Political Cartoons from the Great Depression Eerily Relevant Today These cartoons say a lot about the era, and the debates which continue today over how government should respond to crises. Also see part 1, Cartoons from the Depression. #1) Like today, confidence was the real issue then too (the fundamentals are fine, just don’t dig too deep). August 1931, by C. #2) Jobless Recovery circa 1931. January 1930, by Robert Brown #3) False “green shoots” in Fall of ’31 November 1931, by Robert Brown #4) 1933 – In a fit of insanity which lasted throughout much of the depression, the American government enacted the Agricultural Adjustment Act, which paid farmers to destroy food and plant less crops. June 1935, George Shellhase #5) Another critique of the AAA, this one from a leading black newspaper. May 1934, L. #6) Broke but hoping. January 1931, by Ed Graham #7) Mixed signals. October 1931, John Cassel #8) Santa gets jacked. December 1931, Ralph Fuller #9) Depression-era critique of Keynesian economics. February 1936, Robert Day #13) Feed the rich.
John Lanchester · The Art of Financial Disaster · LRB 15 December 2011 No essay in English has a better title than De Quincey’s ‘On Murder Considered as One of the Fine Arts’. I wonder whether, if he were alive today, he might be tempted to go back to the well and write a follow-up, ‘On Financial Disaster Considered as One of the Fine Arts’? The basic material might be less immediately captivating, but there’s a lot to choose from. In the UK, our most recent outrage has featured Northern Rock, the bank whose collapse in the autumn of 2007 was the first harbinger of the credit crunch and subsequent Great Recession. To sum up: the Virgin deal guarantees big losses for the taxpayer, uses exotic financial techniques analogous to those which caused the Rock to collapse in the first place, and leaves us with a bank which is measurably less safe. I think De Quincey, from the aesthetic point of view, would have preferred the MF Global scandal in the US. Many have tried to rival Goldman.
American Airlines, Bankruptcy, and the Housing Bubble We normally say that a company “went bankrupt,” implying that it had no choice. But when, recently, American Airlines filed for bankruptcy, it did so deliberately. The airline had four billion dollars in the bank and could have kept paying its bills. But it has been losing money for a while, and its board decided that it was foolish to keep throwing good money after bad. Declaring bankruptcy will trim American’s debt load and allow it to break its union contracts, so that it can slim down and cut costs. American wasn’t stigmatized for the move. These people have no hope of ever making a return on their investment in their homes. Part of the answer is practical. Paying your debts is, as a rule, a good thing. When it comes to debt, then, the corporate attitude is do as I say, not as I do. Of course, many borrowers made bad decisions and acted irresponsibly.
New preface to Charles Kindleberger, The World in Depression 1929-1939 J. Bradford DeLong, Barry Eichengreen, 12 June 2012 The parallels between Europe in the 1930s and Europe today are stark, striking, and increasingly frightening. Both the existence of these parallels and their tragic nature would not have escaped Charles Kindleberger, whose World in Depression, 1929-1939 was published exactly 40 years ago, in 1973.1 Where Kindleberger’s canvas was the world, his focus was Europe. These were ideas that Kindleberger impressed upon generations of students as well on his reading public. There was indeed much wisdom in Kindleberger’s lectures, about how markets work, about how they are managed, and especially about how they can go wrong. Summers was right. First, panic. Kindleberger’s second key lesson, closely related, is the power of contagion. It might be hoped that something would have been learned from this considerable body of scholarship. In a sense, Kindleberger predicted all this in 1973. Indeed it is, more so now than ever. 4 Kindleberger (1978).
A wise man knows one thing – the limits of his knowledge John Maynard Keynes, who never tried to conceal that he knew more than most people, also knew the limits to his knowledge. He wrote “about these matters – the prospect of a European war, the price of copper 20 years hence – there is no scientific basis on which to form any calculable probability whatever. We simply do not know.” And Keynes was right. But lesser men find prognostication easier. The models share a common approach. But little of this knowledge exists. This may lead to extravagant flights of fantasy. The impression of rationality these procedures convey is spurious. The future is assumed to be essentially like the present, with differences mainly derived from mechanical projection of current developments. Sometimes the analysis will offer probability judgments – typically derived by tweaking some of the arbitrary assumptions and seeing how many of the scenarios generated fall within specified limits.
How Washington Orthodoxy Fails the Middle Class - David Rohde - Business Revitalizing the American middle class in a transformed global economy is a staggeringly complex task. And neither Democrats nor Republicans alone have the answer. Reuters On Tuesday, Barack Obama declared the debate over how to restore growth, balance, and fairness to the American economy the "defining issue of our time." The following day, Republican front-runner New Gingrich said Mr. The arrival of the middle class at the center of the American political debate is a long overdue step forward, but Obama and Gingrich steered clear of an ugly truth. The Republican right, oddly enough, has become more doctrinaire, utopian and out-of-touch with global realities than the "Marxist" Obama administration. A recent study by MIT professors Frank Levy and Thomas Kochan lays out the staggering task that revitalizing the middle class represents. By contrast, Obama's most specific legislative proposal in his speech was a payroll tax cut funded by a surtax on millionaires.
The roaring 1920s and the Crash 1929 The roaring 1920s and the Crash 1929 April 20, 2008 – Comments (11) I'm going to do a two part series about the 1929-1932 bear market and the following great Depression. First a write up and then some nice videoclips of the time with more information and showing the mood back then! The roaring 1920s and the great bull market: The roaring 20s were a time of great prosperity and with many technological developments. Of course the stock market also rose. So since the last bear market 1920 the Dow Jones Industrials rose 5 fold to 381 on September 3, 1929. Chart from djindexes.com who have a nice article with more details of the 1920-1929 bull market. The bear market 1929-1932: There were no real news that caused the crash. After that the market recovered until April 1930 when it reached 294. Chart from Millionaires became beggars, family fortunes were destroyed, the small investor lost everything. Part 1 (4 min) Part 2 (3 min) Part 3 (4:30) Part 4 (4 min) Part 5 (3 min)
Nudge thyself Economists have more to learn from the natural sciences if they are to claim a realistic model of human behaviour You’ve come to a canteen for lunch: at one end of the counter, you see juicy fat burgers sizzling on a grill and, at the other end, healthy-looking salads. After a little hesitation, you choose the burger. “Cheese and bacon with that?” Classical economists, perhaps uniquely among members of the human race, would assume you made your decision fully aware of the implications of your actions, that you weighed up those implications and came to the conclusion that, all things considered, the cheese and bacon burger is the better choice. Some economists have realised this and, given the failure of classical models to predict the financial crisis, their young discipline of behavioural economics is now enjoying something of a heyday. Take nudging. And this is just what the latest research is showing. Stephen Cave is a writer and philosopher based in Berlin.