We really should stop looking to the GD as a lesson for today’s problems. We don’t use the 30 Years War as means of explaining religious conflict or the Crusades to explain the state of the middle east.
I don't know anything about the Thirty Years war, but I doubt that there's any major recent act of stupidity that was caused by excessive cleaving to (or knowledge of) historical experience.
I suspect we'll keep on looking back at the great depression until it ceases to seem salient.
Oh, and the Crusades explain quite a bit about the state of the middle east.
Most of the faults of colonialism seem to come from how poorly the handoff between the imperial powers and the local population went. It's an interesting dynamic, since almost all of the traditional colonial powers were a shell of themselves by 1945, while the two ascendant powers were the USA and USSR, who really hadn't been involved in the Victorian era colonial land-grabs, at least to the extent that the UK, France, Germany, Belgium, and even Italy were.
Let me introduce you to Balkans war(s) of the 1990s. People who had been living side-by-side peacefully for decades decided to rehash hundreds of years of historical conflicts which to outsiders looked insane.
>I suspect we'll keep on looking back at the great depression until it ceases to seem salient.
The Great Depression is no longer relevant since we don't live in a world on the gold standard. The factors that drove the economy into the ground in the 1930s (massive deflation and bank failures) are not going to happen again. Deflation because countries can print as much cash as they like (Greece excepted), while in regards bank failures we now know banks (and bankers) are too big to fail.
>Oh, and the Crusades explain quite a bit about the state of the middle east.
Nothing about the middle east today is the result of the Crusades except some misguided people thinking the Crusades are relevant.
"this crusade, this war on terrorism, is going to take awhile." - GW Bush[1].
"President Bush said to all of us: 'I am driven with a mission from God'. God would tell me, 'George go and fight these terrorists in Afghanistan'. And I did. And then God would tell me 'George, go and end the tyranny in Iraq'. And I did."[2]
It's pretty easy to paint a picture of attempted cultural (if not religious) domination by the West even without quotes like that. Add that stuff in and it is harder to explain how it isn't the same.
Let's suppose you've managed, as a family, to hack and slash your way to the top of the nobility. Grandfather was a friend of the guy who became king, father inherited lands and got them productive, and now five brothers have all survived. The eldest gets the land. The next four have learned to ride horses, swing swords, and wear armor. One of them decides that the Church isn't so bad, and thus effectively goes into politics. There are still 3 armed badasses who won't be getting the power and wealth they are used to... unless they go and take it from someone else.
Their brothers in the Church have an idea: maybe you can go be violent somewhere else?
The Great Depression was not solely caused by the gold standard, although getting rid of it certainly seems to have aided recovery (worth noting since some argue for returning to it).
Iraq wasn't going to be like Vietnam either because the people loved us, and our weapons were so much awesomer. Incidentally, Bremer was reading about the occupation of Germany and Japan after WWII on his way to Baghdad. History can be instructive, but you need to use it wisely, not cherry pick the instances that support your existing view. There's plenty of Roman history (for example) that maps beautifully onto modern America, even though we are very different from the Romans.
In regards the Great Depression the gold standard seems to be mostly responsible. The countries that left the gold standard first were the first to recover and those that delayed suffered longer. The USA is an interesting exception since Roosevelt revalued gold by fiat in 1933 which had the effect of getting the USA effectively off the gold standard and introducing inflation into a deflationary spiral.
You can certainly raise prices of financial assets but when the long rates are low for so long (and are made lower by QE) there emerges a negative feedback loop of overproduction -> oversupply -> lower prices for goods, with a stronger concentration of this effect low on the value chain (CPI ex-housing). In fact, if you look at domestic and european CPI's ex-housing (European countries are ex-housing by default), you will see that the inflation rates has been nearly 0 since the financial crisis despite printing trillions of dollars. But stocks are expensive. Quote from Greenspan: "As the cost of capital approaches zero, so too will the return on capital."
And to pose another question to you: from what transmission mechanism will your printing press create inflation when long rates are already low?
Like another poster below, I suggest reading the material at http://www.economicprinciples.org/
https://en.wikipedia.org/wiki/Zero_lower_bound
Mind you I think 0% interest rates from a central bank and reckless gov't spending are idiotic policies.
Of course you can always “cure” deflation by printing money. If you gave me control of the printing press for a few weeks I would print up a few billion dollars for each person (or maybe just a few trillion for my friends) and give it away. You can be sure that a dollar would be worth nothing after this exercise.
To answer your second question you can’t create inflation unless you actually get the money into the hands of consumers. The central banks have not been printing and handing the money out to consumers, they have been printing and giving it to banks. If the banks don’t have anyone they want to lend to then the money just sits in the bank and has no effect on demand. If I printed off a few trillion dollars for myself and just left it in a huge vault there would be no inflation - we would only get inflation if I went out a started buying every asset under the sun.
If the gov't created a policy of deflation (which would be against them growing their budget as much as possible) then there would be deflation.
The central bank policy is always political.
While it is worth looking to the past to gain understanding we need to be really careful about doing so since the past really is a foreign land.
Edit. If a country wants me to cure their deflation problem just give me control of their printing press for a few months. I can guarantee that by the time I am finished Zimbabwe will be held up as a paragon of financial rectitude compared to my handy work.
Even characterizations of our past financial crisis (late 2000s financial crisis) as being "the worst since the Great Depression" miss the major difference between it and previous financial crises.
The superficial similarity is that it was tangentially related to an 'asset bubble' (which is the common shared element of most financial crises), but the deeper and more troubling component (troubling in the sense of it hopefully not being an omen for later crises to occur) was the fact that it got out of control because of the omnipresence in late '08 markets of financial instruments designed to allow accredited investors to gain exposure to specific market segments, which then became extremely popular among banking houses and other financial market actors. People commonly view this as the same thing but never before had a class of specific financial products (in this case, RMBSs - residential mortgage backed securities and their related derivative instruments) become so extremely popular that their universal acceptance acted as a prelude to their total deterioration in value.
To preempt subsequent comments:
Yes, LBOs became super popular in the 80s and are kinda sorta similar but these aren't really financial products at all. They are mechanisms to finance the takeover of companies based on debt and financial products are involved but never before had downturns been so driven by the creation of market-specific financial instruments.
The increasing complexity of financial markets is super awesome and will allow the blossoming of a wide variety of financial opportunities for interested parties, but this obfuscation should not come at the cost of... submerging entire market economics lol