then as beaver became scarce and someone discovered that silk hats were very nice and demand for beaver drtopped thru the floor

You answered your own question really. Government intervention in this sort of situation depends on why the market is dropping.

If the problem is a real drop in demand for beaver fur, then government intervention is generally a bad idea. The best the government can do in this sort of case is to help the economy move to a new basis. That could include propping up the price of beaver fur temporarily to keep too many businesses from cratering and turning a specific problem into a general collapse. But such programs don't generally work well.

If the problem is that there are too many seller of fake beaver fur and people can't trust that the fur they buy is real, then government intervention can help. The government can step up enforcement of fraud, setup programs to label real fur, that sort of thing. In this sort of situation, once people believe they are buying real fur again, the market will rebound. In this sort of situation, government intervention can be the only solution. If fake fur is cheaper then real fur to manufacture and difficult for end buyers to identify, then the fakers will crowd the real producers out of the market by cutting prices and increasing supply.

Of course the real world is rather more complex. Our current economic problem isn't a problem, it's a maze of interrelated problems. Over supply, under demand, unemployment, financial fraud, too much of our economy tied up in finance, among others.

Jay