I have to get some slumber mode time here in preparation for a jog up to Billings later on today, but here’s some things I’d like people to think about:
1. The rate of unemployment that we hear so much about today during the Depression (ie, the peak unemployment of 25%) was based on a VERY different statistical basis than how the BLS computes unemployment today. First, there was no BLS computation of unemployment during the Depression. The final accounting of unemployment during the 30’s was done by one man, Stanley Lebergott, in the early 1960’s. From his work, we get the figure of 25% unemployment in 1933.
Lebergott’s methodology was different than how we would count unemployment today, much of which is based on “is the person looking for a job and/or are they collecting unemployment?”
Lebergott considered men who were employable as his starting point - and this included men who were in the military and in prison, as well as teenagers as young as 14. Today, we don’t count teenagers below 16, and people in the military or prison are considered “institutionalized” and out of the employment pool as a result.
Lebergott also didn’t consider the temporary make-work jobs form FDR’s programs as employment.
So in the following paper, we see some 1970’s re-appraisal of the Depression-era unemployment:
http://fraser.stlouisfed.org/docs/MeltzerPDFs/maremp93.pdf
2. While “panics” in the stock market prior to 1929 were over within two years, debt deflations were not. I know I keep harping on this, but there just is no getting around it. Debt deflations have happened multiple times in our nation’s history, and they’ve always been ugly. The one prior to 1929-1940 started in October 1873, and the US economy didn’t really start recovery until about 1879. The cause of that debt deflation was too much money injected into railroad real estate by a) the US government and b) foreign investors, especially Germany, who was plowing war reparations from France (as a result of the Franco-Prussian war) into the seemingly “can’t lose” deal of the time, US railroads. The intermediaries of the time were banks issuing railroad bonds, with goofy prospects of repayment but glowing promises (sound familiar yet) and then one day in October, 1873, a railroad missed a payment on a bond and within a couple weeks, banks would no longer transact each others’ checks and drafts (sound familiar again?)
3. Hoover, as the author points out, was not a hands-off sort of guy. Matter of fact, he was every bit the hands-on meddler in the economy from the get-go. Calvin Coolidge said of Hoover that “That man has offered me unsolicited advice for six years, all of it bad.” That was true.
During Hoover’s time as Commerce Secretary, he meddled more in the economy than perhaps any Commerce Secretary before - and few since. He had a “Own Your Own Home” program (sound familiar?) as well as all manner of meddling in trade. I can go into that more if people ping me late tomorrow.
4. Remember that FDR took us off the gold standard, in effect inflating the currency.
5. People who look closely at what happened during the Depression and try to sort out a useful history for today need to remember there are TWO histories playing out during a debt deflation: the one playing out in the economy, and the other one playing out in the financial/banking sector.
Everyone knows something about the economic history of the Depression. Most people have either ignored or know not where to look for history of the banking/financial sector during that time.
Let’s cut to the chase: the banking sector imploded during the debt deflation of the 30’s, just as it is collapsing now. The government effectively became the lender of first (and sometimes only) resort. The beast we know today as “Fannie Mae” was created during this time to open up a secondary market for mortgages, money was scattered hither and yon in various capital spending projects and companies. The private sector financial companies did not really recover to a proper functional state until about 1947. So to bottom-line this particular point, WWII handled the employment problem in the economy - it did NOT rectify the problems in the finance sector.