- Higgs's thesis in this chapter, which is backed by data (including interesting data on bond yields from the mid-1920s through the mid-1950s), is that the Great Depression was prolonged and deepened by the "regime uncertainty" created by FDR and the New Deal. As it turns out, Uncle Sam never engaged in wholesale nationalizations and other whacky central-planning schemes -- but no one in the 1930s knew what the future held. For investors back then to believe that any investments they made in the U.S. might be confiscated or regulated to smithereens was not unreasonable, given the rhetoric of the time and the shift in policy brought by FDR and his "brain trust."
This "regime uncertainty" stifled investment, keeping the economy stagnant.
An earlier version of this chapter is available here.