Ron Paul’s Economic Theories Winning GOP Converts

[SnyderShrugged]

Uh, his point (I think) is that neither did Hoover.

If thats the case, it's false, since Hoover did in fact have those policies.

[PeterMP]

Back to the OP...

I think it's awesome that HR 1207 has 129 co-sponsors at this point and the list is still growing!

Not that long ago, a proposal to audit the Federal reserve would have been thrown in the generic trash and never even discussed.

Anyone who thinks that Paul hasnt had an impact should consider how enormous of an accomplishment getting that many co-sponsors really is.

I think that is a good thing too. It is nice to see that Paul has moved to auditing rather than simply disbanding too.

[PeterMP]

you said...

"We should adopt Ron Paul's economic theories (i.e., laissez-faire). They served the Hoover administration so well in the 1920s."

It's very clear.

Hoover's policies were anything but Laissez-Faire. Therefore "laissez-Faire" was not a legitimate cause of the GD, and Paul's policies don't compare to Hoover's whatsoever.

BUT that assumes that the GD was caused by Hoover's policies.

We all seem to agree that Smoot-Hawley didn't cause the GD. The idea of Hoover as a big spender, certainly before the collapse, is a myth (as given from the actual increases in the federal budget).

They cerainly don't prove that Laissez-Faire caused the GD, but to say that Hoover wasn't Laissez-Faire and therefore Liassez-Faire didn't cause the GD isn't correct either (unless you want to go back and tell me Smoot-Hawley caused the Great Depression).

[SnyderShrugged]

I think that is a good thing too. It is nice to see that Paul has moved to auditing rather than simply disbanding too.

I think (my personal opinion only) is that one will possibly lead to the other.

[SnyderShrugged]

BUT that assumes that the GD was caused by Hoover's policies.

We all seem to agree that Smoot-Hawley didn't cause the GD. The idea of Hoover as a big spender, certainly before the collapse, is a myth (as given from the actual increases in the federal budget).

They cerainly don't prove that Laissez-Faire caused the GD, but to say that Hoover wasn't Laissez-Faire and therefore Liassez-Faire didn't cause the GD isn't correct either (unless you want to go back and tell me Smoot-Hawley caused the Great Depression).

I don't why anyone feels that Hoover was ever laissez-faire ever, either before or after the GD.

from wiki:

After his successful election in November 1928, Hoover entered office with a plan for reform of the nation's regulatory system. A dedicated Progressive and Reformer, Hoover saw the presidency as a vehicle for improving the conditions of all Americans by regulation and by encouraging volunteerism. Long before he entered politics he denounced laissez-faire thinking.[21] As Commerce Secretary he had taken an active pro-regulation stance. As President, he helped push tariff and farm subsidy bills through Congress.

Hoover expanded civil service coverage of Federal positions, canceled private oil leases on government lands, and by instructing the Justice Department and the Internal Revenue Service to go after gangsters for tax evasion, he enabled the prosecution of gangster Al Capone. He appointed a commission which set aside 3 million acres (12,000 km²) of national parks and 2.3 million acres (9,000 km²) of national forests; advocated tax reduction for low-income Americans (not enacted); closed certain tax loopholes for the wealthy; doubled the number of veteran's hospital facilities; negotiated a treaty on St. Lawrence Seaway (which failed in the U.S. Senate); wrote a Children's Charter that advocated protection of every child regardless of race or gender; built the San Francisco – Oakland Bay Bridge[citation needed]; created an antitrust division in the Justice Department; required air mail carriers to adopt stricter safety measures and improve service; proposed federal loans for urban slum clearances (not enacted); organized the Federal Bureau of Prisons; reorganized the Bureau of Indian Affairs; instituted prison reform; proposed a federal Department of Education (not enacted); advocated fifty-dollar-per-month pensions for Americans over 65 (not enacted); chaired White House conferences on child health, protection, homebuilding and homeownership; began construction of the Boulder Dam (later renamed Hoover Dam); and signed the Norris-La Guardia Act that limited judicial intervention in labor disputes.

These are the policies before the GD. His policies after were much, much worse.

Nothing Laissez-faire about him.

http://en.wikipedia.org/wiki/Herbert_Hoover#Policies

[SnyderShrugged]

Five Myths About the Great Depression

Herbert Hoover was no proponent of laissez-faire.

The current financial crisis has revived powerful misconceptions about the Great Depression. Those who misinterpret the past are all too likely to repeat the exact same mistakes that made the Great Depression so deep and devastating.

Here are five interrelated and durable myths about the 1929-39 Depression:

- Herbert Hoover, elected president in 1928, was a doctrinaire, laissez-faire, look-the-other way Republican who clung to the idea that markets were basically self-correcting. The truth is more illuminating. Far from a free-market idealist, Hoover was an ardent believer in government intervention to support incomes and employment. This is critical to understanding the origins of the Great Depression. Franklin Roosevelt didn't reverse course upon moving into the White House in 1933; he went further down the path that Hoover had blazed over the previous four years. That was the path to disaster.

Hoover, a one-time business whiz and a would-be all-purpose social problem-solver in the Lee Iacocca mold, was a bowling ball looking for pins to scatter. He was a government activist fixated on the idea of running the country as an energetic CEO might run a giant corporation. It was Hoover, not Roosevelt, who initiated the practice of piling up big deficits to support huge public-works projects. After declining or holding steady through most of the 1920s, federal spending soared between 1929 and 1932 -- increasing by more than 50%, the biggest increase in federal spending ever recorded during peacetime.

Public projects undertaken by Hoover included the San Francisco Bay Bridge, the Los Angeles Aqueduct, and Hoover Dam. The Republican president won plaudits from the American Federation of Labor for his industrial policy, which included jawboning business leaders to refrain from cutting wages as the economy fell. Referring to counteracting the business cycle and propping up wages, Hoover said: "No president before has ever believed that there was a government responsibility in such cases . . . we had to pioneer a new field." Though he did not coin the phrase, Hoover championed many of the basic ideas -- such as central planning and control of the economy -- that came to be known as the New Deal.

- The stock market crash in October 1929 precipitated the Great Depression. What the crash mainly precipitated was a raft of wrongheaded policies that did major damage to the economy -- beginning with the disastrous retreat into protectionism marked by the passage of the Smoot-Hawley tariff, which passed the House in May 1929 and the Senate in March 1930, and was signed into law by Hoover in June 1930. As prices fell, Smoot-Hawley doubled the effective tariff duties on a wide range of manufactures and agricultural products. It triggered the beggar-thy-neighbor policies of countervailing tariffs that caused the international economy to collapse. Some have argued that the increasing likelihood that the Smoot-Hawley tariff would pass was a major contributing factor to the stock-market collapse in the fall of 1929.

- Where the market had failed, the government stepped in to protect ordinary people. Hoover's disastrous agricultural policies involved the know-it-all Hoover acting as his own agriculture secretary and in fact writing the original Agricultural Marketing Act that evolved into Smoot-Hawley. While exports accounted for 7% of U.S. GDP in 1929, trade accounted for about one-third of U.S. farm income. The loss of export markets caused by Smoot-Hawley devastated the agricultural sector. Following in Hoover's footsteps, FDR concentrated on trying to raise farm income by such tactics as setting quotas on production and paying farmers to remove acreage from production -- even though this meant higher prices for hard-pressed consumers and had the effect of both lowering productivity and driving farmers off their land.

- Greed caused the stock market to overshoot and then crash. The real culprit here -- as in the housing bubble in our own time -- is the one identified by the economic historian Charles Kindleberger in the classic book "Manias, Panics, and Crashes": a speculative fever induced by excessively easy credit and broken by the inevitable return to more realistic valuations.

In the late 1920s, cheap and easy money fueled a tremendous increase in margin trading and a proliferation of "investment trusts" that offered little in the way of dividends or demonstrable earnings per share, but still promised phenomenal capital gains. "Speculation," as Kindleberger neatly defined it, "involves buying for resale rather than use in the case of commodities, and for resale rather than income in the case of financial assets."

The last thing Hoover wanted to do upon coming to office was to rein in the stock market boom by allowing interest rates to rise to a more normal level. The key to prosperity, in his view, lay not in sound money and rising productivity, but in letting the good times roll -- through government action aimed at maintaining high wages and high stock market valuations.

Enlightened government pulled the nation out of the worst downturn in its history and came to the rescue of capitalism through rigorous regulation and government oversight. To the contrary, the Hoover and Roosevelt administrations -- in disregarding market signals at every turn -- were jointly responsible for turning a panic into the worst depression of modern times. As late as 1938, after almost a decade of governmental "pump priming," almost one out of five workers remained unemployed. What the government gave with one hand, through increased spending, it took away with the other, through increased taxation. But that was not an even trade-off. As the root cause of a great deal of mismanagement and inefficiency, government was responsible for a lost decade of economic growth.

Hoover was destined to fill the role of the left's designated scapegoat. Despite that, the one place where he and FDR truly "triumphed" was in enlisting the support of leading writers and intellectuals for government planning and intervention. This had a lasting effect on the way that generations of people think about the Great Depression. The antienterprise spirit among thought leaders of this time (and later) extended to top business publications. "Do you still believe in Lazy-Fairies?" Business Week asked derisively in 1931. "To plan or not to plan is no longer the question. The real question is who is to do it?"

In his economic policies and his incessant governmental activism, Hoover differed far more sharply with his Republican predecessor than he did with his Democratic successor. Calvin Coolidge, president from 1923 to 1929, made no secret of his disdain for Hoover, who served as his secretary of commerce and won praise from such highly regarded liberals as John Maynard Keynes and Jean Monnet. "That man has offered me unsolicited advice for six years, all of it bad," Coolidge said. He mockingly referred to Hoover as "Wonder Boy."

With the vitality of U.S. and world economies at stake, it is essential that the decisions of the coming months are shaped by the right lessons -- not the myths -- of the Great Depression.

http://online.wsj.com/article/SB122576077569495545.html

[greenspandan]

haha this would be like noam chomsky taking over the democrats. good luck with that.

[SnyderShrugged]

haha this would be like noam chomsky taking over the democrats. good luck with that.

How so? especially since no one has claimed Paul is "taking over" the GOP.

please explain

[PeterMP]

These are the policies before the GD. His policies after were much, much worse.

Nothing Laissez-faire about him.

http://en.wikipedia.org/wiki/Herbert_Hoover#Policies

Well, first, he was certinaly more Laissez-faire then FDR and subsequent American Presidents (even Reagan). Second, I'm not really disagreeing. I'm saying that proving he isn't Laissez-faire doesn't prove that Laissez-faire didn't cause the Great Depression (or that non-Laissea faire policies wouldn't have prevented it).

[SnyderShrugged]

Well, first, he was certinaly more Laissez-faire then FDR and subsequent American Presidents (even Reagan). Second, I'm not really disagreeing. I'm saying that proving he isn't Laissez-faire doesn't prove that Laissez-faire didn't cause the Great Depression (or that non-Laissea faire policies wouldn't have prevented it).

That makes sense to me. (I'd challenge that on many subsequest president's though, as pointed out by another poster, Hoover is closer to GW Bush ) (even though I really don't feel, personally, that Laissez-fair policy caused the GD)

[Oldskool]

It was never Paul's small government thoughts that alienated the majority of Republicans, that honor belongs to his isolationist and xenophobic foreign policy.

[PeterMP]

Five Myths About the Great Depression

Herbert Hoover was no proponent of laissez-faire.

Come on SS. I thought we were pretty much all agreed that Smoot-Hawley didn't cause the GD, then you go and post something like this:

"- The stock market crash in October 1929 precipitated the Great Depression. What the crash mainly precipitated was a raft of wrongheaded policies that did major damage to the economy -- beginning with the disastrous retreat into protectionism marked by the passage of the Smoot-Hawley tariff, which passed the House in May 1929 and the Senate in March 1930, and was signed into law by Hoover in June 1930. As prices fell, Smoot-Hawley doubled the effective tariff duties on a wide range of manufactures and agricultural products. It triggered the beggar-thy-neighbor policies of countervailing tariffs that caused the international economy to collapse. Some have argued that the increasing likelihood that the Smoot-Hawley tariff would pass was a major contributing factor to the stock-market collapse in the fall of 1929."

Are we really going to blame spending increases started in 1929 for the Great Depression:

"After declining or holding steady through most of the 1920s, federal spending soared between 1929 and 1932 -- increasing by more than 50%, the biggest increase in federal spending ever recorded during peacetime."

Guess who was commerce secretary during the 1920s and at the time was given a lot of credit for that "holding" steady during the early 1920s?

[ACW]

It was never Paul's small government thoughts that alienated the majority of Republicans, that honor belongs to his isolationist and xenophobic foreign policy.

Xenophobic? Sadly yes. Isolationism? I guess Washington and Jefferson were isolationist then.

[SnyderShrugged]

It was never Paul's small government thoughts that alienated the majority of Republicans, that honor belongs to his isolationist and xenophobic foreign policy.

except he was not isolationist nor xenophobic in terms of foreign policy. Care to try and prove that please?

Here, I'll help you get started just cuz I'm nice

Isolationism is a foreign policy which combines a non-interventionist military policy and a political policy of economic nationalism (protectionism). In other words, it asserts both of the following:

Non-interventionism – Political rulers should avoid entangling alliances with other nations and avoid all wars not related to direct territorial self-defense.

Protectionism – There should be legal barriers to control trade and cultural exchange with people in other states.

While Paul is certainly in favor of non-interventionalism, there is no single element of protectionism in his views.

Xenophobia is a dislike and/or fear of that which is unknown or are different from oneself. It comes from the Greek words ξένος (xenos), meaning "stranger," "foreigner," and φόβος (phobos), meaning "fear." The term is typically used to describe a fear or dislike of foreigners or of people significantly different from oneself.

http://en.wikipedia.org/wiki/Xenophobia

I'm not sure how you could point to anything even remotely close to xenophobia in Pauls foreign policy.

sorry, you are simply dead wrong

[deejaydana]

It was never Paul's small government thoughts that alienated the majority of Republicans, that honor belongs to his isolationist and xenophobic foreign policy.

I do agree with what much of what Paul has to offer but the isolationist stance, especially in a world that is becoming increasing interlinked and interconnected, just can't work. It particularly cannot work when you're a superpower. I'm not sure I'd call him xenophobic though but in truth I haven't delved into his stuff as much as some have.

[ACW]

Maybe not xenophobic, but his stance on immigration...meh.

[SnyderShrugged]

Come on SS. I thought we were pretty much all agreed that Smoot-Hawley didn't cause the GD, then you go and post something like this:

"- The stock market crash in October 1929 precipitated the Great Depression. What the crash mainly precipitated was a raft of wrongheaded policies that did major damage to the economy -- beginning with the disastrous retreat into protectionism marked by the passage of the Smoot-Hawley tariff, which passed the House in May 1929 and the Senate in March 1930, and was signed into law by Hoover in June 1930. As prices fell, Smoot-Hawley doubled the effective tariff duties on a wide range of manufactures and agricultural products. It triggered the beggar-thy-neighbor policies of countervailing tariffs that caused the international economy to collapse. Some have argued that the increasing likelihood that the Smoot-Hawley tariff would pass was a major contributing factor to the stock-market collapse in the fall of 1929."

Are we really going to blame spending increases started in 1929 for the Great Depression:

"After declining or holding steady through most of the 1920s, federal spending soared between 1929 and 1932 -- increasing by more than 50%, the biggest increase in federal spending ever recorded during peacetime."

Guess who was commerce secretary during the 1920s and at the time was given a lot of credit for that "holding" steady during the early 1920s?

I didnt write the article and I have been very clear that I agree on the point that smoot-hawley wasnt a direct cause. I was posting that article more on the other points it made.

[SnyderShrugged]

I do agree with what much of what Paul has to offer but the isolationist stance, especially in a world that is becoming increasing interlinked and interconnected, just can't work. It particularly cannot work when you're a superpower. I'm not sure I'd call him xenophobic though but in truth I haven't delved into his stuff as much as some have.

I've already proven that his foreign policy is not isolationist so you should now agree with ALL of his policies!

[deejaydana]

I've already proven that his foreign policy is not isolationist so you should now agree with ALL of his policies!

Yeah, I admit, I'm not up to speed on all his suggestions/theories. I did enjoy reading "The Revolution." No matter where you stand in your personal politics I would recommend that book to anyone.

[Madison Redskin]

you said...

"We should adopt Ron Paul's economic theories (i.e., laissez-faire). They served the Hoover administration so well in the 1920s."

It's very clear.

I am not sure how closely you are reading my posts. Let me make this absolutely crystal clear. I do not believe President Herbert Hoover was a proponent, supporter, or advocate of a laissez-faire approach to the economy. However, before Hoover was elected to office, the federal government did generally take a laissez-faire approach to the economy. That laissez-faire approach was one of the causes of the Great Depression. President Hoover got thrown out on his butt, at least in part, because of the Great Depression. Therefore, the federal government's laissez-faire approach to the economy ended up screwing Hoover.

Hoover's policies were anything but Laissez-Faire. Therefore "laissez-Faire" was not a legitimate cause of the GD, and Paul's policies don't compare to Hoover's whatsoever.

Your logic is flawed. You can't conclude that laissez-faire economic theory did not cause the Great Depression because Hebert Hoover was not one of its proponents. That assumes that Herbert Hoover caused the Great Depression, which no reasonable historian would conclude.

[SnyderShrugged]

I am not sure how closely you are reading my posts. Let me make this absolutely crystal clear. I do not believe President Herbert Hoover was a proponent, supporter, or advocate of a laissez-faire approach to the economy. However, before Hoover was elected to office, the federal government did generally take a laissez-faire approach to the economy. That laissez-faire approach was one of the causes of the Great Depression. President Hoover got thrown out on his butt, at least in part, because of the Great Depression. Therefore, the federal government's laissez-faire approach to the economy ended up screwing Hoover.

Your logic is flawed. You can't conclude that laissez-faire economic theory did not cause the Great Depression because Hebert Hoover was not one of its proponents. That assumes that Herbert Hoover caused the Great Depression, which no reasonable historian would conclude.

Glad you made yourself clear, even if that is not what you said initially:)

Lassez-fair policy did not cause the GD. It's your logic that is flawed.

It's a myth pushed forward by the very same Keynsians that claim we need to spend our way to prosperity this go around.

From what I've read from many economists of the era and their contemporaries there were many "causes" of the GD, and Laissez-faire policy is not one of them.

for example:

The restoration of the international gold standard, following the massive monetary expansions that took place during and after World War I, could only be lastingly secured by means of aggressive devaluation or deflation or a combination of both.

The post-WWI attempt to limit the need for deflation or devaluation, by erecting a "cheap" gold exchange standard, was doomed from the start because a crisis in any of the participant countries could cause the entire house-of-cards to come tumbling down, spreading the crisis worldwide.

Add in a fragmented, unit banking system that increase the risk of bank failures owing to sector-specific or regional shock. (first principles of finance)

Also, consider the widespread bank failures that cause a run into currency, which lead to monetary contraction. and state-declared bank "holidays" will only cause more people to withdraw their deposits.

Don't forget price controls! besides preventing the price level from adjusting in such a manner as to eliminate general gluts or general shortages of goods, they also distort the structure of relative prices, thereby undermining efficiency and productivity.

What's strange to me is not that the depression happened (given policies that were resorted to,) but that such destructive policies secured wide support despite their often readily-predictable, adverse consequences.

These and more caused the Great Depression, not hands off Federal policy (which didnt exist much in 1929)

[boofMcboof]

The more I read about how convoluted the relationship between the fiat monetary system, the wall street elite, higher ups in federal government and reserve, the less crazy Ron Paul seems to me. Or maybe I'm the one that's going crazy.

One take on how the Great Depression actually took hold: http://seekingalpha.com/article/134219-plunge-protection-team-attacks-bofa-this-ends-now

In the late 19th and early 20th century, the U.S. government was sworn to its people, and to the world, to be following a pure gold standard. That is, the dollar was supposed to be "good as gold", and interchangeable at any American bank at a rate of a little over $20 per ounce. The government was supposed to be keeping a stockpile sufficient to redeem all proffered dollars, but it lied.

In the late 1920s, at the urging of Wall Street interests, far more Federal Reserve Notes (dollars) were printed up than there was gold to back them. This resulted in a huge temporary boom, much like the one we saw between 1987 and 2000. But, finally, it resulted in a serious recession in 1930-31, when the irrational investment that the boom had stimulated began to unwind.

By the early 1930s, so many people were demanding to convert dollars to gold, that there was a likelihood that the United States Treasury would run out of gold. When that became clear, the People lost faith in sanctity of the dollar, and the nation fell from a recession, that began to improve in 1930, to the biggest depression the world had ever seen, in 1931-1934.

The similarities to our current situation are striking. Anyone care to set me straight?

[Koolblue13]

The more I read about how convoluted the relationship between the fiat monetary system, the wall street elite, higher ups in federal government and reserve, the less crazy Ron Paul seems to me. Or maybe I'm the one that's going crazy.

He has been calling it since 2002 and has been dead on. I don't know how many things he needs to be right about, before people stop thinking he is the crazy one.

[Larry]

If thats the case, it's false, since Hoover did in fact have those policies.

Damn you, you've actually made me go and look up more information than the one or two sentences I remember from High School about the Great Depression! I hate actually losing some of my ignorance.

[twa]

I wonder how he feels about this historic moment?...as if I didn't know:)

In a historic first, Uncle Sam has supplanted sales, property and income taxes as the biggest source of revenue for state and local governments.