Here is austerity April and the great economic experiment begins, with us as laboratory animals for George Osborne\’s rerun of the depression years. If extreme retrenchment didn\’t work then, double the dosage and try again.
But, erm, there wasn\’t \”extreme retrenchment\” in either the US or the UK in those years. Hoover massively expanded government spending and the deficit. Economy still cratered. In the UK, the budget was kept balanced and the important action was coming off the gold standard. Economy recovered in 18 months or so.
Yes, we all know the Keynesian theory, the story. It\’s just that the evidence isn\’t there in the 1930s to support it.
The place that went wild with deficit spending took ages to recover. The place that didn\’t had pretty much a normal recession.