Amity Shlaes is one of my favorite writers based on her book, The Forgotten Man, a wonderful history about the Great Depression and the New Dealers. This piece deals with what she sees as false parallels of today and the Great Depression.
Depression Fear Mongers Obscure the True Concerns
By Amity Shlaes
Amity Shlaes
This year is supposed to be like 1932. That’s what you would believe after reading commentators who compare current patterns in the Dow Jones Industrial Average to those at the end of Herbert Hoover’s presidency.
To focus on these stock patterns is to be like weather forecasters who talk about the heat index or wind chill. They are gilding the statistical lily. The ungilded reality: today the Dow is down about 30 percent from its 2007 high, nowhere near its decline of 89 percent between September 1929 and July 1932. Today, joblessness in the U.S. is a bit less than 10 percent; in 1932 it was 25 percent.
While these differences set today’s slump apart from the Great Depression, there are other issues that may be holding back a recovery.
Instability in the international currency arrangement is the first one. Today doubt that the euro will survive is affecting the dollar and the stock market. The issue is whether Europe will make the fiscal repairs necessary to preclude an otherwise inevitable collapse of the European currency. It isn’t clear whether or when the euro can be restructured. This, as we’ve seen recently, can hurt U.S. stocks.
In the early 1930s an unsustainable monetary construct likewise jeopardized recovery. In that instance, the teetering house wasn’t the euro but the international gold standard. Depositors concerned that the whole arrangement would break apart were pulling gold out of U.K. banks at a rate the country couldn’t afford. When the U.K. did go off gold in September 1931, the investor panic migrated to the U.S., where depositors also started withdrawing gold. Another wave of bank failures ensued. … Continue reading Is Today Similar To The Great Depression?
By Jeff Harding
This article on the Great Depression was written in 1969 by Hans Sennholz, an Austrian theory scholar and professor. Ludwig von Mises had escaped the Nazis in Vienna and then in Switzerland to arrive in New York in 1940. Mises arrived with nothing, almost the last surviving scholar of the Austrian School. Sennholz was Mises’s first PhD student in America and was a major force in the rebirth of the Austrian movement.
It’s a brilliant summary of the history of the Great Depression and I urge you to read it at your leisure. It is a long article, but wonderfully written. It will save you from reading lengthier tomes on the subject. You will find the parallels to our present situation remarkable.
The Great Depression
Caused by government action
Although the Great Depression engulfed the world economy many years ago, it lives on as a nightmarefor individuals old enough to remember and as a frightening specter in the textbooks of our youth.
Some 13 million Americans were unemployed, “not wanted” in the production process. One worker out of every four was walking the streets in want and despair. Thousands of banks, hundreds of thousands of businesses, and millions of farmers fell into bankruptcy or ceased operations entirely.
Nearly everyone suffered painful losses of wealth and income.
Many Americans are convinced that the Great Depression reflected the breakdown of an old economic order built on unhampered markets, unbridled competition, speculation, property rights, and the profit motive. According to them, the Great Depression proved the inevitability of a new order built on government intervention, political and bureaucratic control, human rights, and government welfare. Such persons, under the influence of Keynes, blame businessmen for precipitating depressions by their selfish refusal to spend enough money to maintain or improve the people’s purchasing power. This is why they advocate vast governmental expenditures and deficit spending — resulting in an age of money inflation and credit expansion. … Continue reading The Great Depression: A Short History
