From: John Conover <john@email.johncon.com>
Subject: Re: WWII
Date: 16 Aug 1999 01:11:53 -0000
constantinople@my-deja.com writes:
>
> The Depression was caused by a combination of monetary
> contraction (i.e. deflation) and government price fixing (wages
> were kept artifically high). Real wages rose by 25% as a result
> of the price level falling by 1/3 combined with policies
> preventing a fall in wages. With such a steep and artificial,
> government-created rise in real wages, it's small wonder that
> businesses could not afford to create full employment. The
> Depression was ended by monetary expansion (i.e. inflation),
> which reversed the conditions that had caused it, lowering real
> wages to their correct level. The monetary expansion was created
> to pay for WWII, just as a monetary expansion had been created to
> pay for the Civil War.
>
And the depression that affected 1/3 of the world's countries at the
time-including most of the industrialized world-had nothing,
whatsoever, to do with it?
Of course, such "contagion" is difficult to explain by the traditional
macroeconomic dogma of monetary policy, but why did the US depression
happen in 1930 when such policies had been the prevailing wisdom for
over a decade and a half? Why not 1920? Why not 1935?
Why 1930?
Maybe monetary policies didn't have too much to do with it. And maybe
they did. But at any rate, changes in monetary policy didn't fix
things for the decade of the 30's, and it was WWII that saved the
Roosevelt Presidency.
John
--
John Conover, john@email.johncon.com, http://www.johncon.com/