Keynes in The General Theory Of Employment, Interest, And Money (1936) argued that a major cause of recessions is a failure of free markets. He said that economic bubbles develop by under consumption and over investment. He said the solution is for the government to pick up the consumption with programs like the New Deal under Roosevelt. This is the same idea as stimulus spending under Bush and Obama. The Federal Reserve Bank finances the deficit spending causing inflation.
Von Mises in Human Action: The Scholar's Edition (about 1940) argued that a major cause of recessions is interference by government sponsored central banks manipulation of the money supply. The Federal Reserve Bank increases the money supply causing people to buy more and investors to invest more. These are mal investments and the economic correction causes recessions.
After the stock market crash or 1929, the government passed the Smoot-Hawley Tariff. The U.S Department of State argues that this turned a recession into The Great Depression. John Stossel agrees when he wrote, "Yet 16 years after the Fed's creation, the Fed's low interest rates fueled the Roaring Twenties and led to the greatest stock market crash in history. Then the Fed's tight money worsened the Depression."
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