The lack of results so far from the various “stimulus” plans seems to have got the American Left worried already. How else can one explain the appearance in the NYT of an article which declares that Obama’s actions are similar to Hitler’s and that Hitler was successful in his economic policies? I would never have predicted an article like that in the NYT in a million years!

Taranto writes at some length about the broader aspects of the comparison so I will confine myself to the economic argument in the article. Although I am a former High School Economics teacher, I am not fully engaged with economic statistics these days so I will speak in general terms and hope that a more detailed critique will emerge from elsewhere.

The Hitler comparison is in fact only one of the dubious comparisons used in the article. The writer declares successes where few others would. That the Hoover/FDR policies did not cure unemployment is, I think, undeniable but to our NYT writer they were a success — as were the policies behind the Japanese doldrums of the 1990s. So one must suspect from the outset some flimsiness in the Hitler comparison too.

Much has been written about the German economic recovery of the 1930s but the first point that needs to be made is surely that Germany’s position at that time was very different from that of the USA today. The twin impacts of a currency totally destroyed by inflation under the Weimar regime and a continuing demand for “reparations” were huge negative factors for the German economy at that time. And the large reductions in those problems were more the work of the brilliant Hjalmar Schacht at the Reichsbank than anyone else. Just relieving Germany of those problems was a very good “stimulus” to an economic recovery.

And it was also the manoeuvring of Schacht that enabled Hitler to finance his public works programmes. The programmes concerned did of course run up huge debts and it was only Schacht that kept Germany out of some form of bankruptcy. But Schacht could only do so much and by 1939 Germany was effectively “broke” and it is often contended that Hitler’s march to war in that year was as much an economic necessity as an ideological imperative. Germany’s generals certainly did not think that they were ready for war at that time. They felt that their buildup would not be complete until a couple of years further down the track. And the outbreak of war in 1939 in fact saw Germany facing French forces that were in most ways numerically superior to it.

So Hitler went to war to loot the gold in the Bank of France and elsewhere as much as for any other reason. Thanks to the brilliance of General von Manstein he initially succeeded in his objectives. One shudders to think what might have happened if he had put Manstein in charge of the Russian campaign.

Obama does not have to go to war to deal with the debt problem he is creating. Because America is the provider of the world’s reserve currency, he can simply print all the greenbacks he likes to pay his government’s bills. And he has already started doing that on a large scale. That is of course called “inflation” and there are plenty of commentaries from all sorts of sources on the evils of that. That it rewards debtors and penalizers savers has always been obvious but in the present case it has also started the process of snatching away from the world its reserve currency. And the consequences of discouraging saving (and hence capital formation) worldwide must indeed be grim.

The gold bugs are of course as happy as pigs in mud at the moment and gold exporting countries, such as Australia, are doing a roaring trade. But the net effect of that is to increase the Reserve Bank of Australia’s holding of American paper — and it is precisely that which now seems unwise. So from that alone one can see that the gold standard has its own problems — which is why it was abandoned many years ago.

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