As I spend more and more time pondering the actions of our Treasury and Fed, along with the last Depression and the actual steps taken by various administrations (most specifically Hoover and FDR), I come to the conclusion that those who claim to know so much about it, and how to prevent it, are in fact either talking out their ass - or worse.

Yes, this means you Ben.

See, the common rhetoric is that we had a Depression because credit tightened and liquidity dried up - the government took a "you made a mess, you burn in it" attitude.

This, however, is simply not true, and worse, it ignores the fact that The Fed created the bubble in the 1920s that led to the Depression, just as The Fed created this bubble that is now bursting!

In fact, one wonders - if Ben was chosen for his expertise on The Depression, was (and is) his intent to cause the second one?

You could hardly pick a better matching set of conditions.

1. In the 1920s The Fed's (newly minted at that from The Federal Reserve Act of 1913) "liquidity machine" was on overdrive, and regulation non-existent.  There was a huge property bubble created filling in swampland in Florida, stock market speculation was rampant, and even ordinary shoe-shine boys were running on 10:1 leverage on margin accounts.  People were becoming rich by the hour, to the point that we called the entire decade "The Roaring 20s".  Likewise, this time around The Fed pumped liquidity into the markets after the 2000 Tech Stock disaster, The SEC removed leverage limits on investment banks, regulators willfully ignored the fact that entities under their regulatory umbrellas were sporting 20:1, 30:1, 40:1 or even 80:1 (in the case of Fannie and Freddie) leverage and the CDS marketplace made a mockery of any sort of leverage limit at all.  People became rich by the hour speculating in real estate.
2. When the bubble burst in the Florida Property market in '27 and then in the stock market in '29, there were some who argued for a "liquidationist" position - that is let the idiots who made the bad bets fail.  Among them was Andrew Mellon, Secretary of the Treasury.  Herbert Hoover had always been an interventionist and in fact promoted that stance as Secretary of Commerce under Harding and Coolidge.  From his nomination speech onward, he maintained a strong interventionist stance, and refused to allow the debtors and creditors who were both overextended to meet their just desserts in the marketplace, instead intervening to prop both up.  Today it is George W.