Thursday, December 8, 2016

One By One We Are Repeating All the Mistakes of the Great Depression

Scott Sumner writes:
I spent much of my life studying the intellectual climate during the 1930s, including reading all of the New York Times from 1929-38. I can't tell you how depressing it is to see today's intellectual climate reverting back to the vulgar Keynesianism of the 1930s. To see us making all of the same mistakes.

But opposition to free trade might be the worst of all, as it's based on pure innumeracy.
Sumner  also lists 7 specific Great Depression mistakes that are being repeated now. I agree completely with 6 of the 7 mistakes he identifies:
One by one we are repeating all the mistakes of the Great Depression. We are falling prey to fallacies that were adopted in the 1930s, but rejected by the 1990s. Now they are all coming back:

  1. The view that the Fed was out of ammo.
  2. The view that interest rates measure the stance of monetary policy.
  3. The view that exchange rate depreciation is a beggar-thy-neighbor policy.
  4. The view that fiscal stimulus is needed in recessions.
  5. The view that a higher minimum wage could boost the economy.
  6. The view that mercantilist policies are justified.


  1. Because absolutely nothing has changed about the State in over 100 years.

  2. "The view that exchange rate depreciation is a beggar-thy-neighbor policy."

    If exchange rate depreciation is managed by various central banks, how could it not be a type of "beggar thy neighbor" policy?

    I really wish we had global free market money- I'll bet it would solve a lot of problems.

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  4. Not only in economics, but other areas as well. We decide we want to overthrow the Syrian president, but want to do that by arming and assisting "rebels". What was the outcome? Has it differed much from the past times we've dome tha?