The Great Depression: contrary to conventional wisdom, the historical record shows that interventionist policies during the Hoover and FDR administrations caused and prolonged the Great Depression

New American, The, June 23, 2008 by Charles Scaliger

   He [Strong] was obliged to consider
   the viewpoint of the American
   public, which had decided to keep
   the country out of the League of
   Nations to avoid interferences
   by other nations in its domestic
   affairs, and which would be just
   as opposed to having the heads
   of its central banking system attend
   some conference or organization
   of the world banks of
   issue.... He said that very few
   people indeed realized that we
   were now [i.e., in 1928, when
   the first signs of trouble were
   appearing on the horizon] paying the
   penalty for the decision which was
   reached early in 1924 to help the rest
   of the world back to a sound financial
   and monetary basis.

In other words, Strong and his counterparts overseas were acting with flagrant disregard for the well-being of their respective citizenries and, in many cases, the laws of the land. Because Americans in the 1920s were still deeply suspicious of the motives of the international power elites, Strong carried out his pro-British, internationalist agenda in secrecy. He died in 1928, leaving millions of Americans to foot the bill for years of monetary exuberance in the service of foreign interests. When the inflationary bubble finally burst in late 1929, few mined investors understood that their losses were part of the price to be paid for the machinations of Benjamin Strong and other international bankers.

Hoover's Interventionism

The onset of the Great Depression very nearly coincided with the presidency of Herbert Hoover. According to conventional wisdom, it was Hoover, the pro-free market Republican conservative, who was responsible for the Great Depression--by allegedly permitting the chaotic excesses of the market to make things worse after the 1929 crash. Nothing could be further from the truth.

Like most modern-day Republican leaders, Hoover the politician publicly sang the praises of the free market--while working sedulously to hamper the workings of the market with a welter of intrusive new government programs.

Early in the Hoover administration, such interventionism mostly took the form of presidential hectoring of industry leaders, pressuring them to keep wage rates at what the government deemed to be optimal levels, making threats against supposedly wicked stock speculators, and agitating for more public-works projects to create jobs.

But in 1931, things took a turn for the worse. The nations of Europe one by one went off the gold standard entirely, repudiating their obligations to redeem debt in gold into the bargain. Especially calamitous was Britain's renunciation of the gold standard on September 20 of that year, despite earnest assurances of the perfidious Montagu Norman to the head of the Netherlands Bank just two days previously that England had no such intention. The European crisis touched off by the exodus from the gold standard wrought havoc in American banking and sowed further distrust in the American public that their leaders would soon follow Europe's example. Stocks of gold held by American banks declined precipitously as the public redeemed its paper money for gold. Moreover, bank reserve levels dropped as the public, spooked at the prospect of bank failures, converted their savings into legal tender.