Give Thanks: This is NOT the Great Depression
Daniel Gross says don’t be depressed. It’s not like 1929 and all those Great Depression analogies are wrong:
The world of 1929-33 was one that lacked shock absorbers such as Social Security and deposit insurance to insulate people from economic disaster. In the 1930s, some of the world’s largest economies—Germany, the Soviet Union, Japan, and Italy—were run by leaders hostile to the very notion of market capitalism. Today, U.S.-style market capitalism is under assault from self-inflicted wounds, and Germany, Italy, and Japan (Russia, not so much) are working with the United States to cope with a common problem. Back then, we were cursed with a feckless Federal Reserve, and a wealthy Treasury secretary, Andrew Mellon, saw the downturn as a force for good. “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” he said. “People will work harder, live more moral lives.” By contrast, today’s Federal Reserve chairman, Ben Bernanke, is a student of the Great Depression, and the wealthy Treasury secretary, Henry Paulson, wants to provide liquidity to stocks, farmers, and real estate. A final difference: After the 1929 crash, the nation had to wait more than three years for a president who simply wasn’t up to the job to leave the scene. This time, we’ve got to wait only two more months.
BTW, the other day I was one of the many bloggers and media types to hype Peter Schiff’s Prescient Pessimism. My enthusiasm for him was later doused by this Planet Money interview with Schiff. He’s smart to revel in this moment because he’s gone past right and is headed right back to wrong!
Photo Credit: Wikipedia, A poster for the “War of Wealth” by Charles Turner Dazey, a play that opened February 10, 1896.
4 Responses to “Give Thanks: This is NOT the Great Depression”
I wish people would stop saying “oh we don't have 25% unemployment and not many banks have failed” as evidence that things aren't bad….since the numbers and rate of acceleration are similar to what they were in 1929 and that sort of comparison is looking at the depths of the Depression.
There is one thing that is commonly overlooked and that is that the United States does not have the same role it had then. As Yves Smith mentions our primary problem then was running a gigantic trade surplus, and when our trading partners collapsed under their debt burden, we suffered enormously by trying to keep up exports.
In essence, if our policy makers forget this, then they are in great danger of creating the problems that Peter Schiff is so worried about. Already China is starting to position itself in a way depressingly similar to the role that the US did during the Depression.
It's not the Great Depression. However, it's possible we'll get a deflationary spiral, and in any case we have an irresponsible media that is engaging in hype and sensationalism, which doesn't help. How will their tune change when Obama replaces Bush in the White House and will the media have short-sightedly done more damage than it realized between now and then, I wonder. Japan didn't have a Great Depression, but it, the default modern model for other developed nations for a deflationary period, illustrates what we may face, if not somewhat worse, if our economy really does fail. No, we don't need to make things worse by starting to enact trade restrictions. Paul Volcker was most credited with braking inflation in the 1980s. He's good to have with us now, and the big question now will be if he tries hard to forestall deflation and be stimulative or if he'll still fear inflation as many still do, and do as others would, not act as strongly as might be desired.
Just a quick note, by the way, that one of the threads on The Truth About Cars (which is highly critical of the Detroit Three, first, second, and third most of all about the Big Three's management) used this same poster in an earlier thread about possible conflicts to develop between the Big Three and the suppliers. In case readers have ignored (for whatever reasons) the link before, here it is again.
http://www.thetruthaboutcars.com/editorial-gene…
Prozac (fluoxetine) for Depression: I have been taking Prozac for 1 week for depression. It seems to be helping me with my attitude. But I am VERY concerned about weight gain.