The easy thing now might be to proclaim that debt is evil and ask everyone — consumers, the federal government, state governments — to get thrifty. The pithiest version of that strategy comes from Andrew W. Mellon, the Treasury secretary when the Depression began: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” Mellon said, according to his boss, President Herbert Hoover. “It will purge the rottenness out of the system.”
History, however, has a different verdict. If governments stop spending at the same time that consumers do, the economy can enter a vicious cycle, as it did in Hoover’s day.
tnb
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