Interesting read: The Great Depression

[CUDA]

I found the similarities of what happened in the 1930's and what is happening now interesting. and how the actions that were taken by the Government in the 30's and how the results of those actions are eerily similar to whats happening now. I guess it's true. "those that forget their past are Doomed to repeat it"

Main articles: Great Depression in the United States and New Deal
Shacks, put up by the Bonus Army (World War I veterans) on the Anacostia flats, Washington, D.C., burning after the battle with the 1,000 soldiers accompanied by tanks and machine guns, 1932.[74]
Bennett buggies, or "Hoover wagons", cars pulled by horses, were used by farmers too impoverished to purchase gasoline.

President Herbert Hoover started numerous programs, all of which failed to reverse the downturn.[75] In June 1930 Congress approved the Smoot–Hawley Tariff Act which raised tariffs on thousands of imported items. The intent of the Act was to encourage the purchase of American-made products by increasing the cost of imported goods, while raising revenue for the federal government and protecting farmers. However, other nations increased tariffs on American-made goods in retaliation, reducing international trade, and worsening the Depression.[76] In 1931 Hoover urged the major banks in the country to form a consortium known as the National Credit Corporation (NCC).[77] By 1932, unemployment had reached 23.6%, and it peaked in early 1933 at 25%,[78] drought persisted in the agricultural heartland, businesses and families defaulted on record numbers of loans,[79] and more than 5,000 banks had failed.[80] Hundreds of thousands of Americans found themselves homeless and they began congregating in the numerous Hoovervilles that had begun to appear across the country.[81] In response, President Hoover and Congress approved the Federal Home Loan Bank Act, to spur new home construction, and reduce foreclosures. The final attempt of the Hoover Administration to stimulate the economy was the passage of the Emergency Relief and Construction Act (ERA) which included funds for public works programs such as dams and the creation of the Reconstruction Finance Corporation (RFC) in 1932. The RFC's initial goal was to provide government-secured loans to financial institutions, railroads and farmers. Quarter by quarter the economy went downhill, as prices, profits and employment fell, leading to the political realignment in 1932 that brought to power Franklin Delano Roosevelt.


Shortly after President Roosevelt was inaugurated in 1933, drought and erosion combined to cause the Dust Bowl, shifting hundreds of thousands of displaced persons off their farms in the Midwest. From his inauguration onward, Roosevelt argued that restructuring of the economy would be needed to prevent another depression or avoid prolonging the current one. New Deal programs sought to stimulate demand and provide work and relief for the impoverished through increased government spending and the institution of financial reforms. The Securities Act of 1933 comprehensively regulated the securities industry. This was followed by the Securities Exchange Act of 1934 which created the Securities and Exchange Commission. Though amended, key provisions of both Acts are still in force. Federal insurance of bank deposits was provided by the FDIC, and the Glass–Steagall Act. The institution of the National Recovery Administration (NRA) remains a controversial act to this day. The NRA made a number of sweeping changes to the American economy until it was deemed unconstitutional by the Supreme Court of the United States in 1935.


Early changes by the Roosevelt administration included:

Instituting regulations to fight deflationary "cut-throat competition" through the NRA.
Setting minimum prices and wages, labor standards, and competitive conditions in all industries through the NRA.
Encouraging unions that would raise wages, to increase the purchasing power of the working class.
Cutting farm production to raise prices through the Agricultural Adjustment Act and its successors.
Forcing businesses to work with government to set price codes through the NRA.

These reforms, together with several other relief and recovery measures, are called the First New Deal. Economic stimulus was attempted through a new alphabet soup of agencies set up in 1933 and 1934 and previously extant agencies such as the Reconstruction Finance Corporation. By 1935, the "Second New Deal" added Social Security (which did not start making large payouts until much later), a jobs program for the unemployed (the Works Progress Administration, WPA) and, through the National Labor Relations Board, a strong stimulus to the growth of labor unions. In 1929, federal expenditures constituted only 3% of the GDP. The national debt as a proportion of GNP rose under Hoover from 20% to 40%. Roosevelt kept it at 40% until the war began, when it soared to 128%.
WPA employed 2-3 million unemployed at unskilled labor.

By 1936, the main economic indicators had regained the levels of the late 1920s, except for unemployment, which remained high at 11%, although this was considerably lower than the 25% unemployment rate seen in 1933. In the spring of 1937, American industrial production exceeded that of 1929 and remained level until June 1937. In June 1937, the Roosevelt administration cut spending and increased taxation in an attempt to balance the federal budget.[83] The American economy then took a sharp downturn, lasting for 13 months through most of 1938. Industrial production fell almost 30 per cent within a few months and production of durable goods fell even faster. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938, rising from 5 million to more than 12 million in early 1938.[84] Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels.[85] Producers reduced their expenditures on durable goods, and inventories declined, but personal income was only 15% lower than it had been at the peak in 1937. As unemployment rose, consumers' expenditures declined, leading to further cutbacks in production. By May 1938 retail sales began to increase, employment improved, and industrial production turned up after June 1938.[86] After the recovery from the Recession of 1937–1938, conservatives were able to form a bipartisan conservative coalition to stop further expansion of the New Deal and, when unemployment dropped to 2%, they abolished WPA, CCC and the PWA relief programs. Social Security, however, remained in place.

[Nightshade]

Isn't it great? We're even getting dustbowl-like conditions.

[CUDA]

In June 1937, the Roosevelt administration cut spending and increased taxation in an attempt to balance the federal budget.[83] The American economy then took a sharp downturn

2011 the President wants to cut (barely)spending and raise taxes. maybe he should read up on what happened as a result of that in 1938.

I was also reading where they said the "new deal" didn't work because they didn't spend enough money. isn't that exactly what they are saying now? that they didn't spend enough money on the stimulus and that's why it didn't work.

Insanity: doing the same thing over and over again and expecting different results.

[dissent]

at Mankiw's site

The Always Quotable Larry Summers
A reader alerts me to this interview of Larry Summers on the Charlie Rose show. He finds this quotation (starting around 21:50) particularly provocative:

Never forget, never forget, and I think it’s very important for Democrats especially to remember this, that if Hitler had not come along, Franklin Roosevelt would have left office in 1941 with an unemployment rate in excess of 15 percent and an economic recovery strategy that had basically failed.

[Spidey]

/me looks for Hitler.

[woodchip]

Actually FDR needs to thank the Japanese

[fliptw]

Actually FDR needs to thank the Japanese

No, he needs to thank Churchill. Lend-Lease people.

[LEON]

And here is how crisis should be dealt with.
http://fwcon.wordpress.com/2009/02/11/h ... ic-crisis/

[Tunnelcat]

Isn't it great? We're even getting dustbowl-like conditions.

You mean those "haboobs" in Arizona?

In June 1937, the Roosevelt administration cut spending and increased taxation in an attempt to balance the federal budget.[83] The American economy then took a sharp downturn

2011 the President wants to cut (barely)spending and raise taxes. maybe he should read up on what happened as a result of that in 1938.

I was also reading where they said the "new deal" didn't work because they didn't spend enough money. isn't that exactly what they are saying now? that they didn't spend enough money on the stimulus and that's why it didn't work.

The economy isn't the same as back in 1938 anyway. We're now part a a global economy, not just a national economy. I agree that trying the ideas of the past isn't going to fix things in the present. Neither party has the solution right now either.

And people keep saying that WWII brought us out of the Depression. Well, 2 unfunded wars has gotten us headed towards one now. War spending is a 2-edged sword and war spending is not productive growth. It only destroys things, not create them.

Insanity: doing the same thing over and over again and expecting different results.

Like that "cutting taxes will spur job creation" crap the Republicans keep shoving in our faces (which didn't work under Bush) over and over and over as the main reason to be intransigent sticks-in-the-mud jerks to keep all revenue hikes off the table, NO MATTER WHAT HAPPENS?

[callmeslick]

Actually FDR needs to thank the Japanese

no, the Hitler thing is correct. What drove US neutrality was that we were selling armaments to all comers for quite a while. DuPont had a great history of doing just that, supplying both sides in most major conflicts from 1820-1940.

[callmeslick]

Thanks, TC, for stating the obvious about the VAST differences in economic/industrial positions.
I stated as much to CUDA when he posted the same thing elsewhere.

[Firewheel]

World War II itself did not lift the US out of depression post-war; it was the fact that most other industrialized nations besides the US were destroyed and had to rebuild themselves (with our help) that caused the recovery. And unlike the 1930s, where the depression was mostly over in other countries by 1933, only America was instituting the disastrous Keynesian policies that prolonged our economic woes. This time things will be much, much worse.

And yes, our present military entanglements are certainly part of the problem, as well.

[CUDA]

In June 1937, the Roosevelt administration cut spending and increased taxation in an attempt to balance the federal budget.[83] The American economy then took a sharp downturn

2011 the President wants to cut (barely)spending and raise taxes. maybe he should read up on what happened as a result of that in 1938.

I was also reading where they said the "new deal" didn't work because they didn't spend enough money. isn't that exactly what they are saying now? that they didn't spend enough money on the stimulus and that's why it didn't work.

The economy isn't the same as back in 1938 anyway. We're now part a a global economy, not just a national economy. I agree that trying the ideas of the past isn't going to fix things in the present. Neither party has the solution right now either.

TC, it's really best if you understand something before you post about it. we were in a global economy in 1938. that much is evident by the results of the US economy collapsing and it bringing the worlds economy with it.

And people keep saying that WWII brought us out of the Depression. Well, 2 unfunded wars has gotten us headed towards one now. War spending is a 2-edged sword and war spending is not productive growth. It only destroys things, not create them.

wrong again. while the Iraq/Afghan war did nothing to help our debt it was not relate to the economic collapse of 2008. that was cause by legislation on the banking industries

According to the National Bureau of Economic Research (the official arbiter of recessions) the recession began in December 2007.[15] The financial crisis is linked to reckless lending practices by financial institutions and the growing trend of securitization of real estate mortgages in the United States............The emergence of Sub-prime loan losses in 2007 began the crisis and exposed other risky loans and over-inflated asset prices.

and lets see who signed it into law?

The current mortgage crisis came about in large part because of Clinton-era government pressure on lenders to make risky loans in order to “make homeownership more affordable for lower-income Americans and those with a poor credit history,”

so lets take an Historical look at who was responsible for our current economic crisis. and since you have such an affinity for playing partisan I'll indulge you with some of your own medicine.
1977 the Community reinvestment act is signed into law. by Jimmy Carter a Democrat

The CRA was passed into law by the 95th United States Congress in 1977 as a result of national grassroots pressure for affordable housing,

and in 1995 President Clinton a Democrat modifies the law to make even less regulation on the banking industries

These revisions with an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans.

but let us not forget Andrew Cuomo in this fiasco another Democrat

Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments.

Insanity: doing the same thing over and over again and expecting different results.

Like that "cutting taxes will spur job creation" crap the Republicans keep shoving in our faces (which didn't work under Bush) over and over and over as the main reason to be intransigent sticks-in-the-mud jerks to keep all revenue hikes off the table, NO MATTER WHAT HAPPENS?

Once the Clinton administration cut the capital gains tax rate in 1997, after the Clinton tax hike of 1993, both GDP and real wages fared better in the following four years compared to the preceding four years.

as Clinton ran budget surpluses from 1998-2000. Interestingly, though, these budget surpluses occurred after the capital gains rate was cut in ’97.

Ireland was transformed from one of the poorest countries in Western Europe to one of the wealthiest. Disposable income soared to record levels, enabling a huge rise in consumer spending. Unemployment fell from 18% in the late 1980s to 4.5% by the end of 2007,[24] and average industrial wages grew at one of the highest rates in Europe. Inflation brushed 5% per annum towards the end of the 'Tiger' period, pushing Irish prices up to those of Nordic Europe, even though wage rates are roughly the same as in the UK. The National debt has remained constant during the boom, but the GDP to Debt ratio has dropped, due to the dramatic rise in GDP. ".[25]

The new wealth resulted in large investments in modernising Irish infrastructure and cities. The National Development Plan led to improvements in roads, and new transport services were developed, such as the Luas light rail lines, the Dublin Port Tunnel, and the extension of the Cork Suburban Rail. Local authorities enhanced city streets, and built monuments like the Spire of Dublin.

just some of the things that happen when you Cut Taxes, provided you cut spending along with it., which is Obvious that our current president does not want to do.

[Jeff250]

Cuda, you should always cite your quotes.

and in 1995 President Clinton a Democrat modifies the law to make even less regulation on the banking industries

Congress modifies law, not presidents. Congress was Republican-controlled at that time, so I don't think you can play partisan with this one.

just some of the things that happen when you Cut Taxes, provided you cut spending along with it., which is Obvious that our current president does not want to do.

You're talking about the effect of cutting capital gains and corporate taxes, not personal income tax. The former two are arguably double taxation anyways. Arguing for the economic benefit of cutting personal income tax is a more difficult argument.

[CUDA]

Cuda, you should always cite your quotes.

ya I was in a hurry, the wife was ready to go to Sunday morning Coffee and you don't stand in-between that woman and her Coffee

and in 1995 President Clinton a Democrat modifies the law to make even less regulation on the banking industries

Congress modifies law, not presidents.

but who signed it into law

Congress was Republican-controlled at that time, so I don't think you can play partisan with this one.

Agreed. but as I tried to point out I was attempting to pull as TC and say it's all the DNC's fault. because that's what TC ALWAYS does with the RNC and Bush. In her mind we would live in a perfect Utopia if there was no RNC. she doesn't care for the truth, and she doesn't care to lay blame at anyone but the RNC because it fit in so nicely with her warped vision of reality.

just some of the things that happen when you Cut Taxes, provided you cut spending along with it., which is Obvious that our current president does not want to do.

You're talking about the effect of cutting capital gains and corporate taxes, not personal income tax. The former two are arguably double taxation anyways. Arguing for the economic benefit of cutting personal income tax is a more difficult argument.

no doubt, but it is still cutting Taxes none the less. and cutting Taxes Does spur economic growth. and I posted evidence to back it up. the bit about Ireland was from Wiki, look up Tiger tax

[Jeff250]

I'm just saying it's important to distinguish which taxes you're talking about. There's probably at least one tax that even TC thinks we should cut. Maybe she would even agree with you on cutting capital gains or corporate income taxes. On the other hand, when you're arguing for Republican's tax cuts as being beneficial to the economy, their personal income cuts are definitely the elephant in the room.

[Tunnelcat]

TC, it's really best if you understand something before you post about it. we were in a global economy in 1938. that much is evident by the results of the US economy collapsing and it bringing the worlds economy with it.

Not like today. Back in 1938, we had a huge manufacturing base that employed A LOT of people, IN COUNTRY. That manufacturing base is what gave us the ability to go to war at a moments notice, since we had the capability to convert private manufacturing into war manufacturing with the sign of a pen. In other words, the factory infrastructure was built, in use and available. We built most of the stuff we used OURSELVES! We also grew MOST of our own food. Now that most of our manufacturing has been shipped overseas, along with all those former jobs, we are in a different state of affairs. We are dependent on other countries for our products and quite a bit of food nowadays. Even our medicines are made in many foreign countries. We've become dependent on the world to survive now. I also seriously doubt that we could ramp up manufacturing for a major global war right now if we had to as well. Don't forget we are now under the thumb of the Saudis and other foreign nations for our oil supply. Not so in 1938.

wrong again. while the Iraq/Afghan war did nothing to help our debt it was not relate to the economic collapse of 2008. that was cause by legislation on the banking industries

True, but our present huge debt WAS caused by those 2 wars, which Bush started and his party (and some Democrats) spent on like no tomorrow, then conveniently hid and kept said spending off the national books, creating the present time bomb we're dealing with. And yes, Obama is still running those 2 money pits.

The current mortgage crisis came about in large part because of Clinton-era government pressure on lenders to make risky loans in order to “make homeownership more affordable for lower-income Americans and those with a poor credit history,”

Can't argue with you there, except that Clinton was dealing with a Republican majority in Congress, and what they wanted, he gave them. That's where I put some blame on him. But as for the national debt, don't forget Bush's role in the setup to disaster. You'll still also notice the date of the start of the recession was 2007, under Bush's watch. That hidden war spending finally caught up to stain him before he left office and was an important part of setting off this whole national debt crisis.

But even though I agree with you that the Dems are not clean in this whole sub-prime and national debt mess, don't forget that under Clinton, one of the biggest reasons for this sub-prime loan mess was brought to you by a Republican Congress, specifically 3 Republicans, who brought forth the repeal of the Glass Steagall Act. I blame Clinton for signing this coup de grace. Everything else before was foreplay. That one piece of legislation is what finally broke down the wall of separation between Investments, speculation, derivatives and banking, which then gave banks and speculators the ability to gamble, in the form of derivatives and credit default swaps, on those poisonous sub-prime mortgage securities. All for what? To make massive profits off of all of the homeowner simpletons out there who just wanted to buy a home to call their own, not realizing the game was now rigged against them. These bastards at the banks haven't even kept the paper, or kept track of the paper, on just about ALL of these sub-prime mortgages, so the foreclosure process is rife with corruption and greed. So I don't blame homeowners for wanting cheap loans, I blame Wall Street and Washington, mostly Republicans, for being so greedy as to set things up for homeowners to fail and get screwed.

Who Repealed Glass Steagall?

just some of the things that happen when you Cut Taxes, provided you cut spending along with it., which is Obvious that our current president does not want to do.

Well, why didn't Bush's tax cuts flatten out his economic downturn? Ten years of tax cuts haven't solved the jobs problem yet for Obama either. The real problem is that since the majority of tax revenues now rest on the shoulders of working people, and there are a larger number of either low wage or unemployed people out there (thanks to global job outsourcing) that are NOT paying as much in taxes because, surprise, they have LITTLE OR NO INCOME TO TAX in the first place. And if they have no income to spend, a consumption tax will not solve our revenue problem either.

Then we have large multinational corporations who are sitting on wads of cash because they don't want to repatriate it and pay taxes on it like good little patriotic national stewards should do. Why? Because they are now GLOBAL CORPORATIONS with no stake or national pride in OUR country. I just don't think things will ever get better in the future for the U.S. from now on, because those who make most of money just don't want to pay a greater share for the common good of everyone, period.

And now we have Republican lawmakers in Washington that want to put an even greater strain on the poor, retired and working people in this country by cutting only entitlement programs. I don't see them wanting to cut ANY defense spending or raising ANY revenue to at least slow down this speeding debt freight train. Both sides are going to have to compromise at the present, and yes, the Dems will have to make painful entitlement cuts. We need to raise some revenue and cut spending. BOTH options will be needed to help the present problem. Obama is out there cutting Medicare and Medicaid, much to the chagrin of his party, but I don't see Republicans and tea partiers giving one iota on tax increases. Negotiations can't be one-sided affairs.

[CUDA]

but our present huge debt WAS caused by those 2 wars,

actually that's not the case. only a small portion of the debt can be attributed to the wars. now here's the truth for you about the deficit

During Bush's presidency, the national debt rose by an average of $607 billion a year. How does that compare to Obama? During Obama's presidency to date, the national debt has risen by an average of $1.723 trillion a year — or by a jaw-dropping $1.116 trillion more, per year, than it rose even under Bush.

multiply that times a Potential 8 years and you come up with $13.2 trillion "ASSUMING" he doesn't increase spending any more. he is on pace to raise the deficit more than the whole history of our country combined.

some more facts

President Bush expanded the federal budget by a historic $700 billion through 2008. President Obama would add another $1 trillion.
President Bush began a string of expensive finan­cial bailouts. President Obama is accelerating that course.
President Bush created a Medicare drug entitle­ment that will cost an estimated $800 billion in its first decade. President Obama has proposed a $634 billion down payment on a new govern­ment health care fund.
President Bush increased federal education spending 58 percent faster than inflation. Presi­dent Obama would double it.
President Bush became the first President to spend 3 percent of GDP on federal antipoverty programs. President Obama has already in­creased this spending by 20 percent.
President Bush tilted the income tax burden more toward upper-income taxpayers. President Obama would continue that trend.
President Bush presided over a $2.5 trillion increase in the public debt through 2008. Setting aside 2009 (for which Presidents Bush and Obama share responsibility for an additional $2.6 trillion in public debt), President Obama’s budget would add $4.9 trillion in public debt from the beginning of 2010 through 2016.

The current mortgage crisis came about in large part because of Clinton-era government pressure on lenders to make risky loans in order to “make homeownership more affordable for lower-income Americans and those with a poor credit history,”

Can't argue with you there, except that Clinton was dealing with a Republican majority in Congress, and what they wanted, he gave them. That's where I put some blame on him. But as for the national debt, don't forget Bush's role in the setup to disaster. You'll still also notice the date of the start of the recession was 2007, under Bush's watch. That hidden war spending finally caught up to stain him before he left office and was an important part of setting off this whole national debt crisis.

UHM please explain to me why there has been no approved Budget in the 2 1/2 years that the Democrats controlled congress and Obama has been President. there is your problem with the current debt crisis. you cannot blame Bush when the DNC has had 2 1/2 years to correct this issue. and in-fact have refused to even address it.

Who Repealed Glass Steagall?

UHM President Clinton. he signed it into law, he alone had the power to stop it if it was bad legislation. THAT WAS HIS JOB

just some of the things that happen when you Cut Taxes, provided you cut spending along with it., which is Obvious that our current president does not want to do.

Well, why didn't Bush's tax cuts flatten out his economic downturn? Ten years of tax cuts haven't solved the jobs problem yet for Obama either.

it seems you stopped reading my quote at the Cut Taxes part and neglected the Cut spending also part. Business will invest in a friendly secure environment. our current government is not providing that

[Tunnelcat]

You're forgetting that much of the present debt that Obama got stuck with is now due to the escalating compounding interest payments on the debt that Bush (and Reagan) gave us with their "tax cut and spend like no tomorrow mantra" and is NOT due to some dramatic increase in actual government spending.

If both Reagan and Bush had kept their spending under control, we wouldn't have this bad of a problem now.

http://zfacts.com/p/1195.html

Bush war cost (and counting with Obama continuing those same 2 wars plus one more). Remember, this cost was omitted from the budget books during Bush's term, which Obama is keeping visible, mostly.

http://costofwar.com/en/

You're also forgetting that Republicans raised the debt ceiling 7 times under Bush without any hoopla. But when a Democrat becomes president, they suddenly become skinflints.

You're Ireland example is busted too. Supply-side economics may not be their savior.

http://www.businessweek.com/investor/co ... 644055.htm

And speaking of the Laffer Curve..............I think that the Republicans are going for the "extreme Laffer Curve" economic fix now. It hasn't worked in the past and it ain't going to work now.

http://www.businessweek.com/magazine/th ... 12011.html

[Burlyman]

I found the similarities of what happened in the 1930's and what is happening now interesting. and how the actions that were taken by the Government in the 30's and how the results of those actions are eerily similar to whats happening now. I guess it's true. "those that forget their past are Doomed to repeat it"

No, the only people who forgot the past are the ignorant public. It's about time somebody noticed this. =P

[woodchip]

Actually FDR needs to thank the Japanese

no, the Hitler thing is correct. What drove US neutrality was that we were selling armaments to all comers for quite a while. DuPont had a great history of doing just that, supplying both sides in most major conflicts from 1820-1940.

FDR needs to thank the Japanese as Pearl Harbor propelled us into WW2, ending the high unemployment rates and getting FDR re-elected.

[Burlyman]

Isn't Roosevelt dead though? ^_~

[flip]

Yeah, but his wife's aunts brothers sisters son is still around I bet