Depression 2.0
I have been reading Capitalism: The Unknown Ideal and came across a chapter in the book "Common fallacies about Capitalism". One of the sections of the chapter explains why the US hit a depression in 1930s and blames most of it to government intervention. It strongly blames the Federal Reserve that made the cheap money available which caused the whole problem. I was bit taken aback to read this explanation because I hear the exact same rationale for the current problems in the US economy. There is no doubt that the US is in recession but I hope it does not jump into depression. Also I think the things are much worse now because of the soaring gas and food prices. But one thing that is starkly different from the 1930s is that the world has been strongly wired together and I am not sure whether the US will face the bulk of the problem or if some other countries will share the hit as well.
Also I am really surprised that Alan Greenspan has authored some of the chapters in the book. In one of the chapters he mentions that the gold standard is an essential standard for free economy, and that paper money created by federal reserve is harmful. I don't understand how did he forget all of these principles when he lowered the interest rates that created all of the mortgage mess that we see today.
