The Real Lessons of the Great Depression

[Kevin_Kennedy]

Since late 2007, more and more commentators have drawn parallels between our current financial crisis and the Great Depression. Nobel laureates and presidential advisors confidently proclaim that it was Herbert Hoover’s laissez-faire penny pinching that exacerbated the Depression, and that the American economy was saved only when FDR boldly ran up enormous deficits to fight the Nazis. But as I document in my new book, The Politically Incorrect Guide to the Great Depression and the New Deal, this official history is utterly false.

Let’s first set the record straight on Herbert Hoover’s fiscal policies. Contrary to what you have heard and read over the last year, Hoover behaved as a textbook Keynesian after the stock market crash. He immediately cut income tax rates by one percentage point (applicable to the 1929 tax year) and began ratcheting up federal spending, increasing it 42 percent from fiscal year (FY) 1930 to FY 1932.

The Real Lessons of the Great Depression by Bob Murphy

 

[tigerbob]

Your post is meant to indicate that Hoover increased spending significantly and it didn't work, and therefore history provides a precedent for Obama's policies not working? Correct?

 

[Kevin_Kennedy]

Your post is meant to indicate that Hoover increased spending significantly and it didn't work, and therefore history provides a precedent for Obama's policies not working? Correct?

Well my post was a referral to an article written by Robert P. Murphy, who wrote the article to promote his new book The Politically Incorrect Guide to the Great Depression and the New Deal. But yes, I intend for people to look back at history and see that massive government spending only helped to prolong and worsen the Great Depression and that we are allowing history to repeat itself in our present economic downturn. That being said, what I intend and what I expect are two different things. I expect to be called a revisionist and to be told that I am wrong.

 

[Toro]

The argument is disingenuous. It was only in the last year of Hoover's term did the deficit rise appreciably. From this book

[ame=http://www.amazon.com/Anatomy-Bear-Lessons-Streets-Bottoms/dp/1905641575/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1240245348&sr=8-1]Amazon.com: Anatomy of the Bear: Lessons from Wall Street's Four Great Bottoms: Russell Napier: Books[/ame]

The deficit never rose above 1% of GDP until 1932. It wasn't until 1932, the bottom of the Depression, did the deficit rise over 4% of GDP.

I briefly looked on the Internet to find something visual, and this is all I could find for the moment.

EH.Net Encyclopedia: The United States Public Debt, 1861 to 1975

As you can see, total public debt barely moved from 1927 to 1932. It wasn't until 1932 when the debt began to rise.

Edit: Here is some more

As you can see, it was only in 1932 when the government began heavily financing the deficit. Before that, after the economy had collapsed, the government hardly did anything at all.

The author's own facts could be used against him in his argument.

There is a lot of ideological revisionism going on.

 

[Old Rocks]

Once again Kevin get's ideology whacked by facts. One might notice the line from 1992 to 2000. And the slope of the line appears not to have changed with the inauguration of President Obama.

 

[xsited1]

The argument is disingenuous. It was only in the last year of Hoover's term did the deficit rise appreciably. From this book

Amazon.com: Anatomy of the Bear: Lessons from Wall Street's Four Great Bottoms: Russell Napier: Books

The deficit never rose above 1% of GDP until 1932. It wasn't until 1932, the bottom of the Depression, did the deficit rise over 4% of GDP.

I briefly looked on the Internet to find something visual, and this is all I could find for the moment.

EH.Net Encyclopedia: The United States Public Debt, 1861 to 1975

As you can see, total public debt barely moved from 1927 to 1932. It wasn't until 1932 when the debt began to rise.

Edit: Here is some more

As you can see, it was only in 1932 when the government began heavily financing the deficit. Before that, after the economy had collapsed, the government hardly did anything at all.

The author's own facts could be used against him in his argument.

There is a lot of ideological revisionism going on.

Are you talking about this?

Let’s first set the record straight on Herbert Hoover’s fiscal policies. Contrary to what you have heard and read over the last year, Hoover behaved as a textbook Keynesian after the stock market crash. He immediately cut income tax rates by one percentage point (applicable to the 1929 tax year) and began ratcheting up federal spending, increasing it 42 percent from fiscal year (FY) 1930 to FY 1932.

Not knowing what you're referring to, I'll just comment about the above quote. Here is the data:

Year GDP-US Federal Deficit-fed
1930 91.2 -0.87
1931 76.5 0.13
1932 58.7 1.63

Federal Spending, State and Local Public Spending 1792-2014 - Charts

 

[midcan5]

This gets so tiring.

Summary
Timeline of the Great Depression
The Great Depression, to 1935
The Main Causes of the Great Depression
Stiff upper lip.

[ame=http://www.amazon.com/Great-Depression-New-Deal-Introductions/dp/0195326342/ref=sr_1_8?ie=UTF8&qid=1230302046&sr=1-8]Amazon.com: The Great Depression and the New Deal: A Very Short Introduction (Very Short Introductions): Eric Rauchway: Books[/ame]

 

[Kevin_Kennedy]

This gets so tiring.

Summary
Timeline of the Great Depression
The Great Depression, to 1935
The Main Causes of the Great Depression
Stiff upper lip.

Amazon.com: The Great Depression and the New Deal: A Very Short Introduction (Very Short Introductions): Eric Rauchway: Books

Agreed. Did you intend to surrender to the fact that the New Deal prolonged the Great Depression, and that Hoover was, indeed, the first New Dealer?

 

[manu1959]

Your post is meant to indicate that Hoover increased spending significantly and it didn't work, and therefore history provides a precedent for Obama's policies not working? Correct?

actually no.....the claim is he didn't spend enough....which is why bush / obama are spending like they are.....

 

[Toro]

Agreed. Did you intend to surrender to the fact that the New Deal prolonged the Great Depression, and that Hoover was, indeed, the first New Dealer?

Generally no and definitely no.

 

[Barb]

Since late 2007, more and more commentators have drawn parallels between our current financial crisis and the Great Depression. Nobel laureates and presidential advisors confidently proclaim that it was Herbert Hoover’s laissez-faire penny pinching that exacerbated the Depression, and that the American economy was saved only when FDR boldly ran up enormous deficits to fight the Nazis. But as I document in my new book, The Politically Incorrect Guide to the Great Depression and the New Deal, this official history is utterly false.

Let’s first set the record straight on Herbert Hoover’s fiscal policies. Contrary to what you have heard and read over the last year, Hoover behaved as a textbook Keynesian after the stock market crash. He immediately cut income tax rates by one percentage point (applicable to the 1929 tax year) and began ratcheting up federal spending, increasing it 42 percent from fiscal year (FY) 1930 to FY 1932.

The Real Lessons of the Great Depression by Bob Murphy

What everyone seems to miss about the Great Depression is what led up to it, and that Hoover was Secy of commerce under Harding and Coolidge, so he didn't quite "inherit" the economic crisis he faced as president, he had a hand in the deregulation that shaped it.

 

[editec]

Since late 2007, more and more commentators have drawn parallels between our current financial crisis and the Great Depression. Nobel laureates and presidential advisors confidently proclaim that it was Herbert Hoover’s laissez-faire penny pinching that exacerbated the Depression, and that the American economy was saved only when FDR boldly ran up enormous deficits to fight the Nazis. But as I document in my new book, The Politically Incorrect Guide to the Great Depression and the New Deal, this official history is utterly false.

Let’s first set the record straight on Herbert Hoover’s fiscal policies. Contrary to what you have heard and read over the last year, Hoover behaved as a textbook Keynesian after the stock market crash. He immediately cut income tax rates by one percentage point (applicable to the 1929 tax year) and began ratcheting up federal spending, increasing it 42 percent from fiscal year (FY) 1930 to FY 1932.

The Real Lessons of the Great Depression by Bob Murphy

What everyone seems to miss about the Great Depression is what led up to it, and that Hoover was Secy of commerce under Harding and Coolidge, so he didn't quite "inherit" the economic crisis he faced as president, he had a hand in the deregulation that shaped it.

I didn't know that.

Thanks for adding to my spatterings of ignorance on this vast subject.

 

[Kevin_Kennedy]

Since late 2007, more and more commentators have drawn parallels between our current financial crisis and the Great Depression. Nobel laureates and presidential advisors confidently proclaim that it was Herbert Hoover’s laissez-faire penny pinching that exacerbated the Depression, and that the American economy was saved only when FDR boldly ran up enormous deficits to fight the Nazis. But as I document in my new book, The Politically Incorrect Guide to the Great Depression and the New Deal, this official history is utterly false.

Let’s first set the record straight on Herbert Hoover’s fiscal policies. Contrary to what you have heard and read over the last year, Hoover behaved as a textbook Keynesian after the stock market crash. He immediately cut income tax rates by one percentage point (applicable to the 1929 tax year) and began ratcheting up federal spending, increasing it 42 percent from fiscal year (FY) 1930 to FY 1932.

The Real Lessons of the Great Depression by Bob Murphy

What everyone seems to miss about the Great Depression is what led up to it, and that Hoover was Secy of commerce under Harding and Coolidge, so he didn't quite "inherit" the economic crisis he faced as president, he had a hand in the deregulation that shaped it.

You're correct about Hoover being a part of their administrations, but no "deregulation" caused the Great Depression. During the recession of 1920 - 1921 Hoover actually tried to get Warren Harding to intervene the way he would during the Great Depression, luckily Harding ignored this senseless advice and the recession only lasted about a year.

 

[Barb]

The Real Lessons of the Great Depression by Bob Murphy

What everyone seems to miss about the Great Depression is what led up to it, and that Hoover was Secy of commerce under Harding and Coolidge, so he didn't quite "inherit" the economic crisis he faced as president, he had a hand in the deregulation that shaped it.

You're correct about Hoover being a part of their administrations, but no "deregulation" caused the Great Depression. During the recession of 1920 - 1921 Hoover actually tried to get Warren Harding to intervene the way he would during the Great Depression, luckily Harding ignored this senseless advice and the recession only lasted about a year.

The great depression is a case study in the results of deregulation.

 

[Kevin_Kennedy]

What everyone seems to miss about the Great Depression is what led up to it, and that Hoover was Secy of commerce under Harding and Coolidge, so he didn't quite "inherit" the economic crisis he faced as president, he had a hand in the deregulation that shaped it.

You're correct about Hoover being a part of their administrations, but no "deregulation" caused the Great Depression. During the recession of 1920 - 1921 Hoover actually tried to get Warren Harding to intervene the way he would during the Great Depression, luckily Harding ignored this senseless advice and the recession only lasted about a year.

The great depression is a case study in the results of deregulation.

Not true in the least. The Federal Reserve was responsible for the recession, as they always are, and Hoover and Roosevelt are responsible for making it worse with their interventions into the market.

 

[Toro]

Yeah, I wouldn't say deregulation had much of a bearing on the Great Depression. It certainly played a big part in this recession however.

 

[editec]

The 1929 depression and the 2009 depression are NOT going have the same outcomes.

There is not a helluva lot we can learn to help us now, by studying that event, I think.

Too many thing are way too different for that event to help us find a path back to normalcy.

Economic history does not repeat itself because economical circumstances are never really the same.

 

[Barb]

You're correct about Hoover being a part of their administrations, but no "deregulation" caused the Great Depression. During the recession of 1920 - 1921 Hoover actually tried to get Warren Harding to intervene the way he would during the Great Depression, luckily Harding ignored this senseless advice and the recession only lasted about a year.

The great depression is a case study in the results of deregulation.

Not true in the least. The Federal Reserve was responsible for the recession, as they always are, and Hoover and Roosevelt are responsible for making it worse with their interventions into the market.

Timeline of the Great Depression
Guess again.
"Over the decade, about 1,200 mergers will swallow up more than 6,000 previously independent companies; by 1929, only 200 corporations will control over half of all American industries"
That is deregulation.

And, someone else responded as to the application of then and now. While it is certainly true that the results will not be the same (we have more sophisticated means of addressing these problems) there are definite similarities.

" * Organized labor declines throughout the decade. The United Mine Workers Union will see its membership fall from 500,000 in 1920 to 75,000 in 1928. The American Federation of Labor would fall from 5.1 million in 1920 to 3.4 million in 1929.

* "Technological unemployment" enters the nation's vocabulary; as many as 200,000 workers a year are replaced by automatic or semi-automatic machinery.

* Over the decade, about 1,200 mergers will swallow up more than 6,000 previously independent companies; by 1929, only 200 corporations will control over half of all American industry.

* By the end of the decade, the bottom 80 percent of all income-earners will be removed from the tax rolls completely. Taxes on the rich will fall throughout the decade.

* By 1929, the richest 1 percent will own 40 percent of the nation's wealth. The bottom 93 percent will have experienced a 4 percent drop in real disposable per-capita income between 1923 and 1929.

* The middle class comprises only 15 to 20 percent of all Americans.

* Individual worker productivity rises an astonishing 43 percent from 1919 to 1929. But the rewards are being funneled to the top: the number of people reporting half-million dollar incomes grows from 156 to 1,489 between 1920 and 1929, a phenomenal rise compared to other decades. But that is still less than 1 percent of all income-earners."

 

[Kevin_Kennedy]

Deregulation is the removal of regulations. Companies merging together does not constitute deregulation.

 

[Barb]

Deregulation is the removal of regulations. Companies merging together does not constitute deregulation.

How old are you? There were regulations that prevented those mergers, then there weren't. Just as (more recently) there were regulations that prevented banking houses from selling insurance on loans, and then there weren't. deregulation: the removal of regulations. Um, yeah, that's kind of what I was saying.