Monday, September 7, 2009
Nobel Prize Winning Economist Says Obama is Making the Same Mistakes as Policymakers Made During the Great Depression
Charles Rowley of George Mason University and Nathanael Smith of the Locke Institute say that Obama is committing the same mistakes that policymakers made during the Great Depression.
Specifically, Rowley and Smith say:
They further warn:
The policy responses to the debt bubble demonstrate crude political consideration rather than economic understanding. If excessive government indebtedness is a major source of the problem, why increase the government debt? Why encourage households to go yet further into debt?The prognosis is catastrophic if projected government policies are not cut back...
Individual banks and their counterparties should not be bailed out, although the system should be protected by ensuring that failing banks are wound up in an orderly fashion – this is the only way to restore market discipline.
It is not impossible that the US will experience the kind of economic collapse from first- to third-world status experienced by Argentina under the national socialist governance of Juan Peron.James Buchanan - who won the Nobel prize for economics in 1986 - is endorsing Rowley and Smith's view, adding:
"We have learned some things from comparable experiences of the 1930s' Great Depression, perhaps enough to reduce the severity of the current contraction. But we have made no progress toward putting limits on political leaders, who act out their natural proclivities without any basic understanding of what makes capitalism work."