IPFS Howard Blitz

More About: Economy - Economics USA

A Tale of Two Depressions

With the cost of gasoline, food products, and health care increasing at faster rates the current inflationary depression is beginning to show signs of full development.  Like the deflationary depression of the 1930’s there will, no doubt, be many individuals who will place the blame for the cause of both on free enterprise, capitalism, and the obnoxious greed of private individuals and corporations. 
The two depressions are different in that in the 1930’s prices declined while the current developing depression prices of goods and services are rising. 
The two depressions are the same, though, in that both result in the individual having very little money with which to purchase goods and services.  In the 1930’s there was not enough money around to help individuals live their lives.  Today, individuals are flooded with money, but still cannot afford to purchase many goods and services because the value of the dollar continues to decline. 
The two depressions are also alike because both are and were caused by the ineptness and failure of government control and regulation, in other words socialism. 
Capitalism and free markets do not fail.  In a free market corporations and individuals may make bad decisions causing them to fail, but that is the market reflecting those decisions.  However, many continue to look at greedy individual corporations as the cause of the two depressions, when actually the cause of the two depressions rests squarely upon government officials’ decision making. 
Indeed, there exist fraudulent individuals who need to be prosecuted by government.  However, it is the control and decision making of government officials who encourage mal-investment decisions by a vast number of individuals thereby resulting in economic hard times for the masses. 
In both depressions government controls the supply of money through a monopolistic bank created by government called the Federal Reserve System (Fed).  Government also controls what drugs may come on the market, who gets to provide health care, who gets to produce gasoline, how much can be produced, and where it can be produced.  Growers of food products are controlled in the same manner as is most, if not all other markets. 
There is no free market in the United States of America.  Markets are regulated by government edict, not by the decisions of free individuals.  As a result the current inflationary depression and the deflationary depression of the 1930’s is and was directly caused by officials who make these decisions, especially those in the Fed. 
The irresponsible lending and borrowing by individuals in the marketplace is encouraged by the decisions of government officials.  With the soon to be distribution of a government tax rebate and the decision by Fed officials to lower interest rates again, individuals will mistakenly believe they have additional funds with which to spend when in reality they do not. 
Today, the only answer to the current downturn in the housing and credit market is for the Fed to turn on the money spigot, flooding the market with more money thereby causing a further deterioration of the dollar meaning the price of all goods and services must and does increase. 
In the 1930’s the Fed did not inflate the currency fast enough.  As a matter of fact, it reduced the amount of currency in circulation causing the general price level of all goods and services to decline.  Fed officials are determined for that not to happen again, and by their current actions, they will certainly achieve that end.  However, a depression happens just the same. 
By offering $100 billion in new bank loans and encouraging banks to not foreclose on individual home mortgages, the risk of an inflationary depression where prices increase at increasing rates is amplified. 
Reducing the rate of preventable foreclosures does not promote economic stability for households, neighborhoods, or the nation.  What promotes economic stability is the removal of government control of the supply of money through the private banking monopoly of the Federal Reserve System and the removal of all government rules and regulations placed upon individuals allowing for peaceful trade to take place in every industry.  In this way the real free market, decisions made by all individuals of their own free will, can regulate the activities of every one else.  There might be local depressions due to the fact that some individuals and companies make poor decisions, but there is not the kind of depression that existed in the 1930’s and the one that is currently developing.