Skip to comments.After all, what's the worst that can happen...?
Posted on 06/11/2006 6:18:54 PM PDT by pickrell
Nearly every accident investigated by forensic teams proves to have been caused by a series of seemingly small, individually survivable mistakes which, if left isolated to burn themselves out, would not have caused the actual conflagration. Military, law enforcement and business interests have learned, under the pain of great cost to themselves, to establish 'break points'- the clear cut fire lanes of operational safeguards- in the chains of events which lead to losses. Looking at these sequences of events, later, from the comfort of our Lazy Boy recliners, it is wrenching to realize that if only a few, (or sometimes even one), less things had gone wrong at the same time, hundreds, thousands and even more lives could have been saved, and great catastrophies and loss could have been avoided.
In fact, it would seem a matter of madness not to insist on teaching these chains of catastrophe, of cause and effect, to our nation's children. Surely some time could be spared from esteem building, in order to forestall the crushing pain of the consequences of ill-advised actions. Our nation has in the past produced the highest standard of living, and the greatest liberty and hope for the future for our citizens, by learning from our past mistakes, and avoiding others entirely via the gift of the imparted wisdom of our parents.
Someone once said that good judgement comes from experience, and that experience comes from bad judgement...
Someone also should have said that it would be a shame if every single child in America had to hit himself in the face with every single brick he comes across, before he realizes that:
A: that sort of thing hurts,
B: he could have learned that from the first brick, or
C: he could have just asked... an older, flat-faced kid.
What strange dysfunction, then, could prevent us from illustrating to these children of ours one of the most important lessons of a successful society- that of protecting a healthy and resilient economy?
It is apparent to most of the growing legions of public providers of rehabilitative services, that self-destructive actions can be more costly, and more certain to maim young futures, than all of the external threats faced in today's society. And, some might argue, even more tragic- since a thin comfort could at least be grasped by the rage at what bad luck, and being in the wrong place at the wrong time, can exact in punishment from the unwary. How much comfort can the victim derive from the eventual merciless realization that no one even bothered to prepare him... to be careful of what he wished for?
Current trendiness points to maximizing the number of votes cast in order to better serve the nation. Where one lemming leaning a little too far over the cliff is a heartbreak- endless battalions of them blindly charging to oblivion are somehow...a healthy development? Should those who have lived long enough to understand the gravity of, uhhh, gravity, and who have been over the terrain previously in their lives, take the time to explain to those who feel no more ground in front of them should just make for easier walking... that brief, wide, and terminal pain is about to result?
Maybe we owe that to them.
Let's look at a curious set of events.
At the conclusion of World War One, the tremendous hyper-supply of grain and other agricultural products that our farmers had been growing for sales to our military and to warring nations overseas, suddenly had no market. The war was over, and the hungry soldiers were sent home. Farmers who hadn't thought this through well ahead of time suddenly had no way to make the payments on the land they had recently purchased under easy credit in a booming wartime economy. Or, to service the mortgage on that nicer home that they had finally committed to, now that the twenties were roaring. The vice began to turn...
Local banks, who earlier had successfully lobbied for "unit banking" laws, had lent enormous amounts of their depositor's money to those farmers who had thereby bought additional land to cultivate. Unit banking laws prevented national banking chains from competing in small towns, by restricting the access and reach of those large banks, thus preventing competition against those same local banks. Those small banks, many with capitalization barely above $ 100,000.00, suddenly found that the majority of their borrowers were in deep trouble, and couldn't make their payments. The danger of having all of their deposits lent out to a single industry, that of farming, now hung like an unexploded bomb over their offices. They were too small to have diversified like the big banks, so that a problem with one segment could not be rode out until conditions improved in that particular industry. The vice turned again, creaking out a warning...
The large banks, still smarting from having been successfully squeezed out of those small markets certainly felt no compulsion to rush out to save the small banks who had earlier shafted them, by unit banking law legislation forbidding them from opening branch offices in small towns. What goes around comes around. And the vice began to be uncomfortably tight...
Depositors, who had to withdraw some of their cash occasionally to make payments on the margin purchases of stocks that they made, didn't realize that those funds in their accounts were about to dry up. It was generally accepted that smart people got their fair share of the good life by buying stocks that "could only go up...". The vice quietly turned even tighter...
Federal Reserve officials noted with worry that prices on stocks were reaching the "irrational exuberance" level, and moved to steadily increase interest rates. In an age where the science of economics was new, they didn't realize that changes take time to have their effect; and great patience, planning and competence were critical in fiscal and monetary policy. When it seemed that interest rate increases weren't immediately cooling off what seemed dangerously inflative and needlessly risky, they decided to also decrease the nation's money supply.
And they did.
It took removing a full third of the nation's money supply from circulation, before they noticed that the drought of consumer's liquidity produced the first noticeable effects, like water leaking threateningly from the face of that new dam...
Soon the vice would begin to crush bones. The problem was, that by the time anyone noticed the blood dripping from the vice, simply loosening it would not restore mangled national sinews. That would take...time. But time was the only commodity who's price now would go up.
Lessons were about to be learned which would require great cost to remedy. Unfortunately, no one was in school that decade, as we shall see. And so a great cost was magnified exponentially... into national and eventually world-wide calamity, and then tragedy.
After the collapse of the stock market in 1929, a conference of industrialists was called together- Henry Ford, Sloan of General Motors, Rosenwald of Sears, Teagle of Standard Oil, and others. President Hoover cited Henry Ford's unilateral increase in the wages paid by his company and urged all other industrialists to do the same. Rather than admit, or even apparently realize, that government policy had amplified the crisis, his advisors decided that paying subsidies to stimulate an increase in farm production would save the family farm! The idea that a huge over-production of farm products could only be solved by policies, or even patience, to allow the market to do it's work, was disdained in favor of more government intervention. Harper's Magazine explained as early as January of 1933, that, "Prices must come down to bring goods closer to the size of available income..." Instead, $100 million in further farm subsides was injected into an oversaturated market. A few farms postponed failure, but nearly everyone increased production, as critics had predicted.
Business interests railed against foreign competition, farmers concurred, and against the grave advice of those who warned of retaliation, Congress passed the Smoot-Hawley tariff, imposing import duties on 25,000 foreign made products and agricultural goods. To European countries struggling to rebuild after years of warfare, it struck like an artillery round. The retailiation was immediate, with U.S. exports dropping even more than U.S. imports. The winners of World War One had celebrated by forming a circular firing squad. Within 3 years, agricultural exports dropped to less than a third of their weakened levels before the tariffs.
The high wages policy fared even worse. A few employees did better for a few months, but the shareholders of Corporations that they trusted with their retirement funds, took a severe pounding. The net effect was to simply drive home that small investors now took a back seat. Unfortunately, these small investors were to be simultaneously surprised with the newly invented "bank holiday". The vice was about to pulverize national sinews.
As international trade collapsed, countries around the world starved their armed forces in order to have money to intervene further in the market economy, and do "even more good". Except, of course, a few countries with visions of 1,000 year Reichs. In less than a decade, the cost of this popular trade-off, would turn amazingly unpopular to the citizenry which had approved of it. But by that time, a staggering bill would be exacted.
Small banks collapsed by the hundreds, while larger diversified banks tightened credit, and remained surprisingly healthy. As governors in various states closed all banks "as a precaution", what began as a liquidity problem, organized itself into a stampede. Citizens of healthy banks, fearing more government closing of banks, started runs on a widening circle of states.
By now, the New Dealers and Franklin Roosevelt had swept Hoover from power, and began their program to save the country through "bold and innovative new government intervention. A New Deal for the citizen..."
In spite of the fact that larger banks, including those which also maintained investment arms in the stock market, were remaining solvent and the sole bulwark against system collapse, the Banking act of 1933 was made law, aiming at the largest and healthiest of American banks. It mandated the breakup of commercial banking from investment banking, with great fanfare. It's most immediate effect was to spin the depression as somehow having been the fault of the banking industry. In the common citizen's mind, "they" wouldn't have been dealt with if they hadn't caused the problem.
It was the start of "implication management", and the beginning of the demise of governmental accountability. The fact that over 85 percent of total bank portfolio depreciation was due to the decline of bonds and not stocks, was somehow quietly overlooked. Most of these bonds were from industries heavily regulated by the government, and such a public admission could have been embarrassing. The fact that the legislation to save small banks had no impact on the continuing failure of small banks, due to the fact that it didn't even apply to small banks, was not deemed newsworthy, since other fish were about to be fried.
Gold was suddenly discovered to be the root of all evil! Unbelievably, the reason the gold grab was born when certain of FDR's advisors noticed that gold prices often mirrored agricultural commodity prices. When the price of corn rose, the price of gold often rose nearly the same amount. It only took a small amount of non-linear thinking to "discover" that the price of gold must therefore control the price of grain. In order to help the farmers, it would only be necessary to seize all of the nation's privately owned gold. The fact that this would irrevocably disconnect the nation's currency from anything which might hinder it's manipulation,,,was merely a tongue-in-cheek surprise side benefit. The fact that it was done by Presidential 'decree', and only later forced upon a cornered Congress, to hasten through an after-the-fact legitimization bill, was never made part of a fireside chat.
The model for this kind of pitch is the fire/water illustration. The theory holds that the amount of water going into a typical home remains fairly constant... until a fire breaks out. The water usage then unarguably goes up dramatically, as the flames are fought. Therefore... if you control the amount of water going into a home, you obviously eliminate the possiblity of fire! To take advantage of this on a city-wide basis, it is only necessary to shut off all of the fire hydrants, and dismiss all of the fire-fighters, in order to eliminate all fires permanently! It is breathtaking in it's simplicity, as are most liberal ideas.
Once the massive clouds of smoke eventually dissipate, and the ashes stop clinking and begin slowly cooling, it is then only necessary for the city's newspapers to expose how this was somehow all the fault of greedy industrialists, and that a firm hand would now be needed to seize all private wealth, in order to begin the rebuilding process.
Such breathtaking genius has propelled the collectivist movement to where it is today, blaming Zimbabwe's current famine on the faithless fleeing of the surviving white farmers from that brilliantly administered, and formerly prosperous, land.
The fact was that the U.S. currency, tied to gold at $ 20.67 per ounce, proved to be a major stumbling block to further intervention. Citizens were guaranteed by law to be able to turn in paper currency in exchange for an equivalent amount of gold. It meant that simply printing ever larger amounts of money, as was being tried in Germany, would not be possible in the U.S. The gambit began at the end of F.D.R.'s announcement of the forcible, national "bank holiday", in 1933. He asserted that gold hoarding had brought on the crisis, conveniently ignoring previous and continuing destructive fiscal and monetary practices. It was necessary to warn the American people of the threat of global warming- er cooling, uhh, that is to say, hoarding. The stage was being set for the most unconstitutional property grab in American history,
Americans were suddenly put on notice, by executive order 6012, that all gold had to be turned into the government in exchange for paper currency. The penalties for a citizen retaining his own property were severe. All contracts involving gold were instantly nullified, without benefit of a court order, wreaking havoc with business transactional law. Sadly, in spite of the previous "control" that gold exercised over commodity prices, the seizure of the nation's gold mysteriously had no effect on falling agricultural prices. Gold prices continued to rise everywhere except in the U.S., and grain prices continued to fall everywhere. It didn't matter because their intentions were good.
In January of the next year, FDR "reluctantly" announced the devaluation of the U.S. dollar to $ 35.00 per ounce. The U.S. Treasury, in a schizophrenic digression from inflative policy, had been trying to pin the price of gold at twenty dollars per ounce, and had spent vast millions of taxpayer dollars overseas in an attempt to do just that. When all that happened was that taxpayers were bled white, the policy was eventually abandoned. The net effect was that the U.S. government now held $ 7 billion in gold, while the taxpayers were increasingly losing their jobs and homes, and the remnants of their life savings was now devalued by over 40 percent, through a simple Presidential decree. Those who had earlier lent money at full value, hoping to help others through troubled times, were mugged by the U.S. government. The supply of money circulating within the U.S., meanwhile, had reached an epic low, but no one paid attention to that.
All of this relentless government help... sure makes a tireless interventionist thirsty...and also necessitated raising taxes. The frantic warnings that now tripling the tax burden on an economy which already was reeling from governmental intervention, was as bad of an idea as the original contraction of the money supply, simply was dismissed by Roosevelt advisors, who actually remarked that, "After all, the money would just remain with the rich, who will only waste it, by saving it or investing it..."
"Progressive" ideas were compassionate, and therefore should work. As Chase wrote in his 1932 work, "A New Deal", "Why should the Russians have all of the fun of remaking a world?" Admiration was strong in the Roosevelt White House for the huggable Russian bear. Mandatory union membership was proposed, as a prelude to moving away entirely from the messy business of private business decisions, in favor of the more scientific State control of industry and trade. The only careful avoidance was the use of the "C" word, even though communism was unfamiliar to many Americans.
The important thing was that FDR was a genius at convincing voters that he felt their pain. He had that magic ability to set in motion conflicting actions, permanently temporary solutions, government actions forbidden by the constitution, all of which eased the way to expanding a 2 year recession into an 11 year depression.
And the voters loved him for it. Granted, many of them loved him from the street, since they no longer owned homes, or held jobs, or ate lunch regularly... but that was just part of the FDR charm. It would be studied, memorized and later brilliantly copied by a future first 'black" President.
This was in contrast to the perceived "coldness" of former President Hoover, who disdained the idea of playing upon emotion, in deference to his engineering background. The public had earlier witnessed lack of government tenderness, during the Bonus March.
Painfully squeezed veterans of World War One several years before had decided that their only hope financially was to petition the government for early payment of war bonuses scheduled for payout in 1945. They marched on Washington, and set up a shanty town while the hoped for action of Congress percolated. President Herbert Hoover had no hope of immediately creating massive amounts of disbursable cash, and most of the marchers returned home despondent. When the 1800 or so who desparately remained, then tangled with area police, Hoover entrusted General Douglas MacArthur to send the remainder of them back home.
MacArthur's men had some trepidation, and not a few carefully-hidden tears, at being ordered to stand against blooded veterans who had won the war, but were now bankrupt and starving. MacArthur decided that he would not let the protestors "contaminate" the thinking of his troops, and blatantly exceeded his authority. Though ordered to simply prevent violence, he ordered his men to route the veterans from their pathitic camps. Quite a few were hurt, but Hoover was too good of a man to shift the blame to MacArthur. He accepted responsibility, and confirmed in the nation's eyes that the Hoover Administration was in the pocket of big business bullies.
It was enough to get the Democratic Governor of New York, Franklin D. Roosevelt elected, and he and his followers never forgot it.
About the only other thing that FDR could have ordered, during his tenure, which would have disrupted the economy even further, would have been the mining of New York Harbor and the saturation bombing of the steel and coal industries. But a Supreme Court, which resisted his attempts at the ultimate control of the nation's destiny, was beginning to pare back the worst of his mistakes.
This doesn't mean that Franklin Roosevelt was an evil man, any more than the fellow who decided to bring African bees to South America in order to increase honey production. What it does testify to is that persons in a position to do great, lasting, and even permanent harm to countless others cannot merely fall back upon a lament of, "...but you know, I had really good intentions..." And it applies as well to Herbert Hoover who preceded Roosevelt.
It is not enough to feel our country's pain. If you aspire to wield great power, then you must possess the competence and maturity not to magnify, prolong or even broaden- through wholesale distribution-, that level of pain. If a political party is utterly clueless to the chains of events which produce such economic disfunction, they certainly must never again be put into a position to expand that disruption exponentially. Watching the Democratic party, over the last five years, rage that the worst measures we could possibly take to deal with the Clinton recession, was to reduce taxes, place a $ 500.00 rebate into the hands of consumers, and begin dismantling the minefields of litigation, regulation and fluctuation... it should be obvious that these people might eventually be entrustable to pay the paper boy, but only then under supervision.
Does this mean that a free-spending, Republican-controlled Congress has a sure grip on the reins? No. But it is the job of the responsible citizen to use the primary ballots to remove such quasi-Republicans from consideration in those Novembers yet to come. For if they aren't removed and replaced with real, competent, conservative candidates, then we have side-stepped our responsibilities to the next generation.
Now the question must be asked. If all of this, and so much more that simply exceeds the length-tolerance of a Free Republic post, has been known for so long, by so many serious students of economics, why has it remained unknown to the general public?
It is no secret that the liberal media will embargo virtually any truth which isn't useful to the liberal agenda. But there is no proven method to entirely suppress fact and history without at least the collusive indifference of both sides of the aisle. Could it be that the deification of FDR and his policies has reached such an untouchable level as to represent the same sort of poison pill that Social Security has become? Is it now a matter of touch this and die?
If the childen of the United States have no exposure to the history of economic failures as contrasted to economic successes, then they are truly at risk. The immutable law of cause and effect does not mellow with age.
Yet today the mainstream media and the liberal party chants the same tune as the socialists did in the 1930's. Some of this is certainly the maddened zealotry of truly gangrenous individuals, (Pinch Sulzberger of the New York Times comes to mind), who would put worship of agenda above the very survival and future of the nation's children. Every society has a certain number of these poisoned minds. Raise taxes, demonize industry, de-fang the military, intervene in the market!
But I can only conclude that many conservatives... are also unequipped, or else are not stupid enough, to publically answer the continuing glorification of Rooseveltian policies. And as such, given the educational priorities of public schools, this will also leave their children to fall victim to the same catastrophies of the past, needlessly repeated and endlessly re-suffered .
Those who refuse to study the past...
In my world, my friends, family and acquaintances call these "alapedes" (half avalanche, half stampede.
I really like this: it should be obvious that these people might eventually be entrustable to pay the paper boy, but only then under supervision.
It's just a bit too long for a tagline. Pity that.
Republican is far from synonymous with conservative.
Good writing, thanks!
Heck, I was only vaguely aware of about 15% of this. Thanks for the read. I expect that its hard to get college students to pay attention to this sort of history until they leave college and have to pay their own way. Agree that we need them to if we expect them to succeed in the future.
Are you ready for an admission? It is only since I turned 40 that I've had a chance to begin re-reading history, and challenging all that we were taught in our youth. I had believed it all for 4 decades. Read "dummy" across my forehead!
And also, I admit, since I became stupid enough to publically challenge the sacred cows.
Oh well, as my home page states, I'm "too old, too fat, and too ugly to run for office", anyway! This only clinches the shutout!
Thanks for the comments.
Once you go back and really read what happened you find out that an awful lot of what you were 'taught' in school is BS.
The surest way to get yourself branded as a radical these days is to go around quoting the Founding Fathers.
Radical Ron. Yeah, I can live with that!
We're the Freeper-cals, I guess. Have a good night. Got to pay my taxes tomorrow. And if any is left over, "Momma needs a new pair of brakeshoes...", as the expression goes.
When I tell them it wasn't me who made it up, but Jefferson or Franklin or Paine (not many folks even know who he was anymore) I get blank stares back, mostly.
You have a good night. I've only got another hour and a half or so and then my weekend starts.
Congratulations! You found a couple of trees. Let's see if you can look around and see the rest of the forest.
Excellent post. Thanks for your time and effort. I was also unaware of much of this, and I paid attention in school.
Actually he is right about that particular tree. I can sometimes type a word repeatedly and it looks right to me, since my head is overtaxed with a few ideas chomping at the bit. It was a lame misspelling.
But he wasn't writing about spelling. Not really.
Whenever anyone takes a deep breath and then challenges the "record" about great figues in our history, he runs the certain risk of stinging the fervent admirers of that figure.
Nervous was stung. But I can't take umbrage at him. If life runs true to form, he will now dig into the internet or the library, in order to "expose" my errors, and set the record straight.
I do not envy him for what is most likely to happen next. As he reads more and more, he will feel a cold chill begin to settle over him. Things he never suspected will brutally mock him from the pages in front of him.
As someone once said, "Shake a man's world hard enough... and the man falls apart, not the world..."
Been there; done that.
Afterwards a bruised and open-eyed conservative emerges reborn, and doubt begins to surface about all of that "other stuff" which he has taken for granted in the past. He has started upon the path. As you and I know- it's a long and rocky road.
Good luck, Nervous.
Thanks for the post, Egon.
You are now ensconced up there with Steyn, Lileks, and the guy from Eject!Eject!Eject!
I humbly prostrate myself in awe of your writing.
Thank you, sir.