Saturday, October 23, 2010

Great Depression: Krugman Budget Cuts Bad Times Makes It Worse

Tags: Economy Great Depression Politics President Hoover Krugman Business Greed Middleclass Fears Values UK Mistake Republicans Cause Recessions Depressions

Herbert Hoover, Republican President of USA during the start of the Great Depression in 1929: “The trouble with capitalism is capitalists. They’re too damned greedy.”

Page 16, The Great Depression: America, 1929-1941, Robert S. McElvaine, 1984, 1993. Many of my thoughts come from this book and similar books I have read.

In most elections, registered Democrats and Republicans vote with their party 90% of the time. The great Middle including Democrats, Republicans, and Independents tends to shift to one party or another during bad times.

Hoover allowed the Banks to fail and cut the budget because tax income fell sharply due to many people being out of work or up to 25%. The Republicans and Conservative government in the UK have normally followed their instinctive behavior of cutting the budget and allowing Banks to fail. We see many examples throughout of the effect of Republican rule causing recessions or depressions.

Essentially all deep Recessions and Depressions occur during Republican rule due to the excess risk taken to make even more money. They essentially occur in cycles until President Franklin D. Roosevelt put in place laws to prevent excess risk taking. The Republican Senate and House forced through laws eliminating all protections during the Republican Impeachment of President Clinton to distract him from his job.

President Obama in his effort to save our economy from going into a Depression from the misdeeds and corruption by the Bush Republicans and Wall Street Banks may have done the wrong thing politically. From a political point of view the great Middle has a gut reaction of not wanting to change things during great uncertainty and a financial crisis so they hated all the changes Obama has made to Healthcare even though logic shows it would help all of us with lower cost and better results and eventually a healthier life.

If Obama would have conceded of not doing the bailout or stimulus, the economy would probably go up to 15-20% unemployment where the Great Middle would gravitate towards Obama and the Democrats. During the Great Depression, American values shifted from the so-called Roaring Twenties where self-interest was the predominant value of sharing and working with others and not worry about buying things for pleasure as we unfortunately still have.

The economy is getting better because the rich and affluent have gone a spending spree of buy expensive stuff and enjoying life again. Remember at 10% unemployment, 90% still have a job, but many still worry about losing their job, but it is starting to abate. It appears that the upswing in the polls indicate that Americans are starting to understand and able to think as their fears are abating. The worse thing people do is to act when they are afraid of something they do not understand.

The reason churches play such an important role in America is that it is about the only place were we can satisfy the human need for a sense of belonging, a context or place in the excessively mobile modern society. That is why movies during the Great Depression showing these values were so popular.

We don’t live in a Black and White world even though Republican politicians and corporations would like us to think so. I thoroughly resent the wholesale attempt by Republicans to separate us based on racial and ethnic basis as a ploy to win elections. We seem to have gone far away from civility. All of remember that one Senate candidate in Virginia lost his race to a Democrat because he called a dark complexion member of his audience Macaca. Now worse words are used by the Republican candidates with barely a peep of regret or repercussions.

I still can’t believe the public has not reacting more fully to the secret money by billionaires and corporations being used to win elections. Our Supreme Court is a Criminal Enterprise Now.

Jim Kawakami, Oct 23, 2010,

British Fashion Victims Paul Krugman NY Times Oct 21, 2010, In the spring of 2010, fiscal austerity became fashionable. I use the term advisedly: the sudden consensus among Very Serious People that everyone must balance budgets now now now wasn’t based on any kind of careful analysis. It was more like a fad, something everyone professed to believe because that was what the in-crowd was saying.

And it’s a fad that has been fading lately, as evidence has accumulated that the lessons of the past remain relevant, that trying to balance budgets in the face of high unemployment and falling inflation is still a really bad idea. Most notably, the confidence fairy has been exposed as a myth. There have been widespread claims that deficit-cutting actually reduces unemployment because it reassures consumers and businesses; but multiple studies of historical record, including one by the International Monetary Fund, have shown that this claim has no basis in reality.

No widespread fad ever passes, however, without leaving some fashion victims in its wake. In this case, the victims are the people of Britain, who have the misfortune to be ruled by a government that took office at the height of the austerity fad and won’t admit that it was wrong.

Britain, like America, is suffering from the aftermath of a housing and debt bubble. Its problems are compounded by London’s role as an international financial center: Britain came to rely too much on profits from wheeling and dealing to drive its economy — and on financial-industry tax payments to pay for government programs. …

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