Think of this as Volume 16, Number 30 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.
Why did the Crash of 1929 result in a recession so severe that the President who dithered over it wound up calling it just “a little depression” – hence the term Great Depression?
None other than Herbert Hoover.
Hoover was not a bad man, nor a stupid man. He may have been one of our brightest Presidents. And until 1929 he was widely celebrated for his work against starvation in Europe after World War I, and the destruction of Louisiana in 1927.
But in the face of collapsing asset values he dithered. He represented creditors, who expected debtors to pay their debts. The fact that the debtors were bankrupt mattered nothing. Liquidate them.
Hoover made several half-hearted efforts to ameliorate the situation. It was the Hoover Administration that created the Reconstruction Finance Corp. But he would go so far and no further, and he would go nowhere fast. First, do no harm he said.
First, do something said his opponent. Franklin Roosevelt. America believed that. FDR was not an ideologue. He was a progressive like Hoover. But he was willing to experiment, to try things, and to discard what didn't work, then try again. Mainly, he was willing to use inflation, to cut the value of the creditors' debts, to allow them to be paid in higher-priced goods. And it worked. U.S. economic growth during the first Roosevelt Administration averaged almost 10%.
So who is Herbert Hoover now?