I have a slightly different perspective. I don't think that in the long term Government intervention does actually even out booms and slumps. It postpones them but does not avoid them.

The new deal did not end the Depression. With the US sinking into depression again in 1937 after a shallow recovery, it was the coming war and the militarisation of the economy, plus the war itself and the destruction of capital, which laid the groundwork for the long post war boom. The permanent arms economy after the second world war then slowed down the increase in the organic composition of capital and hence among other things slowed down the tendency for the rate of profit to fall.

What if the sub-prime loan crisis is an example of the market at work? The world is awash with capital looking for somewhere to invest profitably. The fact that profit rates may be lower now than in the 1960s means some capital looks to high return (but high risk) investments.

Sub -prime loans, built on a business model of expanding employment, wages and housing process, offered just such high returns. Unfortunately the model didn't work - minimum wages in the US have fallen in real terms, unemployment began to rise and as more and more loans got called in after the honeymoon period ended, prices began to fall for the first time in forty years in the US.

Better regulation is not going to curb this drive for higher returns for the likes of hedge funds, sovereign wealth funds and other investors, or indeed in the productive sector either. It is at the very heart of the capitalist system.

Would better regulation have saved Bear Stearns? What has saved that disaster so far was the Fed's guarantee to JP Morgan of 30 bn of doubtful and bad debts. As the head Fed Bernanke said (or words to this effect) if one goes down we all go down. His rescue action may only stave off the inevitable.

I'd be interested in knowing what is happening in the productive sector of the US economy.

"Would better regulation have saved Bear Stearns? What has saved that disaster so far was the Fed's guarantee to JP Morgan of 30 bn of doubtful and bad debts. As the head Fed Bernanke said (or words to this effect) if one goes down we all go down. His rescue action may only stave off the inevitable."

That is moving towards "State Capitalism". Under a free market JP MOrgan should be allowed to fail. It is the price shareholders pay for voting in the wrong Board.

The NAZIs used capital works to some advantage in the 1934/34 period; taking the idea from the socialists [portrayed as communists] they denounced.

The crash of Wall Street, itself, did not cause the Great Depression. The US became protectionist and other countries followed. So, world GDP fell, owing to the lack of trade.

Post WWII, Europe had been wiped-out. The US the only major economy in tact. IT then used the Marshall Plan to create markets for itself, reversing the protectionism of the 1930s. Also, notice the Zaibatsu were permitted to transmute into the Keitsu, creating competition, if the US; but, also creating a Western style economy.

In Australia, as I have said in a previos post, is when rates come down, they will be still paying high interest returns on term deposits. If four major Banks ignore the RBA and retain the intrest rates, an overseas bank with a low cost of capital {HSBC} will make a take-over or undercut the

we are mising a few points
We’ve learned some lessons along the way;?
HAVE "WE" REALLY?

a>>central bank needs a degree of insulation from the fickleness of politicians we’ve strengthened the independence of the central bank and, as a result, the independence of monetary policy<<.

Means the fed is privatly owned

means that govt has to borrow ITS OWN MONEY....
AT intrest,
thus the ALL the proffets from this URSURY go to big buisness that own that it didnt earn

means that tax payers pay the intrest
[on top of their bankfees and bank charges ,rates , govt fees/charges TAX etc]

means that those who PRIVATLY own the bank
AND the issue of currency [or nchose not to ]tell govt what to do [ie not to serve its people but the bankers and big buisness]

means policy is set by the privatly owned bankers/investment-fundshareholders

means that your money can be taken ,by the private owned big buisness elites,
with govt protecting THEIR buisness [as usual], not protecting the voters or national_intrests

>>Likewise central banks have innovated in their attempt to shore up the liquidity of the financial system in the current crisis.<<

by restricting money supply
they can seize the assets
[all the assets that they 'bought' with 'fiat currency' ,

created simply from a book keeping entry ,and our promise to repay[by carefully chosing who/when/how to finance [or not ]

they have picked that they control

[ie anything that has high return[and that WE control[ie debt[owed in money that they can issue.devalue/limit [or issue , as they chose ,not govt]

>> Thus as the RBA Governor told us recently, “In periods of particularly unusual market duress,
[WE] central banks should be prepared to move beyond the normal scope of operations to provide liquidity against a broad range of assets”.<<

SCARY IS IT NOT?

lets NOT
''move beyond the expected normal operations to provide liqidity ''

[or certainly not by whim of the privatly owned federal banking reservists
[read our masters ,autocratic elites that sold even our peoples bank to evil minded private elites ;bankers][money changers]