Friday, September 9, 2011

Retrying the Discredited Policies of Hoover and FDR

I just finished re-reading America's Great Depression by Murray N. Rothbard. I read the book very carefully, because I needed to design a supervised reading course of the book for some students at the U. of Iowa. As I read the book, I was amazed that the same harmful policies pursued by Presidents Hoover and Roosevelt are being repeated today and justified by the same discredited economic theories.

Today's Open Europe news summary illustrates three harmful policies contemplated by the EU that were tried and found to be failures by Hoover and Roosevelt: (1) a proposed tax increases in the form of an EU-wide financial transaction tax; (2) a possible--and probable--rate cut by the ECB; and (3) the implied use of force to prevent a member from exiting the EU in order to avoid policies it deems harmful.

Hoover signed the largest tax increase in the history of the country at the bottom of the Great Depression, which destroyed purchasing power and incentives to produce. The Fed lowered interest rates, which made it impossible for banks to loan funds at a rate sufficiently high to compensate them for risk. The states were not allowed to opt out of the federal make work programs and new regulatory burdens.

I recommend that you read Rothbard's excellent book. You can download the book in PDF form for free:

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