Great Depression (History)

Outside The Beltway
1

If you remember only two things from this thread about the Great Depression let it be this:

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By July 1933 (red star above)

  1. Unemployment was still very very very high, 25% (which without a safety net was brutally painful)
    but

  2. The depression was over, the economy was great, in fact the 75% of Americans who had kept their jobs were better-off than ever before.

2

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Green lines

  • The depression began right after Hoover took office
  • Almost all of the decline had occurred before his first budget took effect and before Smoot Hawley took effect.
  • Within 3-4 years of those taking effect the depression was over, America had recovered.

Of course Hoover lost re-election.

  • The recovery had just barley started on election day and,
  • Unemployment (which was a brutal thing in those days) was still very high and on its way to 25%.
3

It wasn’t really over until WW II broke out in Europe.

The recession of 1937-8 was because of a big pullback in government spending and higher taxation, which showed the economy post 1934 was still mostly being driven by government stimulus and not private industry.

Yes that’s overly simplistic but true.

4

That is true
and the unemployment aspect of the Depression did not end until WW2.

I have always emphasized that GDP is just an indicator

  • private sector gdp is another indicator
  • savings, net worth etc. also needs to be considered
  • what’s the point of any of those if unemployment is brutal and ≥ 15%?

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5

One of the great causes of the Great Depression was
America’s faux gold standard… (England had one too.)

From July 1921 (before the Fed’s 8th birthday) to July 1929,
the Federal Reserve inflated the money supply by 62 percent.
This was far faster than the economy grew,
and far faster than the US increased its holdings of gold.

It was just a phony gold price-fixing scheme built on empty promises.

  • Money supply was not tied to the gold supply,
  • nor was it tied to past economic output.
  • It was tied only to pencil-and-paper economic models.
    “If we print more money people will eat more cookies and the economy will grow.”
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6

So unemployment should not be ignored (especially when there is little or no safety net) by the time FDR was inaugurated (Mar 4, 1933) the Depression, was, by conventional measured, over, done, finished.

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(I made a mistake on my earlier chart. I’m not trying to hide anything, but I did change this one.)

Given that the underlying economy had recovered so well,
it is very plausible that unemployment (always a lagging indicator)
was soon to fix itself as well . . . if Roosevelt had just left things alone.

But Roosevelt did not leave things alone, did he?