Daniel Gross: Why All Those Great Depression Analogies Are Wrong

Slate:

It's difficult to avoid the comparisons between the current sad state of financial affairs and the Great Depression. "This is not like 1987 or 1998 or 2001," Merrill Lynch CEO John Thain said at a conference on Nov. 11. "We will in fact look back to the 1929 period to see the kind of slowdown we are seeing now." Time depicted President-elect Barack Obama on its cover as Franklin Delano Roosevelt. And in Washington, the buzz is all about what the new team will do in its first 100 days. What's next? Show trials in Moscow?

All this historically inaccurate nostalgia can occasionally make you want to clock somebody with one of the three volumes of Arthur M. Schlesinger Jr.'s history of the New Deal. The credit debacle of 2008 and the Great Depression may have similar origins: Both got going when financial crisis led to a reduction in consumer demand. But the two phenomena differ substantially. Instead of workers with 5 o'clock shadows asking, "Brother, can you spare a dime?" we have clean-shaven financial-services executives asking congressmen if they can spare $100 billion. More substantively, the economic trauma the nation suffered in the 1930s makes today's woes look like a flesh wound.

Read the whole story: Slate

Comments

[mero909]

Questioning whether we're in a depression, recession... whatever is irrelevant. My question is how far the government will go to insure that our economy is secure? Will they control everything? Will this Democracy turn into a Socialistic state? Or will we turn into France?

http://www.time.com/time/nation/article/0,8599,1843168,00.html?cnn=yes

Capitalism isn't the problem and was never the source of what transpired over the past 2 decades. I believe that unnecessary government intervention to "correct" economic problems for short term benefits made a huge impact.

Couldn't just let the free market deal with it. That'd be too easy.

[bighillaryfan]

How we can make sure we don't get to this point.

Don't DIGG THIS IF YOU WANT TO HELP CITIBANK SHORT SELLERS!

http://theliepolitic.com/2008/11/digg-this-if-you-want-to-stop-citibank-short-sellers/

They are picking our pockets!

[Kassandra]

Well. I may not be an economist but here's why I think it'll be WORSE than the Great Depression, despite what this genius says: Forget about the banks, we've sold our own homes on the market.
Forget about the banks, we don't have any resources left, we've sold them to foreign consortiums.
Forget about the banks, we have Global Warming coming down the pike like a freight train on meth.
Forget about the banks,we've poisoned our land.
Forget about the banks, they've taken all our money for generations to come.

My aunt who actually LIVED through the Great Depression ( she's 94 and sharp as a tack!) sez she thinks this one is going to be worse!

There are a lot of things that don't match up with the Great Depression­.....becau­se we don't have them anymore to recover with.

Now this: http://blogs.wsj.com/washwire/2008/11/23/obama-aides-suggest-rollback-of-bush-tax-cuts-could-be-delayed/

I would suggest any Christmas spending be directed toward buying warm, well made clothes for the kids and yourself. I've been stockpiling good old stuff from ebay 'cause the Chinese junk, well you may as well throw it away as soon as you buy it.
It's going to be barter time here pretty soon. Thank g-d I've got a sewing machine!

[mero909]

Well, so far, by the "rule of thumb" definition of a depression. We're not really all that close yet.

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

Says we've had one quarter of negative GDP and that was 0.3% in the last quarter. If we have 2 consecutive quarters of negative GDP growth that would, by definition, be a "recession". If we have 4 consecutive quarters of negative GDP growth, that would be a "depression".

We still need 3 straight quarters of negative GDP growth to even be considered to be in a depression.

There are other definitions, such as jobless numbers that could define a "recession" or "depression". It's really based upon "point-of-view". I tend to look at the GDP percentages to gauge the state of the economy. Definitely not the stock market.

The second quarter had positive growth... "In the second quarter, real GDP increased 2.8 percent."

Thoughts?

And don't give me this lame, liberal, conspiracy theory crap like, "those numbers have been cooked by the evil Bush Administration for years...". Give me proof they've been cooked and I'll believe it. Until then, let's assume the BEA is accurate (as they usually are).

[miamia]

The Money Masters - How International Bankers Gained Control of America

http://video.google.com/videoplay?docid=-515319560256183936

[1differentdrummer]

Great Depression? My family didn't think it was so great.

[bubbuh]

So, what's going on isn't a Great Depression? Cool. That in fact is what pretty everyone says I guess the author missed the bulletin. Seems the the point of all the foo-fur-rah is to minimize the chances of falling into a Great Depression .

Makes the whole thrust of the article pointless. I know. Why don't we rebrand what's going on as a "Good Depression?" With the right marketing push, we'll put a smile on the face of all those unemployed as they become part-time Santas and elves.

[Tom Joad]

Don't Get Depressed, It's Not 1929 - YET! Give it time, brother, give it time. The parallels to the Great Depression are not all that inaccurate. In the 1920's and 30's, there were many very small banks across America. Today, there are very few (relatively). Most banking is consolidated in very large mega-banks. The failure of those banks is tantamount to the failure of 'over 4,000' banks during the Great Depression. The misery of the U.S. working class is growing. If the big 3 automakers collapse, those workers join the unemployed. Airlines are nearing bankruptcy. Fuel prices were (until the last month) forcing trucking companies out of business. Give it time, brother, give it time.

[bob8788]

It's not that bad, I lost my job 7 months ago, I started my own computer consulting business right away I always wanted to and had the connections to but was scared of not having a job and paying my bills, But I had no choice, the choice was made for me, survive or die, I chose to survive , Maybe alot of us will choose to survive and find something they love or good at use it to survive and prosper

http://www.barackobamacans.blogspot.com

[wsblake]

Not true. There are many real ( and scary) similarities. For one , the primary cause of the Great Depression- like this one- was an uneven distribution of wealth( not the Stock market Crash) It's common sense- 75 million workers can consume a lot more than one million of the wealthiest ( but you can't spend what you don't have). There are also political similarities- Repubs. Bush and Hoover reacted the very same way- bailout the banks- that didn't work either time. The only thing that will work- Keynesian economics- used by FDR and now proposed by Obama- is the third great similarity.

[rabiddog6708]

What a cold comfort this article will be to all those losing their jobs, their homes and their savings. Relax, this isn't as bas the Great Depression.....oh, thank you...we can breathe a sigh of relief on the soup line.

[BigHeadTodd]

THANK YOU!

This financial mish-mosh is only very very distantly related to what happened in 1929 in that they both featured a Ponzi-type scheme of overextension of credit that fueled an economic downward spiral.

And certainly the government response is far far away from the "can-do" spirit that fostered the New Deal and the mixed results of its programs.

In this instance, we have SOLD the soul and the fiduciary spine of the United States and now look to "fix" things on the backs of the very people that have been hurt -- the American people.

[RobinSeattle]

Yep! It's the greatest embezzlement of a national treasury in world history. Write your Congress critters and tell them to stop the craziness.

[The Deadwind]

pDubya and Durango:

Both parties are controlled by globalist and special interests. They play on the fact that we continue to debate nonsense and play favorites. Both parties are equally corrupt. You really think someone that tries to buy a politician is only going to buy them on one side, and simply ignore the other?

When you control the selection, you control the power. Don't make the mistake of living in fantasy land where it matters if it's a democratic congress or a republican one. It doesn't matter. Try to understand that.

I was a democrat (staunch) my entire life. I cried when George Bush won a second term. But you have to realize a lot of the damage he did was because of Clinton paving the way (Echelon = Patriot Act , NAFTA).

Playing favorites and name calling, insulting and blaming others in bias fashion is reflective of where our minds are at.

Yeah, Bush pushed this through. And he is a republican But DEMOCRATS, a larger percentage of them, voted for this bailout in the first place. I believe that if you're still choosing sides and placing a senseless comment only to anger someone doesn't clear up anything and gets us all nowhere.

[RobinSeattle]

Good post!

Bernanke, Paulson, et al gave the legislative branch the same kind of blathering bum's rush that a used car salesman gives his customers in order to shaft them even further. We should be talking about outfitting those two men as well as Wall Street execs with orange jumpsuits, not handing them more money out of the national printing presses.

[aweissnet]

Well, after we've frozen to death or starved to death, and there is no one to borrow their money, buy their stuff, make their stuff, or sell their stuff, the CEO's, top execs, and government will finally get it.

Unless, well, the people revolt before they all lose their "cake."

The guys are only on top because we're here, paying their way. It's called "trickle up."

[Excitedforfuture]

Exactly -- their greed to have all the money will end up doing them in. And when there is no one but the wealthy and big corporations to pay taxes, they can pay 100% of them!

[stanjz]

Someone below said he/she is "short the market, so he/she is hoping for a great depression." That is the problem, a society where everyone is out for their own, forget the greater good. Well you know what, eventually the world comes tumbling down around you too.

This country could be greater than it ever was if we can stop, not all greed, but this wanton excess greed. If we can get corporations to treat workers/customers with the same respect they do shareholders.

We could then benefit from synergy. "The whole would be greater than the sum of its parts."

[CC1]

It has to get worse before it gets better, unfortunately "worse" will probably be for decades. With luck our grandchildren might see the light at the end of the tunnel.