> is the economic policy that moderated the cycles just setting us up for an extreme crash to come
It's actually not that complicated. All of the complexity of the economy ultimately boils down a very simple thing: it's a mechanism that allows people to exchange current wealth (i.e. stuff) for claims on future wealth (i.e. money). As long as everyone believes that their claims on future wealth will be redeemable at some rate they consider a fair trade, everything hums along. As soon as people stop believing this, everything falls apart.
What happened in 1929 was mainly a liquidity crisis, not an actual economic crisis, at least not at first. The underlying productivity of the American economy was unchanged before the crash and immediately after. But the inability of people to pay for things because of the Fed's unwillingness to loosen credit caused people to lose faith in the value of their claims on future wealth, and that caused an actual reduction in productivity over time. The same thing happened in reverse in the Weimar republic where the problem was effectively the exact opposite: inflation caused by government paying debts by (literally) printing money. (That was a little different because Weimar Germany wasn't very productive, having never really recovered from WWI, but that doesn't really change the basic conceptual simplicity of what happened in both cases.)
It's actually not that complicated. All of the complexity of the economy ultimately boils down a very simple thing: it's a mechanism that allows people to exchange current wealth (i.e. stuff) for claims on future wealth (i.e. money). As long as everyone believes that their claims on future wealth will be redeemable at some rate they consider a fair trade, everything hums along. As soon as people stop believing this, everything falls apart.
What happened in 1929 was mainly a liquidity crisis, not an actual economic crisis, at least not at first. The underlying productivity of the American economy was unchanged before the crash and immediately after. But the inability of people to pay for things because of the Fed's unwillingness to loosen credit caused people to lose faith in the value of their claims on future wealth, and that caused an actual reduction in productivity over time. The same thing happened in reverse in the Weimar republic where the problem was effectively the exact opposite: inflation caused by government paying debts by (literally) printing money. (That was a little different because Weimar Germany wasn't very productive, having never really recovered from WWI, but that doesn't really change the basic conceptual simplicity of what happened in both cases.)