Socialism or?

Hoover indeed felt that the economy was sound. What he also thought was that given enough time, those companies which were unable to function in the market would be replaced by those that could. What he could not forsee, because it had never been possible before in human economics, was the utter collapse and resultant hyper-inflation that occurred in Europe.

Consider, the French and English who had sought to redeem the costs of the war by essentially taxing the only Central Power left when the shooting stopped. Then also consider the nature of the former Austro Hungarian Empire states. It broke into several smaller nations with very weak and primitive economies. All of which had a very limited ability to function outside of the former system. Imperial Russia's collapse had huge shocks as well.

Then if you add to this the fact that rail rolling stock was limited in Europe after the war, the road networks were not sufficient to efficiently move and shift resources effectively, and the naval fleets that had formerly been sufficient to move goods globally in 1914 were now not capabale due to the tonnages sunk after 3 years- you suddenly have a case where the global economy which had been emerging under European Colonialisim was impossible to maintain.

The British compensated by sucking as much cash out of Germany as possible and also attempting to turn most of its colonial empire into unit markets, allowing each one to become specialized in goods or resources ideally suited to each colony. France sucked as much cash out of Germany as it could and turned to a brutal resources strip mining of its colonies- especially its North and West African ones. Italy simply imploded early as did the remainder of the Austro Hungarian Empire. Their economies became almost subsistence in nature. Russia withdrawing from the world markets for almost a decade meant that cheap resources suddenly stopped flowing into Eastern Europe and especially Germany.

Europe essentially ground to a halt. In the USA the buying of stocks on margin coupled with the utter exuberance of the nation after it had won a war, emerged almost unscathed, and saddled with a large returning army of very young men who had "seen the world" and were not content to return to the farm lead to an explosion of goods, companies, resources, and markets for all three. While the USA was not a relatively major player in terms of markets world wide before the war, after the war, America was almost over night the leader in almost all technologies and resources. And for a time the world readiliy bought and could afford the goods America was selling.

What brought it to a halt in America was when the Europeans simply collapsed in terms of currency purchasing power. Exports to the former combatants virtually ceased. Countries like Belgium teetered on bankruptcy and began simply exploiting their colonial possessions, as much as possible. Holland began draining the Dutch East Indies. Great Britain began forcing market access restrictions in India and South Africa, and aggressively began turning formerly self sufficient colonies like Kenya into single product factories .

When the export market began collapsing, and the loans that had been made by the United States government to the European Allies ceased being paid, the capital markets in America were unable to absorb the loss of cash from both trade and war debt repayment. With the resultant slow down, the first uncoordinated attempt to keep the American economy running was in the form of margin purchases of stocks and options on goods/resources. It became an issue when the numbers of warehouses with filed capacity neared almost 100%. The excess goods and services on the market, represented by the options to trade bought on margin were now essentially worthless because there was neither doemestic nor international capacity to absorb these goods into the economy.

Hoover was right in that what should have been done was allow the options to buy to result in losses. That would have eventually brought both the commodity price down, as well as result in market set purchase options in the future in line with the actual value and the actual demands for goods in the future. The problem was the money needed to settle the options was huge. Hoover injected funds into the market in order to make availible dollars to cover the difference between the actual money that had been placed on margin options and the actual paper value of the contracts for those options.

Instead what happened was everyone began trying to dump their options and stocks- making the paltry funds Hoover had re;eased utterly useless. It set up the 1929 stock collapse as well as set up the currency runs in the banks.

Hoover was right in believing the only sound solution was one where the existing options sold at losses, the goods and resource production fell to the level the American economy could absorb, and companies unable to financially weather the environment were allowed to collapse of their own accord.

And in the end that is exactly what happened. The alphabet soup of programs, stimulus packages, socialist handouts, and federal government manipulations of all types of markets, not only continued the economic collapse we call the Depression, but it inadvertently extended it.

There was a cabinet meeting I learned about in early 1940 where the topic was actually Germany and Europe. I really don't remember much more than that about the meeting in detail, but one of FDR's advisors made the remark that at the rate they were going it would take a war to get America out of its economic mess because nothing they had done had worked so far.

Point is, much of what FDR tried did not work. Establishment of Social Security, grand projects like Boulder Dam, and the dozens of alphabet soup programs all had had a marginal effect. And he knew it.

With the start of war, FDR was able to instead drop the facade of "doing something" to actually fixing the problem by getting the government out of the economy.

FDR adopted laissez-faire, used the excuse of war time expedience to encourage volunteer efforts, and quietly shut down most of the alphabet soup programs in a matter of months. It was the result of this adoption of Hoover's plans as they had existed in Treasury Secretary Mellon's interpretation of what the government should have been doing beginning in 1929, that the American economy finally started to get going again.

What FDR did- with the exception of keeping Smoot Hawley on the books- was what Hoover had been doing. Hoover was ultimately correct- the government should only keep people from starving but not attempt to jump-start the economy by managed administration and cash injections. Whether Hoover actually believed that government interference would condition Americans to depend on the government is open to debate. But the reality is that the American people did indeed come to depend upon the federal government to a degree that caused the Depression to continue longer than it should have.

For example, in America unemployment was still over 15% in 1941 and the GNP was pretty flat still in spite of Lend Lease. FDR's economic plans were Keynsian and followed a model of executive administration of the economy. In Germany, the model was decidedly non-Keynsian and placed government in a role of hands off but supervisory administration of the economy.

1932 was the height of the World Depression. In 1936 the Germans were performing at or above the economic levels of 1928 with an unemployment rate of around 6%.

Under FDR, the Depression lasted another 6 years. In 1939 America's economic indicators were at or near the 1928 levels, with a 17% unemployment rate. It would not be until the end of the first quarter of 1942 that the American economy would universally exceed the 1928 levels and drop unemployment under 10%.

The difference? FDR installed socialist stimulus economic models. Hitler didn't install any stimulus packages based on socialism. He allowed the bad companies to collapse, allowed the market to regulate itself, and limit government intervention into industries and corporations only to the extent that undue replication of goods or services was not an artificial drag on export and import exchange.

In short, once the Germans stopped acting like socialists and Keynsians, the economy recovered.

That was what I was pointing out. Obama is pushing hard for Keynsian style stimulus. McCain isn't.

One method historically has worked, one has worked better when the economy is tanking.

The economy is tanking. Therefore the candidate you should support is the one who is advocating the plan which has a better track record of lifting an economy out of collapse.

Real easy decision.

Vote for the Keynsian plan= really bad economy.
Vote for the non-Keynsian plan= bad economy followed by an actual recover in a much shorter period of time.

Using FDR as an example- once he dropped Keynsian directed economy, it took about 16 months to recover fully.

The choice however is yours.