No, Walter, There Is Not A Santa Clause

July 13, 2007 5 min read

Just when I needed a boost, a reader sent a letter that elevated my state of agitation to near normal. I herewith respond.

Dear Walter,

You object to my assertion in "The Boom and Bust of Malice" that the Federal Reserve engineered the Great Depression.

You wrote, "I know of no responsible historian who holds this view."

Well, sir, I know of few historians who know squat about economics. Many economists appear to know less, and they work for the government.

Nevertheless, here are some economists who fully or partly blame the Fed: Ludwig Von Mises, Friedrich Hayek, Murray Rothbard, Milton Friedman, Alan "Bubbles" ("The Maestro") Greenspan and "Helicopter" Ben Bernanke.

The last two have nicknames because they are the former and current chairmen of the Federal Reserve. The get nicknames for the same reason George "Baby Face" Nelson got one.

As an aside, we observe that the president of the United States, under whose guidance the Fed has expanded money and credit by galactic proportions, is fond of giving nicknames to his staff.

You wrote, "The Federal Reserve was mainly written by the brilliant Carter Glass of Virginia."

Let bygones by bygones, sir. I know he was a newspaper editor, but have mercy. We must forgive Virginia her shining son, as we forgive Chicago the brilliance of "Scarface" Al Capone.

You say Glass devised the Federal Reserve Act from a prototype written by the banker J.P. Morgan.

To that, I have a question. If you let a banker draft a bank law, what business do you think that law will profit?

You wrote that "all historians of any stature" agree that the depression had four causes.

First cause: A financial panic caused by overpriced stocks often bought on margin.

Sir, stock market speculators borrowed the money to buy stocks on margin from Wall Street brokerages. The brokerages borrowed the money from banks of the Federal Reserve.

In the 1920s the Fed expanded the money supply 62 percent. In the last decade the Fed has expanded money supply about 125 percent.

Monetary manipulation causes booms and busts. Stocks. Housing. Now we see the action in mergers and acquisitions, another boom doomed to a flaming fiasco of Fed proportions.

Second cause: The Smoot-Hawley Tariff.

You are correct. Tariffs depress economies. You also are correct that most Americans with a pulse urged Herbert Hoover not to sign it.

Hoover thought tariffs protect jobs. The opposite is true. Too bad the present Congress and president have not learned that.

Third cause: The Great Drought of 1930.

I am more concerned with the Great Drought of 2007. My yard has turned brown. However, it will not cause a depression.

Farmers impoverished in wind and dust were not a cause of the depression, but a result.

Fourth cause: Lack of regulations on companies selling stock.

This is FDR anti-capitalist propaganda. FDR was a collectivist regulator like Hoover. Both emulated the Mussolini fascist model. FDR expanded Hoover's raw deal: public works programs, home loan bank system, bankruptcy reform, curbs on competition and immigration restrictions. Remarketed, these became the New Deal and extended the depression a decade.

Sure, we had stock cheats. We still do, but isolated market frauds do not cause depressions. Massive monetary and market manipulation can and do. The agents of this manipulation are the Federal Reserve, the government and private financiers.

You signed your letter, "Sincerely and with some feeling of malice, Walter."

Nice touch, Walter. Touche.

Excellent letter. It distracted me an entire evening. My wife sends her thanks.

My regards with cheerful malice,

Phil "Doomsday" Lucas

Phil Lucas is executive editor of The News Herald in Panama City, Fla. Contact him at [email protected] To find out more about Lucas and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at

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