Central banks can and do protect people from disasters. Since the inception of the Federal Reserve in the US, there have been three really disruptive crises: The Great Depression, 1970s stagflation, and the 2008 collapse. Action by the Fed cured stagflation (with a short-term induced recession - thanks to Paul Volcker's leadership and Reagan's support of him in the face of a hostile Congress), and the Fed's short-term intervention into the unsecured loans market kept the capital contraction of the CDO collapse from taking countless other businesses down with it.
Why was the Great Depression so dang much worse than all the boom and bust cycles that came before? Could it be because of the government's massive economic intervention? I think so, and it's not like economists uniformly disagree with me.
The 2008 collapse is ultimately part of long-term stagnation in the economy. It would have been better to just take the medicine and build a healthy economy after that, that to keep living under the fantasy that government manipulation of the economy can help us in the long run.
Calling the Great Depression the result of "government intervention" is the supreme result of the famous "Do Nothing" president, Calvin Coolage. Despite seeing the signs of impending market collapse, Calvin Coolidge felt that it was not within his rights as president to do anything about it.
Hoover tried desperately to solve the problem of the Great Depression in his first (and only) term, but when the Black Friday market crash occurred only 8 months into Hoover's presidency, it is clear who deserves the blame of the famous market crash that set off the Great Depression.
Deregulation of banks, laissez-faire economics, and a complete reluctance to increase the monetary supply are all cited as reasons for the Great Depression of 1930s.
The ideas of Laissez-faire economics should have died in 1930. It is part of the Government's job to prevent such depressions from occurring ever again.
Coolidge did the same thing as all prior presidents in economic recessions, and it always worked for them.
Hoover, incluenced by the Progressive philosophy of "governmnet solves all problems and individuals be damned," tried to "force" a solution to the recession. Unlike every prior case, it got much worse for much longer.
So if you want to assume correlation strongly suggests causation, I win the argument.
If you instead want to say that we need to look at root causes, I say the notion that we need or can solve economic problems with top-down force instead of bottom-up individual pursuit of values is ludicrous.
> It is part of the Government's job to prevent such depressions from occurring ever again
That is just your assertion. And the notion that the government can do that is fantasy thinking. I think they can influence contractions and expansions but the net of it is less economic production in the long run; it doesn't gain you anything. And sometimes they screw up small and cause things like Freddie and Fannie's mortgage bubble. And eventually they screw up big, as any puppet master does, and you get hyperinflation or bank crises.
>>> Coolidge did the same thing as all prior presidents in economic recessions, and it always worked for them.
Pure ignorance of the first (and second, and third...) financial crisis of the US.
Going back to the first US Banking Crisis: the Panic of 1819... then President Monroe set the standard on how financial crisis would be handled. (Its a complicated story because the US was so different back then... there was the Federally-chartered "Bank of the US", among other things)
To solve the Panic of 1819, President Monroe would nullify certain debts, to ease recovery. Sound familiar?? State-level banks then increased the monetary supply, and Congress passed more Tariffs to discourage exports/imports.
The one thing that is constant in this country's 200 year history, is that the Federalists and the Non-Federalists have been arguing the cause and effect of government since the start. Federalists blame the "free market" of 1816 for causing the panic of 1819 (ie: It was inevitable due to Wartime debt from 1812 and a crisis in Europe). On the other hand, the Non-Federalists blame the centralized "Bank of the US" for setting off the panic.
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The one thing that is clear to me, is that the proud history of the US is for this debate to spin up every 20 years as the US hobbles from crisis to crisis. The President will do the same thing and step in and sponsor new laws... he'll also forgive debts, the monetary supply will expand in some way, and Congress will pass something irrelevant to the discussion.
