From a World Nut Daily email to me:
The Great Depression brought great change to politics. Hyperinflation was running rampant.
Okay, boys and girls, time to gather 'round the penguin and listen up. The most prominent feature of the Great Depression was a deflationary spiral. Indeed, according to the Irving Fisher debt-deflation theory of the Great Depression, the reason the Great Depression turned into the Great Depression rather than just the Sorta Bad Recession was because the currency entered deflation, which in turn inflates the value of debts since debts taken out in cheap inflated dollars are now being expected to be paid back in expensive deflated dollars. Inflated debts could not be paid off, which caused banks to fail when money they expected to be paid back could not be paid back, which caused further deflation, which caused further debt inflation, which caused further bank failures when people couldn't pay their debt, which caused further deflation, wash, rinse, repeat. The economy went into a spiral of deflation, and the end result was the transferring of much of the actual physical wealth of the nation (land, buildings, houses, etc.) from the debtor class to the investor class who had money and could buy up the assets of the debtor class for pennies on the dollar.
None of this is controversial. Crap, even the Austrians admit that there was a deflationary spiral as a prominent feature of the Great Depression, though they claim this was a good thing because it allowed the economy to "purge malinvestments" and "mobilize capital for more productive use". So when World Nut Daily makes that statement at the top of this post, general hilarity ensues. Sadly, WND.com's audience is so stupid and ignorant that they haven't the foggiest idea that they're being fed a line of bullshit about something that's about as true as the notion that the sky is purple with streaks of mauve... so it goes. Never underestimate the stupidity and ignorance of right wingers, eh?
-- Badtux the Economics Penguin
Or their lies and cynicism.
ReplyDeleteWhat a bunch of bums, crumbs ans rats.
The real interest rate during the depression has been estimated at over 11%. Wih nominal rates at ZERO.
That is some serious deflation.
The WND people are just a little confused. They thought the U.S. in the 30's was Germany in the 20's. Wrong continent, wrong decade, totally different economic environment, devestting reparation debts - other than that, spot on, I'd say.
Wow - no wonder WASF,
jXb