Unsolved mystery — how did the economy turn up in Mar. 1933?
The great Paul Kasriel probes one of the true mysteries of the
Great Depression — how did the economy turn around in March 1933, when
the economic doctors of the day were bleeding it with leeches and
attacking it with lethal poisons? Kasriel describes how Usgov clamped down on
trade with protective tariffs in 1930, followed by the Fed sharply increasing
interest rates in 1931. Then in 1932, income taxes were cranked higher.
During the entire period 1929-1933, almost 9,100 commercial banks
failed, while the government stood by sucking its thumb with depraved indifference. YET, the
economy miraculously bottomed in March 1933, even as Hoover’s medieval tortures were piled
onto its breaking back.
Was this a case where positive thinking won the day —
where folks simply got tired of being sick and tired? Beats the hell
out of me. But Kasriel’s chart-amplified summary of the fraught decade
of the 1930s is one of the best you’ll ever find, anywhere. Ben
Bernanke reads this sort of racy stuff under the sheets at night with a
I fully endorse
Kasriel’s conclusion that Usgov can and will turn around the current
slump. With government still able to borrow hundreds of billions at
only 3 percent, there’s really no question that they will win the
battle, if they keep hitting the debt market month after month. Of
course, our future is being vaporized. But burning the furniture to stay warm tonight will
definitely keep us partying through the winter. SKOAL.
It turned up because the deflation was over…the crazy inflated bubbles were fully deflated. By definition, that’s when things turnaround in a deflationary depression. Had absolutely nothing to do with irrelevant government policies. Today’s policies are equally irrelevant when it comes to reflating the economy. Everything they’re doing is in fact prolonging the inevitable deflation that must occur before productive growth can start again. The only way the policies are relevant is in how egregiously they are stealing currency from the middle class and passing their money to rich bankers. It will do nothing to stop the workings of the debt markets. Debt/bond markets rule the world. Governments are helpless, but they sure know how to manipulate people through the press to make it look like they’re relevant.
I don’t know about the facts in that webpage.
Economic growth went nowhere between 1933-1939. Real GDP per adult was still 27% below trend and per capita GDP was lower in 1939 than in 1929. Unemployment was higher in 1939 (at 17%) then it was in 1931, even with double the amount of money in the system.
The bottom was reached in 1933 because Hoover’s policies to enforce wage rates during 1930-32 in the face of falling prices finally forced businesses to go bankrupt. Wages finally fell and the banks finally had a blowout in bankrupcies. Bank runs flared up and this helped create a lot of the deflation in opposition to the Fed’s efforts to inflate their way out of the problem. The deflation was actually a good thing.
FDR tried his best (maintaining Hoovers policies but adding his own pork) but could not do anything to help. It was a big power grab for him; a small group of his elite buddies to finagle the system to serve themselves by creating monopolies and cartels to have complete control of the economy. He passed his version of the New Deal in 1935-36 and they still had another second depression/recession from 1937-39 inside the depression they were already in. Every time the economy started to turn around he had a stupid policy to knock it back down again.
For anyone that thinks that FDR did good for the Great Depression, you need to put away your dumbed down high-school text book that taught you a bunch of crap to boost the image of a failed president.