Thursday, July 14, 2016

Peter Thiel’s Ignorance of Macroeconomic History

Brad DeLong introduces us to libertarian Peter Thiel:
Thiel is speaking at the Republican National Convention… Peter Thiel has many screws loose. He says that the last time you could be optimistic about American politics and regard it as healthy was 1920--before the granting of the vote to women and "welfare beneficiaries" put American politics permanently on the wrong track
Brad provides this from 2009. I want to pick up the following from Mr. Thiel:
the last economic depression in the United States that did not result in massive government intervention was the collapse of 1920–21. It was sharp but short, and entailed the sort of Schumpeterian “creative destruction” that could lead to a real boom. The decade that followed — the roaring 1920s — was so strong that historians have forgotten the depression that started it.
I guess Mr. Thiel does not read Econospeak as we have had several posts discussing this episode in our macroeconomic history. One on Christmas Eve 2014 by Barkley notes:
My post argued that there was monetary stimulus in 1921 and noted that even though there was downward stickiness of wages in 1945-46 and also in 1982, there were rapid bouncebacks with monetary policy in particular being stimulative during those episodes (and fiscal policy also being so in the 1982 one under Reagan).
The 1920 recession was a deliberate attempt by the FED to lower the price level via tight monetary policy similar to the deliberate attempt by the Volcker FED to dramatically lower inflation. Once the task was done – the FED reversed course which is why these two recoveries occurred. Is Mr. Thiel really telling us that the Reagan era resulted in massive government intervention? Will he make this claim before the Republican National Convention?

2 comments: said...

Completely agree, pgl (of course I agree with posts that agree with me, at least most of the time, :-)).

Lord said...

A lot of defense spending anyway, but Republicans are good with that, even if not Trump. Maybe he is thinking about running next time.