Perhaps the most prevalent mental images of the Great Depression of the 1930s are the photos of the soup lines and breadlines where the “down and out,” those with absolutely no hope, stood waiting meals. Today, however, soup lines are a thing of the past, and they will not be evidence of just how bad the economy is. Today, we have statistics to illustrate the state of the economy.
But, statistics stir no emotions. They are numbers in tables, figures on graphs. It’s hard to identify with a graph of rising food stamp recipients, but even the old photos of the 1930’s Depression causes one to feel for those standing in line, who want only meals.
Yet the graph below is evidence of just how bad things are in the US.
Since just before the recognition of the Global Financial Crisis, food stamp recipients have climbed 65%. That’s a huge increase in Americans living on food stamps. Perhaps one could argue that the 26 million on food stamps in 2007 were institutionalized, and that they viewed food stamps as a way of life. However, as for the 17 million added in the last four years, they are probably productive members of society who no longer can find work.
Mac Salvo, in an article on www.lewrockwell.com, discusses this topic further. Included in Salvo’s piece is a 1:27-second video of Treasury Secretary Timothy Geithner asserting that TARP and quantitative easing “averted a second Great Depression.” That remains to be seen, but so far there is little evidence that we are out of the recession.
Geithner also wants to rebuild America with “make work” projects. “Make work” projects, although they provided jobs for some in the 1930s, only extended the Great Depression and were one of the reasons it lasted ten years.
A primary principle of Austrian economic theory is that bad investments must be allowed to fail, the assets liquidated and the capital redeployed in productive projects. When politicians get to decide what businesses remain afloat (usually through bailouts but sometimes through protectionism), the economy stagnates until finally it becomes evident that those businesses cannot make it, even to politicians. Unfortunately, by then it is a full-blown depression, and that may be what we are facing.
Sadly, Geithner also assets that we are in this horrible economic situation because of “a long period of lost opportunities to do things to make America stronger.” As a former President of the New York Fed and a member of the Board of Governors of the Fed, Geithner endorsed the Alan Greenspan’s 1% discount rates that gave us the housing crisis, which, according to most analysts, was the cause of the Global Financial Crisis. You have to wonder what Geithner was taking about when he spoke of “things to make America stronger”