Thursday, September 25, 2008
I missed this yesterday but it showed up today at YouTube (hat tip AD).
From about 30 seconds in:
I think understanding the Great Depression is one of our problems - or the lack of understanding of the depression. Because, generally, most of what people are taught these days is it was the lack of credit in the 30s that caused the prolongation of the depression. They never talk about the excessive credit and misallocation, the malinvestment of the 20s, that precipitated the bubble that had to be corrected.Yeah, it's as if history begins in 1929 for modern day economists. Future economists will probably be required to go back a little bit further.
And then in the depression - what did we try to do? We tried to fix prices which is exactly what we are doing now. We would not, in the depression, allow wages to go down and we said, "The price of farm products has to stay up". So, in doing that, we plowed crops under and people were starving. And I don't think we've gained a whole lot of wisdom since we were plowing under crops to keep prices up.