The Real Deal About the New Deal is it was a Raw Deal

Sometimes when researching to find information that helps me understand why the world is in this economic mess and what I can do to protect myself and my nest egg, I come across some “real gold”.

That just happened today and I have spent considerable time reading and absorbing much of the information I have found.

It started off quite normally with me wanting to catch up on some stuff from Ron Paul. I started at the Mises site where there are many FREE ebooks by current and long forgotten economists and economic writers (philosophy too. I know,  why don’t I get a life, but I like reading this stuff 🙁 )

It was there a noticed a link to an article by Garet Garrett called, ” The Revolution Was“. In the 1930’s Mr Garrett was well-known and was a great critic of President Roosevelt’s New Deal. This article is an indictment of it and much of what he says in the article rings true today. Read it as a primer to reading his great book, “The Bubble That Broke the World“.

One thing caused me concern and that was why did government’s all around the world begin doing exactly the same things that were done from the 1930’s to the 1970’s, at the turn of the century? Mr Garrett’s book, written in 1932 and many similar ones plus the general state of the world economies in the 70’s clearly showed how Keynesian economics had failed and deficits really killed wealthy economies.

You might recall stagflation and many other economic ills in the 1970’s.

It was then I came across a link to a site called, “Generational Dynamics“. This site is owned and written up by John J. Xenakis. He explains Generational Dynamics as follows,

“That societies and nations make mistakes and then learn lessons from those mistakes. But generations grow older, retire and die, and are replaced by new generations who are too young to remember those mistakes and those lessons. When that happens, the mistakes are repeated.”

He claims the older generation who lived through the worst of the Depression and the War learned some lessons but the Baby Boomers now in charge have not had anything really bad happen to them as a whole. So they are not so risk averse.

Mr Xenakis does a great job of reviewing the book, “The Bubble that Broke the World” and relating it to our current economic situation.

“Mass delusions are not rare. They salt the human story. The hallucinatory types are well known; so also is the sudden variation called mania, generally localized, like the tulip mania in Holland many years ago or the common- stock mania of a recent time in Wall Street. But a delusion affecting the mentality of the entire world at one time was hitherto unknown. All our experience with it is original.

This is a delusion about credit. And whereas from the nature of credit it is to be expected that a certain line will divide the view between creditor and debtor, the irrational fact in this case is that for more than ten years debtors and creditors together have pursued the same deceptions. In many ways, as will appear, the folly of the lender has exceeded the extravagance of the borrower.”

The above sounds very familiar. It’s similar to things that I and many other people have written about the debauched use of credit today.

But this wasn’t written today. It appeared in a 1932 book that a web site reader recently alerted me to.

You can jump to specific content below;

Features of the “Universal Delusion”

“Global savings glut” in the 1920s

The financial services industry

Deflation following the crash

Financial collapse of central Europe

Saving Europe

Saving Germany

The securitization of credit

Foreseeing America’s future with China

I believe he has got something and it is worth reading what he has to say. Basically people may learn from history but generations don’t. I think that is the gist of it. So we are doomed to repeat it.

Where does this leave the Baby Boomer like you?

I have said many times we need to understand what happened to we can try to protect our nest egg in the future. It sure looks like the 1930-170 period of economic chaos and stupidity is about to be re-launched under a new generation.

Once again I leave it up to you as to whether generational dynamics will be of use to you in forecasting America’s destiny and your’s and protecting your nest egg. But you can read an online draft of Mr Xenakis’ book, “Generational Dynamics for Historians“.

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