Today on Utah’s Rod Arquette show he was discussing an article he read in the New York Times called “We’re Spent,” by David Leonhardt. The article points out that spending on entertainment and cars and homes and so forth has never fallen below a 3% decline in any recession, and we’re down 7%. The insinuation, of course, is that we may not ever recover, and that consumer and government should increase spending as a result. He argues that history demonstrates this fact and points to the Hoover administration… -1
I called Rod Arquette and in my nervous excitement for actually getting on the radio for the first time happily, nervously and admittedly probably badly, I tried to denounce this. My reasoning is simple. History has shown us quite the opposite. Whenever we hit a recession we tend to see both the national debt and individual and family debts all at the breaking point. The times where we have rebounded are the times when not only the government but individuals got serious about debt elimination.
The Smoot-Hawley Tariff caused in increase in imported consumer goods which, as increased prices always do, lead to a decrease in demand and lost sales. Then Europe struck back by increasing tariffs on American goods and that caused lost sales over seas. This is what lead to Black Friday.
This patter continues for some time, whenever we scaled back spending and paid off our debts things got better, and people started spending again, but the conditions had to be right, low taxes, minimal bureaucracy and a government and a people with minimal debt.
-1 “We’re spent,” David Leonhardt July 16, 2011 New York Times http://www.nytimes.com/2011/07/17/sunday-review/17economic.html?pagewanted=all accessed 7-18-11.
-2 Hoover, Herbert. "American Individualism", 1922.