E Fed Great Depression And Great Recession Liquidations Go Unexplained

Andrew Mellon made a statement that is in dispute as to its origin. It was found in the writings of Herbert Hoover. While many say it was not a legitimate expression of Andrew Mellon's opinions, I believe it was the expression of Hoover's understanding of the Federal Reserve Bank and that it applies to our times as well.

George Selgin of CATO said regarding the quote:

The famous Mellon “statement” is itself a caricature, made up after the fact by Hoover himself. There is actually no direct evidence that Mellon favored all-out “liquidation.” As an ex-officio member of the FRB, he supported rate cuts. For details see the abstract at Wiley.com. 

The statement as found in Hoover's writings that Hoover attributed to Andrew Mellon was as follows:

 “…liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”

I would not be so obsessed with Mellon's view or what I think can be attributed to Mellon even if the quote is made up by Hoover, except that Bernanke presided over another liquidation in 2008. Mellon and Bernanke appear to be on the same liquidation team, though separated by about 76 years!  People have to realize that Mellon, unlike current Secretaries of the Treasury, was a member of the Federal Reserve and that Hoover was speaking his mind about the Federal Reserve in quoting or making up the Mellon quote.

My pesky persistence at Scott Sumner's blog regarding this subject caused me to ask the question: “If Bernanke was such a student of the Great Depression, why didn’t he intervene earlier?” To this, Don Geddis, a Stanford grad and Market monetarist responded on the Money Illusion blog:

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Disclosure: I am not an investment counselor nor am I an attorney so my views are not to be considered investment advice.

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