In the 1930s, Franklin Roosevelt, and a sympathetic Congress, passed laws that kept the Depression going which, after blaming the rich for not investing, he used to justify more laws that kept it going still longer. All that was following what Hoover did. Am I the only one who worries that we could wind up making the same mistakes?
The classic understanding of the Depression is that it was exacerbated from Recession to Depression for three reasons:
1. The Federal Reserve not backstopping a major financial freeze (they kept waiting until it was a "real crisis")
2. Hawley-Smoot tariff hike.
3. Tax hikes in a futile effort to balance the budget in bad times.
The Fed has avoided mistake number one. I fear both candidates, plus the new Congress, will do two and three.
Arthur Schlessinger once said, "There seems no inherent obstacle to the gradualadvance of socialism in the United States through aseries of New Deals.”
Each step represents a further weakening of our liberty, and ain’t good for the economy either.
So we need to hope for a World War to bail the economy out of this mess?
I think you've summarized the causes of the depression fairly well but I would accentuate the role of the Federal Reserve. According to Friedman's "monetary History"(abbr) the federal reserve took the position that their job was to "keep the dollar sound." Consequently they proceeded to drop the money supply by one third. You can imagine what doing that in today's economy would do. They kept it down throughout the depression loosening it up significantly only when Roosevelt was arming for WW2 and the depression ended.Voila!! The economy recovered
Also,it continually amazes me how liberals (especially in the media)can reverse the blame for things that their policies cause. In the depression it was evil bankers foreclosing on farmers who couldn't make payments when it was the Federal Reserve decreed that they wouldn't loan reserves on "nonperforming assets" such as farm loans that weren't being paid but they would if the bank foreclosed and held the asset (farm). This forced the banker to be the bad guy or risk losing all his depositors money.
But the myth of the evil banker still resounds in the media.
The modern day equivalent is the complete refusal by the media to even mention the government requiring banks and investment firms to hold ever increasing billions of sub-prime mortgage while undermining the supposed backstop of Fannie and Freddie and pulling over 1/2 billion out in bonuses for political pals.
Tragic, so tragic