The notion that the excesses and imbalances that lead to a crisis should be allowed to play out and unwind without government intervention was the intellectual rationale behind the position of Herbert Hoover’s Secretary of the Treasury, Andrew Mellon, during the early years of the Depression, when he famously stated: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate[…].
Purge the rottenness out of the system.” Expressed less dramatically, Mellon’s idea was that the crisis originated in a series of distortions which had been building up in the American economy during the “Roaring Twenties”, first and foremost a highly overvalued stock market, and, to a slightly lesser extent, a housing boom.