Laissez faire economics
1920 - 1933
The philosophy of Hoover's economy was best expressed
when his Treasury Secretary Andrew Mellon announced after the
stock market crash that the Fed will stand by as the market works itself out:
'Liquidate labor, liquidate real estate... values will be
adjusted, and enterprising people will pick up the wreck
from less-competent people'. As a result of this inactivity the economy spiralled
dramatically downwards until 1933.
New Deal economics
1933 - 1944
Roosevelt began relatively modest deficit spending
that arrested the slide of the economy and resulted
in some astonishing growth numbers.
Roosevelt's average growth of 5.2 % during
the Great Depression was even higher than Reagan's
3.7 % growth during his so-called 'Seven Fat Years' .
Un-employment declined from 25 % in 1933 to 14 %
In 1937 Roosevelt reversed course and curbed government spending
drastically in order to balance the budget, which sent the economy plummeting back towards 1932
levels. In the fall of 1937 massive government spending began again, and by June 1938 the crisis was past.