For the financial crisis that has wiped out trillions in wealth, many
have felt the lash of public outrage.

Fannie and Freddie. The idiot-bankers. The AIG bonus babies. The Bush
Republicans and Barney Frank Democrats who bullied banks into making
mortgages to minorities who could not afford the houses they were
moving into.

But the Big Kahuna has escaped.

The Federal Reserve.

"(T)he very people who devised the policies that produced the mess
are now posing as the wise public servants who will show us the way
out," writes Thomas Woods in "Meltdown."
http://www.amazon.com/gp/product/159...SIN=1596985879

Already in its sixth week on the New York Times best-seller list, this
eminently readable book traces the Fed's role in every financial
crisis since this creature was spawned on Jekyl Island in 1913.

The "forgotten depression" of 1920-21 was caused by a huge increase in
the money supply for President Wilson's war. When the Fed started to
tighten at war's end, production fell 20 percent from mid-1920 to
mid-1921, far more than today.

Why did we not read about that depression?

Because the much-maligned Warren Harding refused to intervene. He let
businesses and banks fail and prices fall. Hence, the fever quickly
broke, and we were off into "the Roaring Twenties."

But, the Fed reverted, expanding the money supply by 55 percent, an
average of 7.3 percent a year, not through an expansion of the
currency, but through loans to businesses.

Thus, when the Fed tightened in the overheated economy, the Crash
came, as the stock market bubble the Fed had created burst.

Herbert Hoover, contrary to the myth that he was a small-government
conservative, renounced laissez-faire, raised taxes, launched public
works projects, extended emergency loans to failing businesses and
lent money to the states for relief programs.

Hoover did what Obama is doing.

Indeed, in 1932, FDR lacerated Hoover for having presided over the
"greatest spending administration in peacetime in all of history." His
running mate, John Nance Garner, accused Hoover of "leading the
country down the path to socialism." And "Cactus Jack" was right.

Terrified of the bogeyman that causes Ben Bernanke sleepless nights --
deflation, falling prices -- FDR ordered crops destroyed, pigs
slaughtered, and business cartels to cut production and fix prices.

FDR mistook the consequences of the Depression -- falling prices --
for the cause of the depression. But prices were simply returning to
where they belonged in a free market, the first step in any cure.

Obama is repeating the failed policies of Hoover and FDR, by refusing
to let prices fall. Obama, with his intervention to prop up housing
prices and Bernanke with his gushers of money to bail out bankrupt
banks and businesses are creating a new bubble that will burst even
more spectacularly.

The biggest myth, writes Woods, is that it was World War II that ended
the Great Depression. He quotes Paul Krugman:

"What saved the economy and the New Deal was the enormous public works
project known as World War II, which finally provided a fiscal
stimulus adequate to the economy's needs."

This Nobel Prize winner's analysis, writes Woods, is a "stupefying and
bizarre misunderstanding of what actually happened,"

Undoubtedly, with 29 percent of the labor force conscripted at one
time or another into the armed forces, and their jobs taken by elderly
men, women and teenagers with little work experience, unemployment
will fall.

But how can an economy be truly growing 13 percent a year, as the
economists claim, when there is rationing, shortages everywhere,
declining product quality, an inability to buy homes and cars, and a
longer work week? When the cream of the labor force is in boot camps
or military bases, or storming beaches, sailing ships, flying planes
and marching with rifles, how can your real economy be booming?

It was 1946, a year economists predicted would result in a postwar
depression because government spending fell by two-thirds, that proved
the biggest boom year in all of American history.

Why? Because the real economy was producing what people wanted: cars,
TVs, homes. Businesses were responding to consumers, not the clamor of
a government run by dollar-a-year men who wanted planes, tanks, guns
and ships to blow things up.

"The Fed was the greatest single contributor to the crisis that
unfolds before us," Woods writes of today, and "more dollars were
created between 2000 and 2007 than in the rest of the republic's
history."

After 9-11, the Fed kept interest rates low -- in one year as low as 1
percent. That money flooded into the housing and stock markets. And in
2008, as the Fed tightened, the bubble burst.

Now the money supply is again expanding, to rescue us from a crisis
created by the previous expansion. Of Nicholas Biddle's Bank of the
United States, the great Andrew Jackson was eloquent.

"It has tried to kill me," he said. "But I will kill it." And he did.

Should not this creature from Jekyl Island, for all its manifold
crimes and sins against the republic, also be summarily put to death?

http://www.humanevents.com/search.ph...ck+J.+Buchanan