensus."
Jim Powell's "FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression" is one of those historical sources that will change your opinion from that of the "general consensus" that FDR is one of the top five American presidents to something appropriately lower. In this rigorously cited work, Powell presents evidence that FDR's New Deal, far from helping the country recover from the Great Depression, actually extended and exacerbated it.
Powell begins by introducing the FDR's main actors who collectively constructed the New Deal. Almost to a man, they were ambitious, arrogant Ivy Leaguers who thought they knew better how to control an economy than the millions of citizens who daily executed informed economic choices in a free market. As Powell explains, "some New Dealers were outright socialists" who rejected free market economics. Indeed, Chamber of Commerce president, Henry Harriman, typified this attitude when he declared that "laissez-faire must be replaced by a philosophy of planned national economy." Powell also relates how "many people in FDR's administration especially admired Italian fascism."
Powell then addresses several aspects of the New Deal with chapter titles that are questions such as "Why Did FDR Seize Everybody's Gold?," "Why Did the New Dealers Destroy All That Food When People Were Hungry?" and "How Did New Deal Labor Laws Throw People Out of Work?" Then, with sound economic analysis, backed by facts and citations, Powell meticulously describes how New Deal policies made things worse instead of better.
New Deal policies consisted of higher taxes, minimum wages, price controls, production limits and myriad other things that were exactly the wrong things to do to bring about economic recovery. Many of these policies were so-called "experiments," but as Powell writes, "Such policies were `experiments' only to the degree that New Dealers were ignorant about what had been tried and failed before." New Deal policies also assaulted individual liberty and economic freedom. Indeed, in April of 1934, Jacob Maged "was jailed for three months and fined for charging 35 cents to press a suit, rather than the 40 cents mandated by the NRA dry cleaning code." Powell summarizes, "Wherever there is dictatorial power over an economy, wherever economic liberty is denied, people are sure to be suffering agonies of the damned. New Dealers assumed that individual rights, private property, and economic liberty were obstacles to recovery, but they are essential."
Particularly disturbing during this time was FDR's encroachment on constitutional freedoms. Many today accuse George W. Bush of being a dictator, but Bush can't hold a candle to the imperial presidency of FDR. As Powell explains, "...FDR was impatient with American democracy, and he issued an extraordinary number of executive orders - 3728 altogether - which is more than all the executive orders issued by his successors Harry Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard M. Nixon, Gerald R. Ford, Jimmy Carter, Ronald Reagan, George H. W. Bush and Bill Clinton combined." Many of these had the power of law behind them, effectively circumventing the legislature. FDR's assault on constitutional liberty was so severe, that in a November 1941 "Fortune" magazine poll "93 percent of employers said they expected their property rights to be undermined and also anticipated the possibility of a dictatorship."
Powell's book conclusively proves that the New Deal was an economic and civil rights disaster whose effects are still being felt today. FDR and his administration, arrogant in their ignorance, committed the cardinal sin of thinking they knew better than all those who had gone before. The sheer destructiveness of FDR's assault on freedom and his economic incompetence disqualifies him from the top five of "general consensus" and rightly places him near the bottom of American presidents.
Sets the Record Straight.......2007-02-16
What ended the Great Depression was not the New Deal, but instead World War II. However, both liberals and neoconservatives alike have taken as gospel the idea that massive governmental intervention are good for the economy.
As Jim Powell in FDR's Folly makes clear, the New Deal was an unmitigated disaster in its own right. The agricultural policy was a total bust. The unprecedented tax rates drained investment capital out of the economy. The New Deal programs were basically boondoggles with the much ballyhooed Tennessee Valley Authority being rife with corruption.
Jim Powell's FDR's Folly should be required reading in American classrooms.
Not all revisionism is wrong.........2007-01-11
After reading most of these reviews, I feel hard put to place anything new on this book here. The subject matter is important and seems to be finally getting the attention it needs. FDR's false legacy of caring and supreme competence is finally getting the scrutinty needed to be laid to rest. The Great Depression would have simply been another temporary blip like the other half dozen or so in American history EXCEPT the worshippers of government had gotten the reins of power.
Mr.Powell takes each one of the various programs of FDRs and tears them apart. Copiously footnoted, the details are gathered here and show the failure of the entire government intervention for the period. And as others noted, Mr. Hoover gets laid to waste and deservedly so for his part in the whole mess.
Economists have long had a problem with the FDR savior legend, historians now seem to finally be joining in to give him a long overdue come uppenace. I will have my teaching degree next year and plan on letting my students know the true story of FDR's mismanagement-we'll see how long I'm allowed to teach that however!
Book Description
Few periods in history compare to the Great Depression. Stock market crashes, bread lines, bank runs, and wild currency speculation were worldwide phenomena--all occurring with war looming in the background. This period has provided economists with a marvelous laboratory for studying the links between economic policies and institutions and economic performance. Here, Ben Bernanke has gathered together his essays on why the Great Depression was so devastating.
This broad view shows us that while the Great Depression was an unparalleled disaster, some economies pulled up faster than others, and some made an opportunity out of it. By comparing and contrasting the economic strategies and statistics of the world's nations as they struggled to survive economically, the fundamental lessons of macroeconomics stand out in bold relief against a background of immense human suffering. The essays in this volume present a uniquely coherent view of the economic causes and worldwide propagation of the depression.
Customer Reviews:
Very Simple Steps.......2007-09-06
Anyone can spin a story about anything using the various mumbo-jumbo parts of mainstream economics. Bernanke here has decided to ravage the gold standard. Suffice to say, it is extremely tedious, banal, and antithetical to common sense.
Ludwig Von Mises predicted the Great Depression in 1919.
Here's two easy steps to understand the real cause of the crash.
1. Read Murray Rothbard's America's Great Depression
2. Google "Benjamin Strong", the first Federal Reserve chairman who served until his death in 1928. Bernanke does not mention Strong at all. You will find almost all the answers in Strong's tenure. For the severity and length of the recession, please read Jim Powell's "FDR's Folly".
Bernanke and his coauthors follows Friedman but not Smith or Keynes.......2007-08-13
Bernanke is ,unfortunately,ignorant of the preventive medicine approach to Bubbles and Depressions first postulated by Adam Smith in 1776 in the Wealth of Nations and then reapplied by J M Keynes with the additional analytic conclusion emphasizing the importance of clearly differentiating between tolerable security (risk)and uncertainty.
Smith made it straightforward and easy. There are four categories of borrower to whom commercial and Wall Street investment banks can make loans available to-the prodigals,projectors,imprudent risk takers,and the sober people.The task of money and banking policy is to prevent loans from beng made to the prodigals,projectors(Keynes's speculators of chapter 12 of the GT,1936),and imprudent risk takers(dealt with by Keynes in chapter 11 with his lender's risk versus borrower's risk distintion).Economists don't seem to get it.Neither do Fed chairmen.Allow the capital markets to be dominated by leveraged buyouts and hedge fund speculators guarantees that the inevitable bubble will be created.The only question that remains is whether or nor some type of bailout will prevent a panic and crash.This type of money and banking policy allows the problems to be created and then attempts to prevent the problem from mushrooming into a serious recession or depression.
Smith's advise to Bernanke and his coauthors would be to, first, fix the rate of interest permanently a little bit above the prime rate and then maintain it at that level for the long run and ,second,only permit loans to be made to the sober people.Otherwise,periodic financial crises will occur. It's as simple as that.None of the essays deal with the fundamental goal of banking policy-Prevent the problem from arising in the first place.Of course,if you believe in the Efficient Market Hypothesis fairy tale, where all price changes in financial markets are normally distrbuted,as does Bernanke,no problem is supposed to occur.But they do.
Don't Believe the Hype! A commodity standard is the solution, not the problem!.......2007-08-09
The Federal Reserve made the Great Depression almost inevitable when it inflated the money supply. The Fed inflated the money supply before it contracted it. With a true, pure gold standard, this initial inflation never would have been possible. Everything else about the contraction, corrections, tariffs, etc. would have been a moot point, and we wouldn't have had a great depression. Serious recession with some of the other bad decisions, maybe, great depression, nope.
To claim that the gold standard caused the great depression is shady, lawyerly logic indeed--no matter how many reams of mathematical data you distort to fuzzy the matter, it just doesn't jibe.
It all began with rampant inflation (increasing the money supply, ie printing or creating more paper money without a corresponding increase in gold, silver, or real goods and services. As more goods and services aren't created at the same instant new money springs into existence, prices should rise in proportion to the newly created money, but most people don't realize this is what is happening. They mistake the extra money for wealth (additional goods and services, or shifts in demand), and make illusiory assumptions/decisions that are later corrected.) It all began with rampant inflation by the Fed--the primary occurence a gold standard prevents. Period.
Most everything else is just goobley-gook by the rich to keep the poor duped and ignorant, and by corrupt social engineers who fancy themselves do-gooders. There are problems with gold standards, especially when some countries have honest gold standards, others countries don't, and their currencies and goods are exchanged freely, BUT these are far outweighed by the problems and wealth redistribution to the rich created by fiat money systems. Period.
It serves the ultra-wealthy, and proponents of big government and socialism and collectivism, to dupe people about currency reform. Saying the gold standard caused the great depression is like saying raw vegetables cause heart attacks, or breathing clean mountain air causes lung cancer. To claim that the very thing which would have prevented a great depression is the cause is extremely audacious, and supremely sinister, but hardly surprising.
When you are on a gold standard, and you inflate the money supply (ie, create more dollars out of thin air, or simply print more), of course there is a run on gold. This is what the gold standard is supposed to do! The gold standard will prevent governments from printing additional money, by calling their bluff (ie, making them honor their commitment to exchange each dollar for a fixed weight (not monetary value, but weight) of gold). If the government keeps printing, people keep redeeming money, they run out of gold, and the scam is up. In an honest gold standard, this isn't attempted, people know the gold is there, and they simply use the money for its intended purpose--to store value and trade.
When money isn't tied to gold or a commodity, the government prints more, spends it, and each citizen holding money is taxed because their money is reduced in value so that the new money has value. No tax collectors are needed, but this is a bad way to tax because altering the money supply distorts the price signal that is the backbone of the marketplace. The crafty can speculate against these distortians, picking the pockets of honest working class people who, without realizing it, are paying a hidden currency tax.
If banks hadn't commited fraud by circulating money not backed by assets, they wouldn't have failed. The massive banking collapse was fraud being realized, and the accounts being cleared. It sucks that so many middle class people took it on the chin, but the lesson is that we need honest banking in which more money cannot be created out of thin air, and contracts are honored, and liabilities on the ledger cannot be magically converted to assets, and pyramided ad fraudem. One more time: If the Fed hadn't inflated the money suppy, there wouldn't have been a depression. If there had been a pure gold standard, the Fed wouldn't have been able to balloon the money supply. Period. To simply begin halfway into the story by starting with the contraction is unfathomably dishonest.
Countries can get screwed just like people in this system, especially those countries with honest money who can't print it out of thin air like non-gold-standard countries. If they aren't aware how much new money is printed, their imports/exports can suffer, and they end up conducting transactions for depreciating paper currency that ultimately screws them by declining in value faster than they realized, fall prey to gold speculation or price instability, etc. But placing primary blame on the gold standard is absurd. Its like saying the guy that left his house unlocked is guilty of felony robbery when all his possessions are stolen. The thief is the problem, not the gullible or un-streetsmart homeowner -- though he should certainly be wiser and limit his interactions with criminals (fiaters). The corrupt money was the problem, not the honest money. THe fiat system of currency printing was the problem, not the gold standard.
"Undercapitalized". What a cozy euphamism. You mean a bank that fraudulently pryamided assets, misrepresenting time deposits as demand deposits?
In an honest gold standard, a disastrous contraction of the money supply is not a worry, as it is never inflated disastrously, so a house of cards is never created in the first place.
Roosevelt saved the banking industry. What a hero! In English, he perpetuated the fraud, and shifted the cost for all the banks' fraudulent contracts it couldn't honor immediately, but should have been forced to long term, to the people. Then he allowed the fraud to continue. Robin Hood in reverse. What a role model!
All the rest is expected. After the correction, inflation was much more modest, meaning intervention in the marketplace via distorted price signals was much more modest, meaning citizens not machinated by corrupt currency did what they will usually do--busted butt and created prosperity.
Many rigorous economic studies churn numbers, and then try to assign causes or meanings to those numbers, without truly assessing/considering what the numbers mean in terms of actual human behaviour, especially in terms of fundamental causalities that lead to the data. This is one of Rothbard's main problems with conventional economics.
Read Rothbard's book for a real explanation of the Great Depression much more elegant and less scathing than mine. As long as propaganda like this masquerades as truth, the common man's freedom and standard of living will continue to decline.
At least he start out right.......2006-04-24
Overall Bernanke does a good job at looking at different theories, but his theories on the dangers of deflation have been refuted by many authors. It is too bad that this theory clouds his vision, or else his treatment of the depression would have a lot more authority.
For the economist, I would highly recommend "America's Great Depression" by Murray N. Rothbard. He is by far the most thorough in his treatment of the period, delivering the most compete and well founded theory for the cause of the Great Depression, too bad Bernanke hasn't read it.
Rigorous and Authoritative. The Best Book on Great Depression Economics.......2006-03-23
Bernanke rigorously explains the economics of the Great Depression - the holy grail of economics. For a long time there were different theories as to what caused the Depression, but recent rigorous economic studies, especially from an international perspective, have provided massive data explaining what happened.
The Federal Reserve caused the recession when it constricted the money supply again and again, in part due to the constrictive gold standard. The gold standard caused a run on the gold supply, followed by further Fed tightening of the money supply to defend the currency, leading to widespread bank panics, which constricted the money supply further due to the sharp drop in bank loans and the loss of consumer confidence in the financial services industry, which was hardly regulated.
Bernanke first shows that the countries that abandoned the gold standard the soonest, such as Britain, were the ones that recovered the quickest. The countries that clung to the gold standard the longest, such as France, were the ones that suffered the longest. The countries that were not on the gold standard - perhaps using the silver standard - avoided the Great Depression!
The economic crisis was made worse by the massive banking collapse. Thousands of undercapitalized banks went insolvent, and thousands of people lost their savings. Bank panics swept across the country. Other banks refused to make new loans for fear of loan default. The banking crisis resulted in a further contraction of the money supply. The banking industry completely collapsed at the end of Hoover's presidency.
Sticky wages also contributed to the depression, although not as much as Keynesians think, according to Bernanke. Hoover and FDR may have made this worse by trying to maintain and increase the spending power of workers, although the counter argument is that this increased worker spending power increased spending and demand. The book examines many other factors too numerous to list in this review. This is the best book on the economics of the Great Depression.
Once taking office in 1933, Franklin Roosevelt quickly removed America from the disastrous gold standard and saved the collapsed banking industry. Recovery followed. According to Bernanke, industrial output in America grew 5% per quarter from 1933-37. Per quarter. Real wages grew substantially. Productivity grew substantially. Unemployment dropped.
Bernanke says that Franklin Roosevelt's New Deal era of 1933-37 achieved strong economic growth by several different measurements. FDR reversed the contraction in 1933, so technically the depression ended in 1933. GDP grew over 50% in four years. This period of high growth was interrupted by a severe recession in 1937-38, which was followed by more high growth. According to Bernanke, "Quarterly growth rates for manufacturing employment, hours, and input in 1938-40 were 1.8, 2.8, and 4.9 percent, respectively."
I used a pencil to highlight the conclusions in this book. A massive amount of rigorous economic data is included, so only an economist will understand everything, but anyone can understand the conclusions. Bernanke inserts summary sentences so anyone can understand the conclusions. Highest recommendation.
Customer Reviews:
The Madness of Crowds.......2007-09-20
This book is one of the best I have read on the Bull Market. He takes Galbraith as his foil and expresses his profound discontent with Galbraith's unilinear formulation of govt. inactivity and outright stupidity. As Sobel argues, the The Great Bull Market was a product of a particular world view that grew up in the easy-money days of the 1920s. Parts of this world view were:
1) A notion that everyone should and could get rich
2) that hard work and risk as a pre-requisite for gaining wealth was a thing of the past -- indeed, inside the large brokerages it was loudly spoken that such older ethos' were not part of modern Wall Street.
3) supplanting risk and hard work was an ethos of power elites that scrathed each other's back. And that was assumed to be part of the normal healthy business processes.
4) There was a general overall lack of attention to detail and people working through the risks of financial euphoria.
In addition, unlike Galbraith, Sobel says that the powers that be actually made good choices, that the falls were really not as bad as they were made to look at the time.
It is a well written and cogent analysis of this exciting time.
Into the heads of the manic crowd.......2002-10-12
While many stock market books have lots to say about parallels in financial history, this one is very different. The Great Bull Market is not really about the stock market at all. It's about the factors that led to the market mania of the late 1920s. Changes in social patterns, dramatic changes in the economy and living standards and a liberalisation of financial laws all led to the belief that life had really changed for everyone for the better.
Of course, there are wider things to consider than the rather simplistic and sometimes left-wing views put forward here. Even so, The Great Bull Market does take you away from the now perfunctory trawl through margin statistics and takes you into the heads of those who were actually parting with cash. For that it's a great read.
A ride on the wild bull.......2000-07-25
The market could only go up. Margin requirements were minimal. Investment in equities, seemingly ANY equities was a risk-less, rock solid path to fortune. Why buy one of the new electronic phonographs, or a refrigerator, on "time" (credit) when for the same amount of money, one could buy equities on margin, gain immense leverage, and be "guaranteed" to make the money back many times over, and be able to buy many more luxuries.
According to Mr. Sobel, this was, in a nutshell, the mentality of the average investor. Investment houses and financial institutions fueled the fire by making margin cheap and easy. Ultimately, stock prices were held up by nothing. Tremors of instability began to ripple through the market as the impending crash approached, often dismissed as buying opportunities. Ultimately, reality set in, and the unthinkable happened.
Are things different today? Yes and No. More safeguards would seem to be in place, however valuations of today make those of the 20's look miniscule. While a direct comparison is difficult to make between the period covered in the book, and the market of 2000, there are lessons to be learned. "The Great Bull Market" provides a fascinating account of the crash and the events that led up to it. A must read for anyone feeling a little jittery about the climate on Wall Street today!
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General
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| Books
Empire of Debt: The Rise of an Epic Financial Crisis
Crash Proof: How to Profit From the Coming Economic Collapse (Lynn Sonberg Books)
The Coming Collapse of the Dollar and How to Profit from It: Make a Fortune by Investing in Gold and Other Hard Assets
The Second Great Depression
The Demise of the Dollar... and Why It's Great For Your Investments
