Joseph Schumpeter

While teaching at Harvard economist Joseph Schumpeter organized an informal seminar with like minded thinkers called the Seven Wise Men.  They published a piece attacking the New Deal of FDR:

Recovery is sound only if it does come of itself. For any revival  which is mercifully due to artificial stimulus leaves part of the work of depressions undone and adds, to an undigested element of maladjustment, new maladjustment of its own which has to be liquidated in turn, thus threatening businesses with another crisis ahead.  Particularly, our story provides a presumption against remedial measures which work through money and credit.  For the trouble is fundamentally not with money and credit, and policies of this class are particularly apt to keep up, and add to, maladjustment, and to produce additional trouble in the future.

From Grand Pursuit-  The Story of Economic Genius by Sylvia Nasar

HKO comments:

It seems that each economic collapse is built on the mishandled solutions of the previous problem.  The housing collapse that was the center of our most recent financial collapse was especially acute because there were so many forces that inflated it.  There were several fiscal and tax policies over decades that gave advantages to real estate investment and these were magnified by loose money, financial lunacy, and misguided regulation. This created such a hole that recovery will be slow and painful.  Political impatience is trying to restore us to a normal that was never normal to begin with and in fact delays the recovery by refusing to face the truth and thus keeps the recession from clearing out the debris from the misallocations of the boom.