Sarajevo Is The Fulcrum Of Modern History (Part 2): The Great War’s Aftermath Of Keynesianism, Monetary Central Planning And The Permanent Warfare State

Sunday, June 29, 2014
By Paul Martin

by David Stockman
Davidstockmanscontracorner.com
June 29, 2014

The Mythical Banking Crisis and the Failure of the New Deal

The Great Depression thus did not represent the failure of capitalism or some inherent suicidal tendency of the free market to plunge into cyclical depression—absent the constant ministrations of the state through monetary, fiscal, tax and regulatory interventions. Instead, the Great Depression was a unique historical occurrence—the delayed consequence of the monumental folly of the Great War, abetted by the financial deformations spawned by modern central banking.

But ironically, the “failure of capitalism” explanation of the Great Depression is exactly what enabled the Warfare State to thrive and dominate the rest of the 20th century because it gave birth to what have become its twin handmaidens—-Keynesian economics and monetary central planning. Together, these two doctrines eroded and eventually destroyed the great policy barrier—-that is, the old-time religion of balanced budgets— that had kept America a relatively peaceful Republic until 1914.

To be sure, under Mellon’s tutelage, Harding, Coolidge and Hoover strove mightily, and on paper successfully, to restore the pre-1914 status quo ante on the fiscal front. But it was a pyrrhic victory—since Mellon’s surpluses rested on an artificially booming, bubbling economy that was destined to hit the wall.

The Hoover Recovery of 1932

The Rest…HERE

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