Two individuals, Ludwig von Mises (founder of praxeology) and Frans Veldman (founder of haptonomy) gave us the knowledge to understand humanity's crisis.
Joram
***<blockquote>'Every boom must one day come to an end.'
— Ludwig von Mises (1928)
'The crisis from which we are now suffering is also the outcome of a credit expansion.'
— Ludwig von Mises (1931)
'
Although the articles address issues that were debated many years ago, the analysis presented by Mises are as relevant today as they were in his time. Mises reached his conclusions regarding events of the day by means of a coherent theory, as applied to current events, rather than attempting to derive a theory from data alone, as many of his contemporaries did. This is what gave his writings their predictive power then, and it is what makes his writings fresh and relevant today. A proper economic theory such as Mises presents here applies in all times and places.' - Frank Shostak (
The Causes of the Economic Crisis and Other Essays Before and After The Great Depression (pdf), xii) </blockquote>
<blockquote>
Current Crisis Shows Uncanny Parallels to Great Depression - IS 2009 THE NEW 1929?...
...the economic crisis is taking place in 6.5 billion minds at the same time, making it the biggest psychodrama in world history. Experiences and television images become condensed into expectations, expectations turn into fears, and fears shape what is happening in every market today. These fears exert a stronger impact on markets than politicians and central bankers, with their speeches and their programs. The virus has eluded the powerful.
...
A similarly unshakable belief in the future prevailed in the 1920s. In the 1928 election campaign, President Herbert Hoover crowed: "We in America today are nearer to the final triumph over poverty than ever before in the history of any land."
...
Perhaps the most astute contemporaries are those who withhold judgment. When asked the question: "Can you explain what has happened?" Robert Solow, a winner of the Nobel Prize in Economics, simply shakes his head and says: "No, I don't think that normal economic thinking can help explain this crisis."
In light of the difficulties in comparing a past depression with a depression in its embryonic stages, it is worth taking a look at the speed of the respective processes of disintegration. It is an exercise that exposes the raw forces that prevail.
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One can only guess at the long-term political impact of today's crisis. The reason the comparison with the Great Depression is so horrifying is that the world economic crisis led not only to the impoverishment of large segments of the population in Germany and elsewhere, but also to a political catastrophe.
In the wake of the economic crisis, Germany fell into the hands of the Nazis. The slogan, "Hitler - Our Last Hope," was plastered on campaign posters in the 1930s. Many agreed with the sentiment at the time.
A bizarre political group that had formed around Adolf Hitler, a former vagrant and veteran of World War I, was suddenly catapulted to the center of the public eye. On May 2, 1930, Hitler, a man who had been ridiculed until then, was suddenly speaking to a packed house at Berlin's Sportpalast hall. Now the people, or at least a significant portion of the people, were eager to hear Hitler speak.
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The history of the US auto industry -- and this is what makes the current situation so dramatic -- is the history of America as an economic superpower, from its brilliant ascent to its agonizingly slow demise. The GM model, characterized by massive marketing, little substance and an excessive policy of debt financing, has also become the country's model.
...
...when adjusted for the size of today's economy, the US's current debts significantly exceed debt levels during the Great Depression. The superpower has become
an empire of debt.
The most dangerous element of President Obama's crisis management program is that this debt is not being reduced, but expanded. The US's national deficit will reach an estimated $1.8 trillion (€1.36 trillion) in 2009 and will only continue to grow after that, perhaps even doubling. About 40 percent of the national budget is already not being covered by revenues.
If only the problem were limited to the United States. But the situation that has been brewing on the periphery of the crisis is far more dramatic than it was in 1929.
This is mainly attributable to the fact that modern globalization had only begun at the time. Many of today's industrialized nations were agricultural economies, and were not linked to the global economic system.
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Experts like economics Nobel Prize winner Krugman believe that, barring a noticeable improvement in Eastern Europe, Austria could face national bankruptcy. Austria's wellbeing depends on the wellbeing of the Eastern Europeans. This, in turn, is closely tied to the influx of foreign investment capital.
There would be serious political consequences if any Eastern European countries became failed states. One would be a threat to the goal of European unification. A divided Europe would not be a peaceful Europe, as radical influences would quickly begin flowing from the edges of the continent towards its center, which is precisely where Germany is located.
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Germany is also preparing itself for tougher times, at least in theory. As unemployment rises, tax and social security revenues will naturally decline. As a result, Germany will sink further into the red.
The Nuremberg-based Federal Labor Agency has already sounded the alarm, noting that its reserves will be depleted by this fall. Some €2.1 billion ($2.8 billion) have already been set aside for 2009 to pay for the large numbers of workers that are on short-time schemes, where the shortfall in their wages is partly made up by the government.
The government's reserves for social security benefits are likely to be tapped even further, partly to prevent the development of a politically explosive atmosphere. The "Agenda 2010" labor market and social system reforms adopted under former Chancellor Gerhard Schröder have helped to reduce the costs to the government of welfare programs. But in a crisis of the current dimensions, these laws could also lead to the rapid impoverishment of people who are still part of the middle class today.
Anyone who is unable to find a new job within a few months automatically becomes a welfare case in Germany. In the past, if a 57-year-old worker became unemployed, he would continue to receive 60 percent of his last net salary for 32 months. Only then would he qualify for unemployment assistance. Under the old system, he was able to keep his home and his life insurance policies. This helped to slow the descent into poverty.
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...Perhaps the efforts to combat the current crisis are merely laying the foundations for the next crisis, which will be bigger still.
- Der Spiegel,
Current Crisis Shows Uncanny Parallels to Great Depression - IS 2009 THE NEW 1929?, 04/29/2009</blockquote>