Dec

20

 I am reading Freedom from Fear, by David Kennedy, an excellent recount of the '29 Crash and Depression years of the 30s up to 1945. It is long, 900 plus pages, and I am only up to the year 1934. For me it was striking to compare the context of events between then and now. For example, one of the big issues of the 30s was the gold standard and strict adherence. Hoover shaped much of his policy around this. So he was restrictive on monetary policy, and fiscally wanted a balance budget. He proposed raising taxes in addition to cutting spending to add confidence to the system. FDR was different and informally went off the gold standard trying to inflate assets prices, a major policy shift. Another big issue was the roll of agriculture at that time. It made up around thirty percent of GPD, and FDR shaped many programs to support the farmers. He thought the farmers and their purchasing power were the key to getting the economy inflated again. FDR was also very concerned with over-production, so came up with a myriad of alphabet soup programs to centrally plan various industries. The world was much less open to free trade at that time. Most nations opted to go it alone. The ideas of Keynes were just being disseminated into the public forum. Labor unions were in their infancy.

My take away is that though they did have a banking crisis, and a credit crisis, and massive deflation of assets, the context was far different. Today there is no gold standard, much smaller agricultural affects, little concern with overproduction, open trade, more sophisticated economics and labor unions in decline. Regarding government and business responses, they did what they could given the tools they had, but their policies seem unrelated to today and somewhat misguided looking back in retrospect. I believe the next five year will not resemble five years during the mid 30's and see little of predictive value. I do enjoy reading about the period though. Beside an interest in history for its own sake, it makes me realize how much better off we are all today than 70 years ago. And whatever we are going through now, it is nothing compared to the hardships of those times. We have have advanced as a nation even after years like this one and that is a reason for optimism.


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