[nmap]

I've been doing a lot of thinking about Bailaviborita's point - that WWII didn't bring us out of the depression. Elsewhere, I've read that stimulus and other efforts by government cannot end or shorten a bear market. The two positions seem to mesh well.

As a thought experiment, suppose we are in a depression. We decide we don't like it, so we wish to end it. If we suppose that wars end depressions, we could start a major war. The other side might even agree that it was a good idea, if war helps the economy. So, for example, our government could contact China, and we could have a war. Perhaps we would arrange for it to last 5 years, with an option to go another five. If wars improve the economy, then the concept above should have both the U.S. and China in great shape a decade hence. Is that valid? I have to question it.

So, let's modify the experiment. Instead of a real war, let's recreate the conditions without actually engaging in conflict. First, let's draft everyone between 18 and 35. We'll then march them from the East coast to the West coast and back again. We'll also have the factories produce large quantities of WWII-era equipment - other factories will dispose of the equipment. Would this create a strong economy? Again, I would doubt it.

But if the above concepts are fatally flawed, what is it about a war that ends depressions?

If a bear market must play out to its end, perhaps economies do exactly the same thing.

Let's suppose (again) that we see some thunderclouds. We go outside, and we proceed to run in circles, scream, and shout. Rain begins. So, have we caused rain? Of course not! But the two events give the appearance of a connection - there is a correlation.

Perhaps we are confusing correlation with causality. Maybe WWII just happened to start about the same time the 1929 depression had worked out the previous excesses. And if that's true...then all the stimulus efforts by the Treasury will do no good whatsoever.