Forgetting that the great depression occurred after the creation of the federal reserve.
Forgetting that Canada avoided the great depression because it had no central bank.
From Wikipedia: In 1934, with only ten chartered banks still issuing notes, the Bank of Canada was founded and began issuing notes in denominations of $1, $2, $5, $10, $20, $25, $50, $100, $500 and $1000. In 1944, the chartered banks were prohibited from issuing their own currency, with the Royal Bank of Canada and the Bank of Montreal among the last to issue notes. From that point forward, the Bank of Canada has been the sole issuer of bank notes denominated in Canadian dollars. A liability of more than $12 million remains on the Bank of Canada's books up to the present day, representing the face value of Dominion of Canada, provincial, and chartered bank notes still outstanding.
Forgetting that wealth would have been greater had the western world not experienced a great depression..
The EU looked at the world and saw the dominance of the US dollar. They saw research that I have seen shows that the USA is 3% richer than it would be if the dollar was not the dominate currency in the word. They wanted a piece of that. They also thought that a common currency guided by an enlightened central bank.would be better for the Southern countries which had been prone to periods of inflation. Further that a single currency would facilitate trade within the EU. And so the Euro was created.
But big currencies mean big problems and we have Greece, Portugal, Spain and Italy with very high unemployment for 5 years! They are all struggling and falling deeper in debt.
And lest you get the wrong idea even Germany's real growth has been poor. And no one sees an easy way out.
Time to start thinking of smooth way out of the Euro mess.
Mike Konczal on the origins of the modern welfare state in America:
Informal networks of local support, from churches to ethnic affiliations, were all overrun in the Great Depression. Ethnic benefit societies, building and loan associations, fraternal insurance policies, bank accounts, and credit arrangements all had major failure rates. All of the fraternal insurance societies that had served as anchors of their communities in the 1920s either collapsed or had to pull back on their services due to high demand and dwindling resources. Beyond the fact that insurance wasn’t available, this had major implications for spending, as moneylending as well as benefits for sickness and injuries were reduced.
The Hoover Administration’s initial response to the Great Depression was to supplement private aid without creating the type of permanent public social insurance programs that would arise in the New Deal. Hoover’s goal was to maintain, in the words of the historian Ellis Hawley, a “nonstatist alternative to atomistic individualism, the romantic images of voluntarism as more truly democratic than any government action, and the optimistic assessments of the private sector’s capacity for beneficial governmental action.” As President Hoover said in 1931, much like conservatives do today, any response to the economic crisis must “maintain the spirit of charity and mutual self-help through voluntary giving” in order for him to support it.
Noble as that goal may be, it failed. The more Hoover leaned on private agencies, the more resistance he found. Private firms and industry did not want to play the role that the government assigned them, and even those that did found it difficult, if not impossible, to carry out those responsibilities. The Red Cross, for instance, did not want to move beyond providing disaster relief. Other groups, like the Association of Community Chests and Councils, had no interest in trying to coordinate funds at a national, rather than local, level. Hoover understood that private charity wasn’t getting to rural areas, yet private charities couldn’t be convinced to meet these needs.
[...]
What’s most worth noting is that, in the end, both beneficiaries of fraternal societies and private charities themselves welcomed this transition. During the Great Depression, citizens, especially the range of white ethnic communities in the largest cities, watched as mass unemployment tore down institution after institution. From fraternal societies to banks to charities, the web of private institutions was no match for the Great Depression.
As documented in Lizabeth Cohen’s Making a New Deal, these white ethnic communities turned to the New Deal to provide the baseline of security that their voluntary societies were unable to offer during a deep recession. As a result of the implosion of the voluntary societies they depended upon, working-class families looked to the government and unions for protections against unstable banks and the risks of the Four Horsemen.
So if he is correct, it looks to me like the Great Depression was the result of a failure of the Federal Reserve so great that it proved to be too great a burden non-Government charity and so Government stepped in. Of course the the Federal Reserve was created to because of earlier failures of the federal government money system. That system was created to fund the civil war. So government money was both the cause of the failure and reason that government could afford to step in an help.
Never the less, I think that the big flaw in Government charity is not that it helps the poor creating disincentive to work, but that most of the spending goes to rich and middle class (through SS, medicare, farm and other subsidies and Government schooling) and so Federal Government spending on charity is much higher than it should/could be. My reason to believe that is because I do not think it is possible at this time for Government to subsidize the median life time earner. So you are taxing the same people you spend the money on.
So absent if the Great Depression was avoided how much of Government do you think would be devoted to charity? I think it would be much smaller and just about everyone would be better off.
Take Social Security for one example.
- a person who earns $15,000/year will pay $82,000 in payroll taxes (employer and employee combined) over 44 years of work. When he retires, his annual benefit will be $10,476 or 13% of his lifetime payroll taxes.
- a person who earns $50,000/year will pay $273,000 in payroll taxes over 44 years of work. When she retires, her annual benefit will be $21,672 or 8% of her lifetime payroll taxes.
- a person who earns $115,000/year will pay $627,000 in payroll taxes over 44 years of work. When he retires, his annual benefit will be $32,952/year or 5% of his lifetime payroll taxes.[56]
From Social Security Just the facts
$1,294 is the average benefit/worker/month. If everyone got what those who earns $15,000/year that would enable cut the program by about 1/3. We could then lower the tax by about 25% allowing workers to spend that money when they want. Most people are poorer when they are young than old and so would get a higher marginal benefit from keeping that 25% than getting 25% more in retirement. The lower earners would not be hurt because many of them would get more than they get now. Almost all USA citizens would be better off.
BTW In Australia the government part of the retiree pension pays out the same amount to all recipients.
Bottom line we should not work to end Government charity but we should work to educate people about why Gov. charity should be for bottom percentiles of life time earners.
The following Quote is from here.
So instead of global famine, food production tripled even as world population doubled. As a result, the amount of daily calories per capita rose from 2,400 in 1960 to nearly 3,000 today.
I have a friend who is a PHD agronomist from Brazil, he tells me that beef production per acre in Brazil would 6x higher if the average rancher used the practices of the best ranchers. So we have plenty more to go see below.
Researchers at Rockefeller University counter that—because the backlog of productivity enhancing technologies—humanity is on the verge of “peak farmland” and that by 2060 farmers will have returned an area 10 times the size of Iowa to nature, and even more if governments stop subsidizing biofuels.
Also:
The surge in food prices also occurred because huge amounts are being diverted into biofuels. Bourne notes that the International Food Policy Research Institute calculated that biofuel production drove up food prices by 40 to 70 percent. The calories in the 40 percent of the U.S. corn crop that is used to produce biofuel would be enough to feed everyone in Africa for a year. In addition, reducing the third of food that is discarded, spoiled, or eaten by pests would increase supplies by nearly 50 percent.
One other often ignored thing, if you look at the chart here, you will see that some lesser used crops like sweet potatoes yield much more per acre than wheat, corn and rice. I have read that tree crops have even greater yields per acre than potatoes.
Then there is new technology. A 50% increase in wheat yields is at least theoretically possible.
People can easily be bankrupted in the USA due to an illness. Surprisingly to some, people in countries with socialized medicine can also easily be bankrupted due to an illness. Being bankrupt in not necessarily poverty.
Almost no one in the USA lives in poverty today (mostly only the mentally ill homeless still live in poverty and they exist all over the world and are a very though case.) So if the illness is not mental illness, it will not generally drive a person into poverty in any developed country, not even the USA.
If you can go back to working after the illness you can recover from bankruptcy, most will. In the USA if you cannot go back to working you will be able to get on medicaid and SS disability. If medicaid and SS disability did not exist things would different enough that it is hard to imagine how people would get by but I would bet that they would.
The trick with all this is to help the needy while maintaining good incentives to produce. Could we be more charitable, yes but we could also be much more efficient in our charity.
To me, the minimum wage looks like a very clever way for politicians to hide a tax that redistributes some money to some low wage employees.
Who it might hurt:
- A small number of would be low wage workers who will have no idea that the minimum wage is to blame.
- Some marginal businesses that now pay below the minimum wage who might go bankrupt quicker.
- Consumers who buy from those businesses.
Only the few businesses hurt will know what hit them and they account for very few votes. From the perspective of politicians, it is a brilliant, though on might say unethical, scheme. They get to look like the good guys and companies that provide work for employees who cannot find better jobs look bad.
Who it might help:
- Shy mostly young people working very hard for very low pay who are to shy to ask for a raise. I think that I was once in that group.
- Businesses that pay more than the proposed new minimum that compete businesses that pay the less than new minimum.
- Those employees who are marginal but will keep their jobs.
- Businesses like McDonald's and Walmart who can easily pay the higher wages but do not who compete with business that may not be able to afford the new minim wage.
- Businesses like McDonald's and Walmart that compete for employees with business that already pay more that the new minim wage.
Some facts:
- Many people already work for less that minimum wage. If you believe Steven D. Levitt some of those are low level drug sellers. Some work for companies like the one a few offices over from mine called Vector Marketing. I think in the likes of Vector Marketing most people who end up working for them pay to work. Some work scavenging for metals. A few work for cash.
- Also there always some restaurants teetering on the edge of bankruptcy will a higher minimum wage not push them over the edge a little quicker?
- There are large regional differences in cost of living. Some of these are because of differences in real-estate costs but also due to life style.
Much depends on how you feel about the trade off between more money for some workers and less jobs and who should pay for any added expense and also how you feel about hidden taxes.
I think many on the side of the $15/hour minimum wage believe that it is immoral pay someone so little and so are not bothered if it would drive a few small usually poorly run businesses into bankruptcy. They also have little sympathy for those who buy from low paying businesses, besides it allows them to hit McDonald's and Walmart and they can easily afford the higher wages and can most of their customers.
This from Dean Baker
In fact, the main reason that some public sector funds face severe shortfalls is that politicians like Richard M. Daley and Chris Christie chose not to make required contributions.
Politicians have an incentive to over promise and under fund pensions. (Just like the auto company executives.) So each individual should try to make the best arrangements he can and get as much money as he can now. Pensions can be a little like pie in the sky. Pay off your mortgage, add insulation and any home capital that pays back. Work as long as you can keep relations with friends and family strong. Diversify.
So after it has inflicted so much damage on the Greek economy, why might the Greek people vote to stay in the Euro.
This is from the comments on this Marginal Revolution blog post by Peter Schaeffer.
There are, in fact, any number of pro-Euro factions many of which are anti-austerity. Some folks (a large faction) favor the Euro because they want their pensions, paychecks, and other handouts in Euros, not Drachmas. These folks are very opposed to austerity, but even more opposed to receiving Drachmas from the government. These folks hate the Troika, love Syriza, but will vote yes anyway.Another faction is comprised of Greeks with bank accounts. A no vote means either banks accounts will be confiscated or converted into Drachmas. These folks may or may not like Syriza or austerity, but at this point fear is the only issue on the table.Yet another faction is made up of basically conservative folks like the restaurant owner. These folks see the Euro as a tool for forcing the Greek government to reform. I don’t think they are in correct in this matter. However, it is their opinion, not the correctness of their opinion, that matters.Still another faction (center / left) sees the Euro as a symbol of Northern European efficiency, a large and well funded welfare state, effective and progressive taxes, modernity, the “tolerance” agenda, etc. Of course, they also see the Euro as means of bringing Greece up to the standard of Denmark of the Netherlands. I don’t think they are in correct in this matter. However, it is their opinion, not the correctness of their opinion, that matters.As you can see, lots of groups support the Euro for reasons that are highly divergent and in some cases contradictory. Some of these folks strongly oppose austerity. Others overtly favor austerity. They will all vote yes anyways.Finally, let me offer a quote from a Greek citizen that sums up the situation all too well.“The EU can’t afford to let us fail so we should continue to say no and they will blink and give us a better deal.”This person intends to vote no. However, plenty of folks will vote yes precisely because they think that yes means more goodies from Europe. In one respect, the advocates of yes are probably very correct. A yes vote will probably be followed by a reopening of Greece’s banks. That’s one last chance to “take the money and run”.
One other factor might be that in a country like Greece where people are more likely to ignore laws, the real rate of unemployment might be way below the reported 25%.
