Deeper than the Great Crash of 1929

[darkbeaver]

Why the Present Depression Will Be Deeper than the Great Crash of 1929 (June 4, 2009)


Galbraith's conclusions about the causes of the Great Depression point to why the current Depression will be deeper.


Continuing our analysis of The Great Crash of 1929

by John Kenneth Galbraith: by understanding the causes of the Great Depression as elucidated by Galbraith, we can observe the differences between the present and 1929. These reveal why today's Depression will be even deeper than the 1929-1941 one and why today's policy "fixes" as pursued by that great student of Depression, Ben Bernanke, are fighting the last war--a Keynesian stimulus strategy doomed to catastrophic failure. I hesitate to call this topic "important" because such announcements instantly cut my readership in half. Thus I am inclined to call this topic "edgy," "explosive" and "contrarian," all of which sound more interesting than "important" (yawn).
Galbraith begins his exploration of causes by noting that "economics does not allow final answers on these matters. But, as usual, something can be said."
First, he demolishes the notion that abundant credit caused a speculative orgy.

The long-accepted explanation that credit was easy and so people were impelled to borrow money to buy common stocks on margin is obviously nonsense. (page 169) On numerous occasions before and since credit has been easy, and there has been no speculation whatever. Furthermore, much of the 1928 and 1929 speculation occured on money borrowed at interest rates which would have been considered especially astringent. Far more important that rate of interest and supply of the credit is the mood. Speculation on a large scale requires a pervasive sense of confidence and optimism and conviction that ordinary people were meant to be rich. (emphasis added, CHS)
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Next, Galbraith looks to the wellspring of credit which has been virtually nonexistent in
charles hugh smith-Why the Present Depression Will Be Deeper than the Great Crash of 1929