Reliving the Crash of =9229: How Hoover=92s Policies = Blazed the Trail for FDR and Wrecked the US Economy by Murray N. = Rothbard

First=20 published in Inquiry, 12 = November=20 1979.

A = half-century=20 ago America =96 and then the world =96 was rocked by a = mighty stock=20 market crash that soon turned into the steepest and the=20 longest-lasting depression of all time. Only the cataclysm = of World=20 War II was able to pull the Western world out of the = Great=20 Depression. It was not only the sharpness and depth of the=20 depression that stunned the world and changed the face of = modern=20 history: It was the length, the chronic economic morass = persisting=20 throughout the 1930s, that caused intellectuals and the = general=20 public to despair of the market economy and the capitalist = system.=20 Previous depressions, no matter how sharp, generally lasted = no more=20 than a year or two. But now, for over a decade, poverty,=20 unemployment, and hopelessness led millions to seek some new = economic system that would cure the depression and avoid a=20 repetition of it.

Political=20 solutions and panaceas differed; for some it was Marxian = socialism;=20 for others, one or another form of fascism. In the United = States the=20 accepted solution was a Keynesian mixed economy or = welfare-warfare=20 state. Harvard was the focus of Keynesian economics in the = United=20 States, and Seymour Harris, a prominent Keynesian teaching = there,=20 titled one of his many books Saving American = Capitalism; that=20 title encapsulated the spirit of the New Deal reformers of = the=20 thirties and forties. By the massive use of state power and=20 government spending, capitalism was going to be saved from = the=20 challenges of communism or fascism.

One = common=20 guiding assumption characterized the Keynesians, socialists, = and=20 fascists of the 1930s: that laissez-faire, free-market = capitalism=20 had been the touchstone of the U.S. economy during the = 1920s, and=20 that this old-fashioned form of capitalism had manifestly = failed us=20 by generating, or at least allowing, the most catastrophic=20 depression in history to strike at the United States and the = entire=20 Western world. Well, weren=92t the 1920s, with their = burgeoning=20 optimism, their speculation, their enshrinement of Big = Business in=20 politics, their Republican dominance, their individualism, = their=20 hedonistic cultural decadence, weren=92t these years indeed = the heyday=20 of laissez-faire? Certainly that decade looked that = way to=20 most observers, and hence it was natural that the free = market should=20 take the blame for the consequences of unbridled capitalism = in 1929=20 and after.

Unfortunately=20 for the course of history, the common interpretation was = dead wrong:=20 There was very little laissez-faire capitalism in the 1920s. = Indeed=20 the opposite was true: Significant parts of the economy were = infused=20 with proto-New Deal statism, a statism that plunged us into = the=20 Great Depression and prolonged this miasma for more than a=20 decade.

In = the first=20 place, everyone forgot that the Republicans had never been = the=20 laissez-faire party: On the contrary, it was the Democrats = who had=20 always championed free markets and minimal government, while = the=20 Republicans had crusaded for a protective tariff that would = shield=20 domestic industry from efficient competition, for huge land = grants=20 and other subsidies to railroads, and for inflation and = cheap credit=20 to stimulate purchasing power and apparent prosperity. It = was the=20 Republicans who championed paternalistic Big Government and = the=20 partnership of business and government while the Democrats = sought=20 free trade and free competition, denounced the tariff as the = "mother=20 of trusts," and argued for the gold standard and the = separation of=20 government and banking as the only way to guard against = inflation=20 and the destruction of people=92s savings. At least that was = the=20 policy of the Democrats before Bryan and Wilson at the start = of the=20 twentieth century, when the party shifted to a position not = very far=20 from its ancient Republican rivals.

The = Republicans=20 never shifted, and their reign in the l920s brought the = federal=20 government to its greatest intensity of peacetime spending = and hiked=20 the tariff to new, stratospheric levels. A minority of = old-fashioned=20 "Cleveland" Democrats continued to hammer away at Republican = extravagance and Big Government during the Coolidge and = Hoover eras.=20 Those included Governor Albert Ritchie of Maryland, Senator = James=20 Reed of Missouri, and former Solicitor General James M. = Beck, who=20 wrote two characteristic books in this era: The=20 Vanishing Rights of the States and Our=20 Wonderland of Bureaucracy.

But = most=20 important in terms of the Depression was the new statism = that the=20 Republicans, following on the Wilson administration, brought = to the=20 vital but arcane field of money and banking. How many = Americans know=20 or care anything about banking? Yet it was in this neglected = but=20 crucial area that the seeds of 1929 were sown and cultivated = by the=20 American government.

The = United=20 States was the last major country to enjoy, or be saddled = with, a=20 central bank. All the major European countries had adopted = central=20 banks during the eighteenth and nineteenth centuries, which = enabled=20 governments to control and dominate commercial banks, to = bail out=20 banking firms whenever they got into trouble, and to inflate = money=20 and credit in ways controlled and regulated by the = government. Only=20 the United States, as a result of Democratic agitation = during the=20 Jacksonian era, had had the courage to extend the doctrine = of=20 classical liberalism to the banking system, thereby = separating=20 government from money and banking. Having deposed the = central bank=20 in the 1830s, the United States enjoyed a freely competitive = banking=20 system =96 and hence a relatively "hard" and noninflated = money until=20 the Civil War. During that catastrophe, the Republicans used = their=20 one-party dominance to push through their interventionist = economic=20 program; it included a protective tariff and land grants to=20 railroads, as well as inflationary paper money and a = "national=20 banking system" that in effect crippled state-chartered = banks and=20 paved the way for the later central bank.

The = United=20 States adopted its central bank, the Federal Reserve System, = in=20 1913, backed by a consensus of Democrats and Republicans. = This=20 virtual nationalization of the banking system was unopposed = by the=20 big banks; in fact, Wall Street and the other large banks = had=20 actively sought such a central system for many years. The = result was=20 the cartelization of banking under federal control, with the = government standing ready to bail out banks in trouble, and = also=20 ready to inflate money and credit to whatever extent the = banks felt=20 was necessary.

Without a=20 functioning Federal Reserve System available to inflate the = money=20 supply, the United States could not have financed its = participation=20 in World War I; that war was fueled by heavy = government=20 deficits and by the creation of new money to pay for swollen = federal=20 expenditures.

One = point is=20 undisputed: The autocratic ruler of the Federal Reserve = System, from=20 its inception in 1914 to his death in 1928, was Benjamin = Strong, a=20 New York banker who had been named governor of the Federal = Reserve=20 Bank of New York. Strong consistently and repeatedly used = his power=20 to force an inflationary increase of money and bank credit = in the=20 American economy, thereby driving prices higher than they = would have=20 been and stimulating disastrous booms in the stock and real = estate=20 markets. In 1927, Strong gaily told a French central banker = that he=20 was going to give "a little coup de whiskey to the = stock=20 market." What was the point? Why did Strong pursue a policy = that now=20 can seem only heedless, dangerous, and recklessly=20 extravagant?

Once the=20 government has assumed absolute control of the = money-creating=20 machinery in society, it benefits =96 as would any other = group =96 by=20 using that power. Anyone would benefit, at least in the = short run,=20 by printing or creating new money for his own use or for the = use of=20 his economic or political allies. Strong had several motives = for=20 supporting an inflationary boom in the 1920s. One was to = stimulate=20 foreign loans and foreign exports. The Republican party was=20 committed to a policy of partnership of government and = industry, and=20 to subsidizing domestic and export firms. A protective = tariff aided=20 inefficient domestic producers by keeping out foreign = competition:=20 But if foreigners were shut out of our markets, how in the = world=20 were they going to buy our exports? The Republican = administration=20 thought it had solved this dilemma by stimulating American = loans to=20 foreigners so that they could buy our products.

A = fine solution=20 in the short run, but how were these loans to be kept up, = and, more=20 important, how were they to be repaid? The banking community = was=20 also confronted with the curious and ultimately = self-defeating=20 policy of preventing foreigners from selling us their = products, and=20 then lending them the money to keep buying ours. Benjamin = Strong=92s=20 inflationary policy meant repeated doses of cheap credit to=20 stimulate this foreign lending. It should also be noted that = this=20 policy subsidized American investment banks in making = foreign=20 loans.

Among the=20 exports stimulated by cheap credit and foreign loans were = farm=20 products. American agriculture, overstimulated by the = swollen=20 demands of warring European nations during World War I, was = a=20 chronically sick industry during the 1920s. It had awakened = after=20 the resumption of peace to find that farm prices had fallen = and that=20 European demand was down. Rather than adjusting to postwar=20 realities, however, American farmers preferred to organize = and=20 agitate to force taxpayers and consumers to keep them in the = style=20 to which they had become accustomed during the palmy = "parity" years=20 of the war. One way for the federal government to bow to = this=20 political pressure was to stimulate foreign loans and hence = to=20 encourage foreign purchases of American farm = products.

The = "farm=20 bloc," it should be noted, included not only farmers; more = indirect=20 and considerably less rustic interests were also busily at = work. The=20 postwar farm bloc gained strong support from George N. Peek = and=20 General Hugh S. Johnson; both, later prominent in the New = Deal, were=20 heads of the Moline Plow Company, a major manufacturer of = farm=20 machinery that stood to benefit handsomely from government = subsidies=20 to farmers. When Herbert Hoover, in one of his first acts as = President =96 considerably before the crash =96 established = the Federal=20 Farm Board to raise farm prices, he installed as head of the = FFB=20 Alexander Legge, chairman of International Harvester, the = nation=92s=20 leading producer of farm machinery. Such was the Republican = devotion=20 to "laissez faire."

But = a more=20 indirect and ultimately more important motivation for = Benjamin=20 Strong=92s inflationary credit policies in the 1920s was his = view that=20 it was vitally important to "help England," even at American = expense. Thus, in the spring of 1928, his assistant noted = Strong=92s=20 displeasure at the American public=92s outcry against the = "speculative=20 excesses" of the stock market. The public didn=92t realize, = Strong=20 thought, that "we were now paying the penalty for the = decision which=20 was reached early in 1924 to help the rest of the world back = to a=20 sound financial and monetary basis." An unexceptionable = statement,=20 provided that we clear up some euphemisms. For the = "decision" was=20 taken by Strong in camera, without the knowledge or=20 participation of the American people; the decision was to = inflate=20 money and credit, and it was done not to help the "rest of = the=20 world" but to help sustain Britain=92s unsound and = inflationary=20 policies.

Before the=20 World War, all the major nations were on the gold standard, = which=20 meant that the various currencies =96 the dollar, pound, = mark, franc,=20 etc. =96 were redeemable in fixed weights of gold. This gold = requirement ensured that governments were strictly limited = in the=20 amount of scrip they could print and pour into circulation, = whether=20 by spending to finance government deficits or by lending to = favored=20 economic or political groups. Consequently, inflation had = been kept=20 in check throughout the nineteenth century when this system = was in=20 force.

But = world war=20 ruptured all that, just as it destroyed so many other = aspects of the=20 classical liberal polity. The major warring powers spent = heavily on=20 the war effort, creating new money in bushel baskets to pay = the=20 expense. Inflation was consequently rampant during and after = World=20 War I and, since there were far more pounds, marks, and = francs in=20 circulation than could possibly be redeemed in gold, the = warring=20 countries were forced to go off the gold standard and to = fall back=20 on paper currencies =96 all, that is, except for the United = States,=20 which was embroiled in the war for a relatively short time = and could=20 therefore afford to remain on the gold standard. After the = war the=20 nations faced a world currency breakdown with rampant = inflation and=20 chaotically falling exchange rates. What was to be done? = There was a=20 general consensus on the need to go back to gold, and = thereby to=20 eliminate inflation and frantically fluctuating exchange = rates. But=20 how to go back? That is, what should be the relations = between gold=20 and the various currencies? Specifically, Britain had been = the=20 world=92s financial center for a century before the war, and = the=20 British pound and the dollar had been fixed all that time in = terms=20 of gold so that the pound would always be worth $4.86. But = during=20 and after the war the pound had been inflated relatively far = more=20 than the dollar, and thus had fallen to about $3.50 on the = foreign=20 exchange market. But Britain was adamant about returning the = pound,=20 not to the realistic level of $3.50, but rather to the old = prewar=20 par of $4.86.

Why = the=20 stubborn insistence on going back to gold at the obsolete = prewar=20 par? Part of the reason was a stubborn and mindless = concentration on=20 face-saving and British honor, on showing that the old lion = was just=20 as strong and tough as before the war. Partly, it was a = shrewd=20 realization by British bankers that if the pound were = devalued from=20 prewar levels England would lose its financial preeminence, = perhaps=20 to the United States, which had been able to retain its gold = status.

So, = under the=20 spell of its bankers, England made the fateful decision to = go back=20 to gold at $4.86. But this meant that British exports were = now made=20 artificially expensive and its imports cheaper, and since = England=20 lived by selling coal, textiles, and other products, while = importing=20 food, the resulting chronic depression in its export = industries had=20 serious consequences for the British economy. Unemployment = remained=20 high in Britain, especially in its export industries, = throughout the=20 boom of the l920s.

To = make this=20 leap backward to $4.86 viable, Britain would have had to = deflate its=20 economy so as to bring about lower prices and wages and make = its=20 exports once again inexpensive abroad. But it wasn=92t = willing to=20 deflate since that would have meant a bitter confrontation = with=20 Britain=92s now powerful unions. Ever since the imposition = of an=20 extensive unemployment insurance system, wages in Britain = were no=20 longer flexible downward as they had been before the war. In = fact,=20 rather than deflate, the British government wanted the = freedom to=20 keep inflating, in order to raise prices, do an end run = around union=20 wage rates, and ensure cheap credit for business.

The = British=20 authorities had boxed themselves in: They insisted on = several=20 axioms. One was to go back to gold at the old prewar par of = $4.86.=20 This would have made deflation necessary, except that a = second axiom=20 was that the British continue to pursue a cheap credit, = inflationary=20 policy rather than deflation. How to square the circle? What = the=20 British tried was political pressure and arm-twisting on = other=20 countries, to try to induce or force them to inflate = too. If=20 other countries would also inflate, the pound would remain = stable in=20 relation to other currencies; Britain would not keep losing = gold to=20 other nations, which endangered its own jerry-built monetary = structure.

On = the defeated=20 and small new countries of Europe, Britain=92s pressure was = notably=20 successful. Using their dominance in the League of Nations = and=20 especially in its Financial Committee, the British forced = country=20 after country not only to return to gold, but to do so at = overvalued=20 rates, thereby endangering those nations=92 exports and = stimulating=20 imports from Britain. And the British also flummoxed these = countries=20 into adopting a new form of gold "exchange" standard, in = which they=20 kept their reserves not in gold, as before, but in sterling = balances=20 in London. In this way, the British could continue to = inflate, and=20 pounds, instead of being redeemed in gold, were used by = other=20 countries as reserves on which to pyramid their own paper = inflation.=20 The only stubborn resistance to the new order came from = France,=20 which had a hard-money policy into the late l920s. It was = French=20 resistance to the new British monetary order that was = ultimately=20 fatal to the house of cards the British attempted to = construct in=20 the 1920s.

The = United=20 States was a different situation altogether. Britain could = not=20 coerce the United States into inflating in order to save the = misbegotten pound, but it could cajole and persuade. In = particular,=20 it had a staunch ally in Benjamin Strong, who could always = be relied=20 on to be a willing servitor of British interests. By = repeatedly=20 agreeing to inflate the dollar at British urging, Benjamin = Strong=20 won the plaudits of the British financial press as the best = friend=20 of Great Britain since Ambassador Walter Hines Page, who had = played=20 a key role in inducing the U.S. to enter the war on the = British=20 side.

Why = did Strong=20 do it? We know that he formed a close friendship with = British=20 financial autocrat Montagu Norman, longtime head of the Bank = of=20 England. Norman would make secret visits to the United = States,=20 checking in at a Saratoga Springs resort under an assumed = name, and=20 Strong would join him there for the weekend, also incognito, = there=20 to agree on yet another inflationary coup de whiskey = to the=20 market. Surely this Strong-Norman tie was crucial, but what = was its=20 basic nature? Some writers have improbably speculated on a=20 homosexual liaison to explain the otherwise mysterious = subservience=20 of Strong to Norman=92s wishes. But there was another, and = more=20 concrete and provable tie that bound these two financial = autocrats=20 together.

That tie=20 involved the Morgan banking interests. Benjamin Strong had = lived his=20 life in the Morgan ambit. Before being named head of the = Federal=20 Reserve, Strong had risen to head of the Bankers Trust = Company, a=20 creature of the Morgan bank. When asked to be head of the = Fed, he=20 was persuaded to take the job by two of his best friends, = Henry P.=20 Davison and Dwight Morrow, both partners of J. P. Morgan = &=20 Co.

The = Federal=20 Reserve System arrived at a good time for the Morgans. It = was needed=20 to finance America=92s participation in World War I, = a=20 participation strongly supported by the Morgans, who played = a major=20 role in bringing the Wilson administration into the war. The = Morgans, heavily invested in rail securities, had been = caught short=20 by the boom in industrial stocks that emerged at the turn of = the=20 century. Consequently, much of their position in = investment-banking=20 was being eroded by Kuhn, Loeb & Co., which had been = faster off=20 the mark on investment in industrial securities. World War = I=20 meant economic boom or collapse for the Morgans. The = House of=20 Morgan was the fiscal agent for the Bank of England; it had = the=20 underwriting concession for all sales of British and French = bonds in=20 the United States during the war, and it helped finance U.S. = arms=20 and munitions sales to Britain and France. The House of = Morgan had a=20 very heavy investment in an Anglo-French victory and in a=20 German-Austrian defeat. Kuhn, Loeb, on the other hand, was=20 pro-German, and therefore was tied more to the fate of the = Central=20 Powers.

The = cement=20 binding Strong and Norman was the Morgan connection. Not = only was=20 the House of Morgan intimately wrapped up in British = finance, but=20 Norman himself =96 as well as his grandfather =96 in earlier = days had=20 worked in New York for the powerful investment banking firm = of Brown=20 Brothers, and hence had developed close personal ties with = the New=20 York banking community. For Benjamin Strong, helping Britain = meant=20 helping the House of Morgan to shore up the internally = contradictory=20 monetary structure it had constructed for the postwar=20 world.

The = result was=20 inflationary credit, a speculative boom that could not last, = and the=20 Great Crash whose fiftieth anniversary we observe this year. = After=20 Strong=92s death in late 1928, the new Federal Reserve = authorities,=20 while confused on many issues, were no longer consistent = servitors=20 of Britain and the Morgans. The deliberate and consistent = policy of=20 inflation came to an end, and a corrective depression soon=20 arrived.

There are two=20 mysteries about the Depression, mysteries having two = separate and=20 distinct solutions. One is, why the crash? Why the sudden = crash and=20 depression in the midst of boom and seemingly permanent = prosperity?=20 We have seen the answer: inflationary credit expansion = propelled by=20 the Federal Reserve System, in the service of various = motives,=20 including helping Britain and the House of Morgan. But there = is=20 another vital and very different problem. Given the crash, = why did=20 the recovery take so long? Usually when a crash or financial = panic=20 strikes, the economic and financial depression, be it slight = or=20 severe, is over in a few months, or a year or two at the = most. After=20 that, economic recovery will have arrived. The crucial = difference=20 between earlier depressions and that of 1929 was that the = 1929 crash=20 became chronic and seemed permanent.

What is seldom=20 realized is that depressions, despite their evident hardship = on so=20 many, perform an important corrective function. They serve = to=20 eliminate the distortions introduced into the economy by an=20 inflationary boom. When the boom is over, the many = distortions that=20 have entered the system become clear: Prices and wage rates = have=20 been driven too high, and much unsound investment has taken = place,=20 particularly in capital goods industries. The recession or=20 depression serves to lower the swollen prices and to = liquidate the=20 unsound and uneconomic investments; it directs resources = into those=20 areas and industries that will most-effectively serve = consumer=20 demands =96 and were not allowed to do so during the = artificial boom.=20 Workers previously misdirected into uneconomic production, = unstable=20 at best, will, as the economy corrects itself, end up in = more secure=20 and productive employment.

The = recession=20 must be allowed to perform its work of liquidation and = restoration=20 as quickly as possible, so that the economy can be allowed = to=20 recover from boom and depression and get back to a healthy = footing.=20 Before 1929, this hands-off policy was precisely what all = U.S.=20 governments had followed, and hence depression, however = sharp, would=20 disappear after a year or so.

But = when the=20 Great Crash hit, America had recently elected a new kind of=20 President. Until the past decade, historians had regarded = Herbert=20 Clark Hoover as the last of the laissez-faire Presidents. = Instead,=20 he was the first New Dealer. Hoover had his bipartisan aura, = and was=20 devoted to corporatist cartelization under the aegis of Big=20 Government; indeed, he originated the New Deal farm price = support=20 program. His New Deal specifically centered on his program = for=20 fighting depressions. Before he assumed office, Hoover = determined=20 that should a depression strike during his term of office, = he would=20 use the massive powers of the federal government to combat = it. No=20 more would the government, as in the past, pursue a = hands-off=20 policy.

As = Hoover=20 himself recalled the crash and its aftermath:

The = primary=20 question at once arose as to whether the President and the = federal=20 government should undertake to investigate and remedy the = evils=85 No=20 President before had ever believed that there was a = governmental=20 responsibility in such cases=85 Presidents steadfastly had = maintained=20 that the federal government was apart from such eruptions=85 = therefore, we had to pioneer a new field.

In = his=20 acceptance speech for the Presidential renomination in 1932, = Herbert=20 Hoover summed it up:

We = might have=20 done nothing=85 Instead, we met the situation with proposals = to=20 private business and to Congress of the most gigantic = program of=20 economic defense and counterattack ever evolved in the = history of=20 the Republic. We put it into action=85 No government in = Washington has=20 hitherto considered that it held so broad a responsibility = for=20 leadership in such times.

The = massive=20 Hoover program was, indeed, a characteristically New Deal = one:=20 vigorous action to keep up wage rates and prices, to expand = public=20 works and government deficits, to lend money to failing = businesses=20 to try to keep them afloat, and to inflate the supply of = money and=20 credit to try to stimulate purchasing power and recovery. = Herbert=20 Hoover during the 1920s had pioneered in the proto-Keynesian = idea=20 that high wages are necessary to assure sufficient = purchasing power=20 and a healthy economy. The notion led him to artificial = wage-raising=20 =96 and consequently to aggravating the unemployment problem = =96 during=20 the depression.

As = soon as the=20 stock market crashed, Hoover called in all the leading=20 industrialists in the country for a series of White House=20 conferences in which he successfully bludgeoned the = industrialists,=20 under the threat of coercive government action, into = propping up=20 wage rates =96 and hence causing massive unemployment =96 = while prices=20 were falling sharply. After Hoover=92s term, Franklin D. = Roosevelt=20 simply continued and expanded Hoover=92s policies across the = board,=20 adding considerably more coercion along the way. Between = them, the=20 two New Deal Presidents managed the unprecedented feat of = making the=20 depression last a decade, until we were lifted out of it by = our=20 entry into World War II.

If = Benjamin=20 Strong got us into a depression and Herbert Hoover and = Franklin D.=20 Roosevelt kept us in it, what was the role in all this of = the=20 nation's economists, watchdogs of our-economic health?=20 Unsurprisingly, most economists, during the Depression and = ever=20 since, have been much more part of the problem than of the = solution.=20 During the l920s, establish-ment economists, led by = Professor Irving=20 Fisher of Yale, hailed the twenties as the start of a "New = Era," one=20 in which the new Federal Reserve System would ensure = permanently=20 stable prices, avoiding either booms or busts. = Unfortunately, the=20 Fisherines, in their quest for stability, failed to realize = that the=20 trend of the free and unhampered market is always toward = lower=20 prices, as productivity rises and mass markets develop for=20 particular products. Keeping the price level stable in an = era of=20 rising productivity, as in the 1920s, requires a massive = artificial=20 expansion of money and credit. Focusing only on wholesale = prices,=20 Strong and the economists of the 1920s were willing to = engender=20 artificial booms in real estate and stocks, as well as=20 malinvestments in capital goods, so long as the wholesale = price=20 level remained constant.

As = a result,=20 Irving Fisher and the leading economists of the 1920s failed = to=20 recognize that a dangerous inflationary boom was taking = place. When=20 the crash came, Fisher and his disciples of the Chicago = school again=20 pinned the blame on the wrong culprit. Instead of realizing = that the=20 depression process should be left alone to work itself out = as=20 rapidly as possible, Fisher and his colleagues laid the = blame on the=20 deflation after the crash and demanded a reinflation (or=20 "reflation") back to 1929 levels. In this way, even before = Keynes,=20 the leading economists of the day managed to miss the = problem of=20 inflation and cheap credit and to demand policies that only=20 prolonged the depression and made it worse. After all, = Keynesianism=20 did not spring forth full-blown with the publication of = Keynes=92s=20 General=20 Theory in 1936.

We are still pursuing the policies of = the 1920s=20 that led to eventual disaster. The Federal Reserve is still=20 inflating the money supply and inflates it even further with = the=20 merest hint that a recession is in the offing. The Fed is = still=20 trying to fuel a perpetual boom while avoiding a correction, = on the=20 one hand, or a great deal of inflation, on the other. In a = sense,=20 things have gotten worse. For while the hard-money = economists of the=20 1920s and 1930s wished to retain and tighten up the gold = standard,=20 the "hard money" monetarists of today scorn gold, are happy = to rely=20 on paper currency, and feel that they are boldly courageous = for=20 proposing not to stop the inflation of money altogether, but = to=20 limit the expansion to a supposedly fixed amount.

Those who ignore the lessons of history are = doomed to=20 repeat it =96 except that now, with gold abandoned and each = nation=20 able to print currency ad lib, we are likely to wind = up, not=20 with a repeat of 1929, but with something far worse: the = holocaust=20 of runaway inflation that ravaged Germany in 1923 and many = other=20 countries during World War II. To avoid such a catastrophe = we must=20 have the resolve and the will to cease the inflationary = expansion of=20 credit, and to force the Federal Reserve System to stop = purchasing=20 assets and thereby to stop its continued generation of = chronic,=20 accelerating inflation.

Reliving the Crash = of =9229:=20 How Hoover=92s Policies Blazed the Trail for FDR and Wrecked = the US Economy