Smoot-Hawley was "letting things stabilize"? What about the ERA and Reconstruction Finance (spending on infrastructure like Hoover Dam)? How about bailouts for financial institutions and subsidized home loans?
It's too bad Hoover let things stabilize on their own. One wonders what might have happened if he actually did something!
People did things, no doubt about it. The wisdom of those things is another matter. The ERA was a protectionist measure that is today cited as worsening affairs. Reconstruction finance was a good idea, but started in 1932, after 2 years of financial disaster. Hoover's initial responses did not take aggressive action to shore up the money supply or failing banks.
Of course debates on the causes of the Great Depression are endless. Which is why I was careful to say that the Great Depression followed, but was not caused, by that action. However many prominent economists including Milton Friedman and Ben Bernanke have concluded that the primary cause was the contraction in the money supply.
In their view the Federal Reserve did not act fast enough to counter the shrinking monetary supply or to prop up failing banks. The result was multiple rounds of bank panics, the closing of over 40% of all US banks within 4 years, and (after Roosevelt came in) the declaration of a national bank holiday, and an executive order forbidding private speculation in gold. The rapid loss of 1/3 of the money supply was both a cause and effect for the general economic disaster.
Whether or not you agree with this theory, understanding that Ben Bernanke believes it will help you understand why he took the actions he did last year.
They did things. But they did not immediately try to shore up failing banks or stabilize the money supply, which are both parts of the recipe that we use now.
On a related note, the full crisis only hit last year after the Fed decided to let a major financial firm fail.
I must admit that there are many potential financial disasters that could still hit which would make last year seem minor. I have no clue how the fed plans to unwind the what, half trillion in commercial ARM loans that are under water and set to reset in the next year or two. Obama is incredibly dependent on the Chinese willingness to continue borrowing from the USA. We have a lot of work to do to get debt levels back to reasonable amounts. And I'm not at all sure that the disaster was enough to really scare people into becoming fiscally responsible.
However for the moment people seem convinced that the sky is not falling. There are signs of economic recovery out there. There is even a chance that when the official statistics are done we'll be no longer in a recession. So even if a bigger crisis hit, there would be a good cause to call it a second crisis rather than a continuation of the one last year.
And there would be historical precedent for that. Our current problems come from an asset bubble that was pumped up from attempts to stimulate the monetary supply to head off deflation after the dot com collapse. But people don't think of the recent financial crisis as a continuation of the dot com collapse, despite the connection.
It's too bad Hoover let things stabilize on their own. One wonders what might have happened if he actually did something!