The conventional wisdom of the economic "experts" of the 1930s -- business executives, bankers, politicians and academics -- held that the cure for the ills of the Great Depression was a balanced budget, reduced spending and lower taxes. This, they said, was not only the right, rational thing to do; it was the only thing that would work. As the downturn accelerated, however, these measures not only failed, but exacerbated the problem, plunging the nation into the worst economic malaise in the nation's history. The motto then was, "let nature take its course, and the economic body will heal itself."
We hear similar chanting today, as conservatives sing a song of "hands off" by government, and in the long run, all will be well.
It wasn't. In the mid-1930s, government took some strong measures, including a ban on financial institutions acting as both bankers and brokerage houses. That ban was lifted during the Reagan years, and what happened? A rerun of the chaos of 1929.
When will they ever learn?
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