My friend Jeff sent me a nice article about how the current economic situation resembles 1937-38; so I thought I’d write an article about it.
Basically, it says that when the economy started to upswing, just like now, everybody started to freak out about the national debt we were wracking up, so they increased taxes and cut programs, just like the Republicans and Democrats are fighting about now. Scary stuff, because in doing so they threw the country back into recession.
The Nobel-prize winning economist Milton Friedman blamed the Fed and the contraction in the money supply in his epic “Monetary History of the U.S.” And the stock market itself may have been a culprit, falling so steeply that it wiped out the wealth effect of rising prices, undermined confidence and brought back painful memories of the crash. But taken together, they suggest that policy makers moved too quickly to withdraw government support for the economy.
So that’s cool; it’s important to learn from our past mistakes–we should definitely pay attention to what happened before. (What’s the Churchill quote? “If we do not study history we are doomed to repeat it.”) But as we look at what the Tibetans call the tun kyens–the surrounding conditions–as always, we ask, is that the cause?
For example, would it be possible for the government to raise taxes and not through us back into recession? Sure, it’s possible. How would that work? Because I have a generous state of mind, and I think about how my taxes can help others, the result is that the economy improves.
As I’ve written before, what’s the way out of the debt crisis? Wanting to pay back my debts, because I don’t want the mental seeds in my mind of stealing.
What’s the proof? Raising taxes hasn’t got Greece out of trouble; it seems to have worsened it. (Or maybe not. Time will tell.) But there is a point where it’s beneficial to increase taxes. At least theoretically.
So what should we do? Study our history, educate ourselves on what are our best options, but first: plant seeds.