And the fatal problem with “mainsteam” macroeconomics is that it fails to address the bedrock causal process of the economy, the very stuff of money, interest and production cycles — . adaptive valuational choice across time involving non-permanent production processes that take more or less time and produce more or less output.
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The Great Depression was a severe worldwide economic depression that took place mostly during the 1930s, originating in the United States. The timing of ...
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From the point of view of today's mainstream schools of economic thought, government should strive to keep the interconnected macroeconomic aggregates money supply and/or aggregate demand on a stable growth path. When threatened by the forecast of a depression central banks should pour liquidity into the banking system and the government should cut taxes and accelerate spending in order to keep the nominal money stock and total nominal demand from collapsing.  At the beginning of the Great Depression most economists believed in Say's law and the self-equilibrating powers of the market and failed to explain the severity of the Depression. Outright leave-it-alone liquidationism was a position mainly held by the Austrian School.  The liquidationist position was that a depression is good medicine. The idea was the benefit of a depression was to liquidate failed investments and businesses that have been made obsolete by technological development in order to release factors of production (capital and labor) from unproductive uses so that these could be redeployed in other sectors of the technologically dynamic economy. They argued that even if self-adjustment of the economy took mass bankruptcies, then so be it.  An increasingly common view among economic historians is that the adherence of some Federal Reserve policymakers to the liquidationist thesis led to disastrous consequences.  Regarding the policies of President Hoover , economists like Barry Eichengreen and J. Bradford DeLong point out that President Hoover tried to keep the federal budget balanced until 1932, when he lost confidence in his Secretary of the Treasury Andrew Mellon and replaced him.    Despite liquidationist expectations, a large proportion of the capital stock was not redeployed but vanished during the first years of the Great Depression. According to a study by Olivier Blanchard and Lawrence Summers , the recession caused a drop of net capital accumulation to pre-1924 levels by 1933.  Milton Friedman called the leave-it-alone liquidationism "dangerous nonsense".  He wrote:
Jerome (1934) gives an unattributed quote about finance conditions that allowed the great industrial expansion of the post WW I period: