Monday, August 09, 2004

What Was the Cause of the Great Depression?

I finally got through the Great Depression chapter in Friedman's "Free to Choose." Friedman argues that the Federal Reserve was the cause of the Great Depression, at least the cause for its severity. He argues that the Federal Reserve decreased money supply when they should have been increasing. Furthermore, they blamed their errors on capitalism run amuck.

One important note. A major bank was allowed to fail because it was Jewish owned and many others in the banking community were anti-Semites. This caused a lot of ripples obviously.

In economic circles, there's still a debate as to where exactly in the hierarchy the Fed's actions fell in terms of causing/protracting the Depression, but it's fairly well accepted that they were pretty high up there.

It is actually shocking how little major public financial institutions did before the Depression, and frankly even before Black Monday in the '80s, to avoid the wheels coming off the economy.

From what I've read of Friedman, he basicly thinks that the Fed (prior to Greenspan) was the cause of a lot of problems since then too. To the Fed's (of that era) credit, they were pretty knew at what they were doing and didn't have the benefit of hindsight.

The cause and subsequent crash of that Jewish bank is truly sad.
Well, that anti-Semitism, or any bigotry as vitriolic as that against the Jews is sad. During World War II, after America became involved, poll after poll showed that Jews in this country were still less popular than the Japanese, Italians, Germans and--I kid you not--Adolf Hitler. A majority of the Americans believed, even years after the war, that the Jews were the sole instigators of the World War II (this was the case even after the bombing of Pearl Harbor).

Truth be told, I understand bigotry. If people were really true to themselves, I think they'd have to admit that they had at least a rudimentary understanding of the roots of bigotry. I will never understand how even a seed of bigotry can grow into the acute, venomous outrage that, for example, anti-Semitism has grown into.

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