Tuesday, September 23, 2008

DOES 'CHANGE' OFFER 'HOPE'

If we are experiencing depression era problems in the markets , should we adopt the same depression era policies that exacerbated it?

From Thomas Sowell:

"a recycling of the kinds of policies and rhetoric of the New Deal that prolonged the Great Depression of the 1930s far beyond the duration of any depression before or since."


From: Federal Reserve Bank of Minneapolis Quarterly Review
Winter 1999, vol. 23, no. 1, pp. 25–31 ( attached)
"The capitalistic economy is stable, and absent some change in technology or the rules of the economic game, the economy converges to a constant growth path with the standard of living doubling every 40 years. In the 1930s, there was an important
change in the rules of the economic game. This change lowered the steady-state market hours. The Keynesians had it all wrong. In the Great Depression, employment was not low because investment was low. Employment and investment were low because labor market institutions and industrial policies changed in a way that lowered normal employment."

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