From the book I'm reading:
"The Great Depression of the 1930s was hardly the consequence of the stock crash alone. In certain respects, both resulted from the unstable conditions of the larger economy. Agriculture's troubles were well known, but other sectors were not much stronger. A bubble in Florida real estate had burst amid a hurricane in 1926; the escaping pressure flattened much of the residential construction industry. Auto sales had been sluggish for some time; Henry Ford sobered observers by declaring that the industry was substantially overbuilt. Banking labored under its chronic dependence on the confidence of depositors; should anything shake that confidence, even the most responsibly run bank would be at risk.
Nor were the sources of instability confined to America. For decades, but especially since the World War, American finance had been intimately entwined with European finance, rendering American banking houses vulnerable to the missteps and follies of their transatlantic counterparts. Whether mere misstep or full-blown folly, the decision of Britian's chancellor of the exchequer, Winston Churchill, to put Britain back on the gold standard at the prewar exchange rate had the most far-reaching effects. Churchill's decision ignored the fundamental changes the war had wrought in the world economy; it overvalued the pound and undervalued the dollar, making American exports cheap and draining Britian's financial reserves westward across the Atlantic. Benjamin Strong, the governor of New York's Federal Reserve Bank and de facto leader of the Federal Reserve system, did what he could to rectify the situation, slashing American interest rates and thus making the dollar less attractive to overseas investors. But the lower interest rates fueled the stock speculation that inflated the Wall Street bubble, limiting Strong's ability to counter the pernicious consequences of Churchill's exercise in imperial nostalgia.
Strong watched the bubble grow, with concern but not alarm. He understood the risks but believed that he and the Federal Reserve had the tools to deal with the emergent crisis on Wall Street. 'The very existence of the Federal Reserve System is a safeguard against anything like a calamity growing out of money rates', he declared. 'We have the power to deal with such an emergency instantly by flooding the Street with money.' Perhaps the Fed did have the power, but after the untimely death of Strong in 1928, it lacked the nerve. It lowered interest rates modestly after the stock crash, but skittish investors simply interpreted the reduction as a signal that the Fed, too, had lost confidence in stocks and that worse days were coming. They unloaded still more of their stocks. The flood of liquidity Strong had promised never amounted to more than a trickle, and as investors went into hiding, the nation's money supply shrank by as much as one-third. Prices fell commensurately, crushing debtors, who had to repay their obligations with dearer dollars, and discouraging producers from expanding, or even maintaining, output."
What's interesting is that if Strong had not died in 1928, and had the freedom to boldly flood the economy with cash, e.g. liquidity, the Great Depression might never have happened, FDR probably would not have won the election, and we would have faced down the Nazis with Hoover at the head.
Maybe the Great Depression was a blessing after all (as painful and damaging as it was to so many individuals who lived through that very dark time of our history).
But take heart, we have Bernanke, a literal expert on the Depression, doing everything Hoover and company did not. He's trying to flood the markets with liquidity, and while the economy has not bounced back, I believe he has prevented a free fall that may have occurred otherwise.
Also, Obama, who I believe is also as eerily similar to FDR as the Great Depression is to our current climate, becoming president right after the collapse, and not three years later.
By the way, I'm a lot happier about Bush's performance the last year or so of his presidency. He has effectively completely transferred his commander in chief role from Cheney to General Patreus, who has complete authority to do whatever he wants in Iraq, and Patreus basically turned things around over there (granted Bush has neglected all other parts of the world including most devastatingly Afghanistan and Pakistan), and now he has completely turned over the financial system to Bernanke and Paulson, who are much better qualified to deal with it.
Yep, Bush has become a lame duck president, but at least he had to good sense to let experts do his job finally.