George Bernard Shaw got it right. “If history repeats itself, and the unexpected always happens, how incapable must Man be of learning from experience.”
People started panicking; economists told us not to worry. Then the banks failed. Unemployment rose. The policies of one president and his inability to understand the scope of the issues led to a slow reaction to the crisis. A new president stimulated the economy by building infrastructure and shoring up the banks. Unemployment decreased. GDP increased.
Things stabilized and were headed (slowly) in the right direction.
Sound familiar? No, it’s not 2012. This is what happened from 1929 to 1937. Then, suddenly unemployment shot up and GDP went negative. The economy went into a tailspin. What happened? The government stopped public works deficit spending. The Fed tightened the money supply to stop inflation. Taxes on workers increased (from new Social Security taxes).
How do we manage this mess? The Fed has (mostly) increased the money supply. The Bush tax cuts for workers must continue. The wealthy should pay their fair share. We need to create jobs by repairing our roads and bridges. Trickle–down Reaganomics didn’t work before and won’t work now. The choice is clear.
St. Simons Island