Aprender com o Laboratorio da História

The "forgotten depression" of 1920-21 was caused by a huge increase
in the money supply for President Wilson's war. When the Fed
started to tighten at war's end, production fell 20 percent from
mid-1920 to mid-1921, far more than today.

Why did we not read about that depression?

Because the much-maligned Warren Harding refused to intervene. He
let businesses and banks fail and prices fall. Hence, the fever
quickly broke, and we were off into "the Roaring Twenties."

But, the Fed reverted, expanding the money supply by 55 percent, an
average of 7.3 percent a year, not through an expansion of the
currency, but through loans to businesses.

Thus, when the Fed tightened in the overheated economy, the Crash
came, as the stock market bubble the Fed had created burst.

Herbert Hoover, contrary to the myth that he was a small-government
conservative, renounced laissez-faire, raised taxes, launched
public works projects, extended emergency loans to failing
businesses and lent money to the states for relief programs.

Hoover did what Obama is doing.

Terrified of the bogeyman that causes Ben Bernanke sleepless nights
-- deflation, falling prices -- FDR ordered crops destroyed, pigs
slaughtered, and business cartels to cut production and fix prices.

FDR mistook the consequences of the Depression -- falling prices --
for the cause of the depression. But prices were simply returning
to where they belonged in a free market, the first step in any cure.

Obama is repeating the failed policies of Hoover and FDR, by
refusing to let prices fall. Obama, with his intervention to prop
up housing prices and Bernanke with his gushers of money to bail
out bankrupt banks and businesses are creating a new bubble that
will burst even more spectacularly.

The biggest myth, writes Woods, is that it was World War II that
ended the Great Depression. He quotes Paul Krugman:

"What saved the economy and the New Deal was the enormous public
works project known as World War II, which finally provided a
fiscal stimulus adequate to the economy's needs."

Patrick Buchanan
(read all here)