Inconvience Stores

"Klipspringer has been here since a party I threw in April. I didn't even realize he was here until two weeks ago."
--Jay Gatsby (The Great Gatsby)

David Stockman employs some data to counter ongoing claims from the Krugmans and the Stiglitzes that the Depression was 'caused' by a lack of government spending. He notes that government spending back then was tiny, clocking in at about 3% of GDP vs over 25% today. Totally eliminating the fiscal budget back then was insignificant compared to 40%+ haircut that GDP took from 1929 to 1932.

As Mr Stockman observes, the big categorical declines during this period occured in private fixed investment (-92% wow), consumption (-61%), and exports (-65%). All of these were the result of binging during the 1920s. And, as this author and others observe, this binging can be directly tied to the easy monetary policy of the Fed (e.g., Anderson, 1949; Phillips, McManus, & Nelson, 1937; Rothbard, 1963).

The classic 'crack up boom' followed by the inevitable bust.

The evidence is clear for those who want to see it. Obviously, many do not.

References

Anderson, B.M. 1949. Economics and the public welfare. New York: D Van Nostrand & Co.

Phillips, C.A., McManus, C.F., & Nelson, R.W. 1937. Banking and the business cycle. New York: The Macmillan Company.

Rothbard, M.N. 1963. America's Great Depression. Princeton: D Van Nostrand & Co.