07 Aug 2009

Mark Thoma Continues to Spread Myths About the Great Depression

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Greg Ransom sent me this very interesting NYT piece on BB&T’s John Allison and Ayn Rand. Check out this absurd remark from Mark Thoma:

Mark A. Thoma, an economist at the University of Oregon, says the financial crisis would have been worse if the government hadn’t rapidly intervened.

“I completely disagree with the idea that letting the markets heal themselves is the best idea,” he says. “We tried that in the ’30s, and it didn’t work out so well.”

At the very very very most, you could argue that “we” tried letting markets heal themselves until March 4, 1933. But at that point, FDR was in charge, and right away he seized everyone’s gold at gunpoint. And then there was that whole New Deal thing.

So for a good 65% of the 1930s, we clearly had massive intervention; the most in U.S. history, before or since. And for the first portion, we still had much much much more government (and Fed) tinkering than we had ever had up to that point in U.S. history.

I actually think it would be far more accurate to say we didn’t let markets heal themselves in the 1930s, and that’s why we had the worst depression in world history.

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