“With regards to my point on the depression, I have found the following quote from then Treasury Secretary, Andrew Mellon, made in 1930. His suggestion as a means to deal with the great depression was for the Fed to: “Liquidate labor, liquidate stocks, liquidate real estate… values will be adjusted, and enterprising people will pick up the wreck from less-competent people.” In other words, leave it to the market. As can be seen, this failed miserably, with improvement only really occurring around 1933 when government action was taken.”
This was later clarified with:
“I agree, spending did not lead to a remarkable recovery. It did, however, lead to a short term recovery. “
As the free market was impugned with a quote, allow me to respond also with a quote. This time from Henry Morgentha – FDR’s very own Treasury Secretary from 1934-1945:
“We have tried spending money. We are spending more than we have ever spent before and it does not work. . . . I say, after eight years of this administration, we have just as much unemployment as when we started . . . and an enormous debt to boot.”
— FDR Treasury Secretary Henry Morgenthau on May 9, 1939
On another note, people who support either Rudd’s or Obama’s stimulus packages would be a lot more convincing if they could cite a single example in the history of the world where a government increased spending and this led to increased jobs, income and wealth on any sustainable basis.
A good introduction on Keynsian stimulatory policy (and why it doesn’t work) here:
Update: On reflection, my snide remarks about UQLC were completly uncalled for in this forum. I should not fall into the trap of stereotyping an individual on the basis of a collective, nor using this to make cheap political shots. Mr. Trout’s comments so far – whilst wrong – certainly are well thought out and deserving of more. Sorry.