The Obama Administration and Democrats in Congress are acting as if this recession is another "Great Depression." Nothing could be further from the truth.
Two triggers started the Great Depression:
congressional passage of the protectionist Smoot-Hawley tariff bill (producing overseas retaliation and a contraction of international trade) and the Federal Reserve's squeezing of the money supply.
Clark S. Judge, managing director of the White House Writers Group Inc. in Washington and chairman of Pacific Research Institute in San Francisco writes:
Milton Friedman had a rule: Increases or decreases in the money supply take six to nine months to alter economic output and as much as two years to move prices. As the Senate takes up the president's stimulus package, the administration argues that, to avert another Great Depression, it is better to do too much than too little. But a Friedmanesque look at today and the 1930s tells a different story: The analogy with the Depression is wrong; the current downturn may be all but over; and doing too much, not too little, is the real danger.
Unlike U.S. policy in the '30s, the 2008 Treasury and the Federal Reserve attacked the problem at its source. The Fed added more than $1.1 trillion in new facilities to its balance sheet. Each facility was designed to restart the markets for one or another of the troubled classes of assets, strengthening the balance sheets of institutions holding those assets. To supplement these efforts and to augment bank reserves directly through preferred stock purchases, the Treasury received authority to commit up to $1.5 trillion—about a quarter of which had been deployed when the new administration took office. Nonbanks acting as banks were brought under the banking laws where legal authority existed to shore them up too. Currency, bank reserves, assets underpinning bank reserves: Every component of base money was addressed. The question now is, how much is enough—or too much?
Read the article and find out!
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