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Discussion Point XXVII

Is this what it must have felt like in the 1930’s?

30 comments to Discussion Point XXVII

  • Paul Marks

    In the British case – NO.

    Unemployment and poverty were higher, but other things were actually better.

    For example, banking (whilst still fractional reserve) was vastly better in the 1930’s than it is now – the modern banks, even by fractional reserve credit bubble standards, are a joke.

    Also manufacturing industy – it was in trouble but a vast network of family owned manufacturing firms existed in Britain and in many ways British performance in the 1930’s was less bad than any other major country.

    Now we live in an “Economist” magazine world where we are told that finance (banking and other such) “is the economy” or at least “is the base of the economy”.

    That is like saying the base of a house is its roof – banking and so on are very important service industries, but to say that an economy of 60 million people can be maintained by them is utterly absurd.

    Manufacturing (making things) has greatly weakened in this country compared to the 1930’s (in spite of all the problems that there were then) and all the government and service jobs that most people are employed in have no base to sustain them.

    So, no, this is not going to be like the 1930’s – in spite of the improvements in technology and capital investment over time, the situation now is much more serious.

  • No, I don’t think so. The ‘middle class’ is much larger now. The economy is broader and international.

    More like the 70’s recession that I remember…a soft economy going south fast with the future presenting a clueless president prone to blind tweaking.

  • guy herbert

    Our fascist coup d’etat seems to have taken a whole decade already.

  • Paul Marks

    The case of the United States is closer.

    Crazy schemes every other day (and they started with Hoover – F.D.R. just carried them forward), violating economic logic.

    That was the United States of the 1930’s and that is the United States of now.

    On the plus side there has not been the vast increase in taxes on imports that came in the early 1930’s, but on the negative side the banking schemes are actually more crazy now than then.

    I often wonder why people are not more angry at the vast sums that have been tossed down the rathole of malinvestments that is credit bubble financial system.

    Tiny (by modern standards) frauds created a great sound money and anti credit bubble movement in the United States in the early 19th century. Contrary to popular belief President Martin Van Buren was more of a leader of this movement than President Andrew Jackson was – who had some defects in his understanding, (pet State banks are no better than a Federal one), but he does not warrent the insult of having his face put on a fiat note – and I assue you that if Andrew Jackson was alive he would shoot any man who tried to issue such notes (and shoot them by his own hand).

    But today there is much less anger – even though the level of credit bubble ism is vastly greater.

    The government (even before this week’s bailout orgy) had already pledged 24, 000 Dollars for every man women and child in the United States – all to try and bailout the hopeless credit bubble.

    I can only assume that the sums of money are so large (normally because they are not expressed per person) that people just glaze over.

    On the manufacturing side:

    United States manufacturing in the 1920’s was sound – actually it had no real problems at all.

    The Great Depression was a credit bubble affair (plus insane government reacion to the bursting of the credit bubble in 1929).

    Today American manufacturing had very real problems even going in to the credit bubble bursting.

    This will be no 1921 where Warren Harding just cut government spending and taxes and the economy was in recovery within six months.

    I do not even think this will be another Great Depression – the bailouts of the financial trash (insult intended) are already on a much bigger scale.

    What will happen?

    My mind falls over at this point.

  • Paul Marks

    The “economy is broader”.

    If by this is meant that more people work in services (than in the 1930’s) it is so.

    However, too often these services are government financed – they may add to “G.D.P.” but I assure you they are not part of the productive economy.

    As for non government financed services – too much of them are credit bubble economy linked.

    “The economy is more international”.

    A higher percentage of buying and selling is indeed over international borders.

    This may deter “trade wars” (i.e. taxes on imports and other such) – and this would indeed be a good effect.

    However, it also means that even if an individual nation was following sensible policies (not that I can think of any examples right now) it would still be dragged down by the economic decline of other countries.

    So being “more international” cuts both ways.

  • veryretired

    No—you, and many, many others, are overdramatizing the situation.

    We may be recapitulating the 20’s and 30’s politically, but economically the 70’s under Carter are a closer fit.

    The US just elected Huey Long’s political heir, so there are certainly elements to worry about, but not the depression of the 1930’s, unless it is created by unwise policies from the progressive, big government forces now ascendent.

  • Ian B

    What seems quite incredible to me is that there is a general lack of understanding that wealth is production. Whatever one’s particular economic creed, it is surely obvious that wealth is the creation of stuff, and money simply a means of facilitating trade in that stuff. And yet it seems apparent that the majority of our ruling class genuinely believe that money is wealth, and that generating money is economic productivity. Service industries of all kinds, be they financial services or e.g. an employment agency, only generate wealth inasmuch as they improve the efficiency of productive industries, in those cases by easing financing or improving the efficiency of hiring staff. They assist others to produce, but do not produce for themselves, as such. And of course a service company which serves only to facilitate compliance with government diktat- e.g. an environmental audit consultant, produce no wealth at all. It would be more beneficial to the economy to pay their staff to stay home.

    Or am I a fool? Is wealth really created simply by moving money from desk to desk in cunning ways?

  • Ian B

    My above comment was just kind of following on from Paul Marks’s comments…

    As to the issue itself, something I’ve pondered on is that, despite the best efforts of a century of socialism, we are actually wealthier than we were in the 1930s. As such, people have farther to fall before they hit rock bottom, so a recession as severe as the 1930s won’t have such severe visible effects- although it will still be devastating for some. There is more wealth to shuffle around to create non-jobs and workfare schemes to prevent lines at soup kitchens, kind of thing.

  • Economically? I doubt it.

    Politically? I think that every so often, the world decides that fascism is GurrrEAT! and puts fascists in power everywhere. Hitler, Stalin, Mussolini, Churchill, and FDR all arose at about the same time and were all fond of each other before the shooting started.

    I think that is surely feels like the 30’s there.

  • The economy, and even the “true” economy (productive sector) is much stronger, much more advanced, much more productive, much bigger now than in 1930.
    We are very far from the desperation and poverty that prevailed then. Industrial output dropped then by 50-60%, unemploymnet was 25%… how much has it dropped so far this year? 0.5% ?
    We don’t know yet how deep the hole is. So far we’re ok. Things will get worse, no doubt. How much worse? Nobody knows.
    Let’s talk again in 6 months.

  • Laird

    I’m with Jacob on this.

    I don’t know too much about Europe in the ’30s, so I’ll confine my remarks to the US.

    There are a couple of major differences between the two eras which no one has yet mentioned. The first is the severe, nearly decade-long drought which wracked much of the principal agricultural areas of the midwest in the ’30s (the “dust bowl”). This added greatly to the overall misery level. We’re not seening anything like that now, and with modern irrigation techniques I doubt that we will. The other difference is the massive numbers of bank failures in the ’30s, which left millions of depositors without any cash whatsoever. We now have federal deposit insurance and, whatever the moral hazards that implies (and there are many, but that’s another discussion) at least people today aren’t worried about their bank failing and taking all their savings with it. The currency may be devalued, but at least the government can always print more and people will get something.

    As Jacob says, let’s talk again in six months.

  • lucklucky

    Things are much better now. But people and Governments are idiotic like always.

    We have much more wealth, we have much more scientific knowledge and better products.

    The increases in productivity means that there is no need for so many many people working unless products increase complexity.

  • RRS

    The question was: “Does it feellike the 30s”

    As one who experienced that period (in the U.S.) all be it as a teen-ager, no, present conditions have not yet produced the same overall sense of “decline’ and downright dispair of say 1935.

    However, as the cliche goes, life was simpler then. Events had much more direct impacts, rather than being filtered through. To many today, it may “feel” more like 1930 felt to the general population of that day (still heavily agricultural).

  • Alice

    Also, the 1930s had active signs of coming European trouble — the Spanish Civil War, for example. And the response to such trouble was different from today — the 1930s had those fascinating “Premature Anti-Fascists”, & the Lincoln Brigades of testosterone-charged left-wing Americans (& others) who went to Spain to fight (as in fire guns & get shot, not chant slogans outside some international conference).

    Today, the sounds of gunfire are much further from European shores, and western heads are much more firmly buried in the sand. Kumbaya and taxpayer handouts can solve all problems.

    So — no, this is probably not what the 1930s felt like.

  • Larry Sheldon

    I was born in 1939, so I don’t remember the 1930’s.

    But I remember the 1940’s. We lived for a while in a pretty nice house with a big backyard where mom and dad grew vegetables, rabbits, and chickens.

    Which is what we ate. I do0n’t remeber going to the store much.

    Then we got evicted and lived in the garage of the boarding house where dad had lived.

    Then we moved to a tiny house (there were 4 of them on a city lot).

    One car–a hand-me-down from dad’s fathe4. No TV. No iPods. No widesceen HDTV in every room. Or any room. (we got our first TV when I was in highschool.)

    Mom made soap. Stuff that took your hide right off.

    Walked to school. Delivered newspapers and mowed lawns. Money went into the family funds.

    I doubt that my close cost as much in a year as one pair of pants for the poor does now.

    In a lot of ways, we might ave been better off–I didn’t know that I grew up in abject poverty until I was 30.

    But itr was a hard life, and I don’t want to do it agai.

  • Larry Sheldon

    Eeek! “clothes”, not “close”. And “again”.

  • “…but not the depression of the 1930’s, unless it is created by unwise policies from the progressive, big government forces now ascendent.”

    So… we’re dead. Got it.

  • Economically, it doesn’t even feel like the ’70s. None of its double-digit inflation, and certainly none of the ’30s double-digit unemployment.

    Foreign policy-wise is another matter. An evil totalitarian menace is growing, and governments don’t want to confront it. Especially not its Hezbollah branch. The menace is not murderous Fascist empires but a murderous Fascist international syndrome. And in both cases a Russian empire waiting to fill part of the power vacuum resulting from Allied victory.

  • Note that the economic damage tends to be industry-specific – US automakers and subprime-linked financial firms. Under normal circumstances, we’re facing a tougher version of the savings-and-loan crash.

    Unfortunately, these aren’t normal circumstances – we face an Obama presidency. We don’t know yet the full sum of damage he’ll inflict on the nation, so I’m not building my raft to New Zealand just yet.

  • On the 1730 news on Radio Magic, I just heard this one, or something very like it:

    There has been a slowdown in the rate of fall of house prices.

    I was around in hard times of the 1970s and I don’t think there was such desperation then for looking on the bright side. The Great Depression, however, predates me; does anyone else have a view?

    Best regards

  • Alsadius

    In the 1930s, no. In 1929, yes, but also at any other point where things seem to be circling the drain. It doesn’t always turn out all that badly – look at the serial financial crises of 1998/1999 – a major hedge fund imploded spectacularly, plenty of nations had meltdowns of one sort or another, and the stock market crapped itself when the tech bubble burst. A panicky reaction at that point could have made the perception of “1929 all over again” very real to a lot of people, and a sufficiently incompetent reaction could possibly have made it actually that bad.

    Fortunately, nobody lost their heads over it, which is more than can be said today. Of course, the bailout is less astonishingly stupid than some of the things tried in 1929(never mind 1933), but it could well be enough to make this really ugly.

    So in summary, “Yeah, probably”.

  • Brad

    We are at about 1929. The bottom of the Depression didn’t hit until a few years later (1932 according to most historians but I look at that year with a jaundiced eye since what they see as a “pick up” economically was simply the entrenchment of FDR’s expansion of Government Works, building roads and shoddy houses utterly inefficiently, so there may have been more people at work, but sound production was still years away.

    So no, this isn’t the 1930’s yet, that still a half decade of government mismanagement away. We’re only scratching the surface right now.

  • Barry Glass

    This definitely is not the 1930s.

    Both my parents grew up on farms in Western Canada during the Great Depression and what we are experiencing now is the equivalent of a cough compared to then’s influenza.

    This can be demonstrated, perhaps too simply, by looking at what happened with a pair of jeans.

    A new pair of jeans was bought for the oldest child and the jeans were several sizes too large so the child could grow into them. When they became too short, they were lengthened. If a hole was worn in, it was patched. When they were too small to be altered, the jeans were passed to the next child and the process repeated. When the jeans were beyond repair, they were cut up to provide material to lengthen or repair other, newer jeans. Anything left over was cut up further and made into a rag mop.

    Have you heard of anyone doing such a thing lately with any object? The closest might be some eco-fanatic who reduces/reuses/recycles because he thinks people are a disease on the Earth.

    My mom says even though her family did this, as well as many other cost-saving measures, they were actually better off than many others.

    I think even with all that’s happened to US real estate prices, they are still far over-valued when adjusted for inflation. So, we might, as others have posted, be in 1929, but nowhere near the 1930s.


  • Rob


    “We are at about 1929.”

    Yep, late 1929. The real shit is still to come.

  • I have five sons and have patched, lengthened, and ‘adapted’ clothing for almost three decades and I am no eco-weenie, I promise you. My 3 older sons still occasionally bring home jeans for me to patch and most of their stuff is too worn out now for the two younger boys.

    The problem is that many people who NEED these skills do not have them. They can’t make a single thing for themselves, and I keep running into women who can’t fix a zipper or even sew a button on. They buy new garments or take them to the cleaners to be ‘mended’. This is the result of NO home ec for girls.

    These women can’t cook with any kind of intuitive skill because they don’t know how ingredients work; they can’t sew an apron for themselves (why would they need one?); canning food for the family during times of abundance seems esoteric to them; and they don’t have the manual dexterity to knit or crochet.

    The hard times that are likely coming are not so hard if you have a little bit of independence, but so many of these young women are totally dependent and like it that way. It costs money to be dependent….and THAT is what is going to be a problem and THAT is where the Obama-neo-fascist crowd are going to get their power. From the perennially lame.

  • Paul Marks

    Yes technology is much improved on the 1930’s

    And yes there has been a lot of capital investment over time.

    However, I repeat that the British economy is in a much worse structural state now than it was in the 1930’s.

    This is simply a fact – not a statement of opinion.

    The banks and other finance area enterprises were clearly in a better state in the 1930’s Britain than they are now – although Mr J.M. Keynes did mess up the largest life insurance company.

    And the manufacturing base (on which banks and other such, in the end, depend – it is NOT the other way round), had terrible problems in certain areas (especially certain traditional industries in the north and in Wales), but was in a much stronger position overall.

    As for the United States:

    One problem that is overlooked is the long term growth of the programs that were set up in the 1930’s and the 1960’s.

    These programs (Social Security, Medicare and so on) started out TINY (hardly a burden at all) – and are now HUGE (and getting bigger every day).

    The hard fact is (again a fact, not an opinion) is that the United States was on the road to bankruptcy even before the credit bubble burst and the bailout orgy started (which is something between 20 and 30 thousand Dollars for every man, women and child in the United States).

    The Comptroller General calculated the unfunded Welfare State liabilities at over 40 trillion (trillion) Dollars.

    What do you think the economic mess will add to those liabilities – loss of tax revenue, new burdens and so on.

    The situation is utterly vile – and hardly anyone seems to understand it (in spite of people like me shouting about it for years – so much that I am almost bored with the subject).

    For God’s sake people WAKE UP.

    This is not the 1930’s – this is much worse.

  • Paul Marks

    Almost needless to say the comptroller resigned in disgust – no one (in power) wanted to hear his warnings.

  • The USA at least has enough gun-nuts – of the kind that a few years ago started shooting at government officials when those tried to enforce some less-than-popular hunting regulations (promptly dropped, it should be noted). Try to look up the prices and the availability of firearms – “someone” out there is buying weapons en masse. In the UK, on the other hand… to quote an immortal movie:

    Eddie: They’re armed.
    Soap: What was that? Armed? What do you mean armed? Armed with what?
    Eddie: Err, bad breath, colorful language, feather duster… what do you think they’re gonna be armed with?

  • Midwesterner


    Your comment reminded me of a laugh I had about our liberal Wisconsin governor, Jim Doyle. When threatened with revenue cuts he suggested that just maybe the Dept of Natural Resources wouldn’t have enough money to issue hunting permits. Within hours he dropped that line of argument.

    My suspicion is that a staffer took him aside and asked “Governor, do you really want 500,000 snipers with a grudge against you wandering around for the 9 days of the deer season and nothing to shoot at?”

  • Paul Marks is right.

    In many ways this is much worse. We had a global synchronized bubble founded on leverage and short risk premium trades, and now we are experiencing a global synchronized bust. The whole capital stock is badly adjusted to the pattern of demand that will hold in a non-bubble world, and we are only beginning to realize that huge amounts of physical and human capital will need to be scrapped at a time when the ‘real pool of funding’ has been badly depleted by chronic overly lax monetary policy.

    Most jobs created post 2002 in the US were associated directly or indirectly with the housing market , and it will be a long and painful process for newly-‘liberated’ workers to retrain and find new jobs in more productive endeavours. (The 30s were somewhat similar in this respect in that the replacement of horses by the combustion engine liberated many farmworkers to find new jobs in the cities).

    In addition this is happening at a time when the terms of trade of the west are in structural decline. The prices of the things we sell are going down in relation to the prices of the things we buy.

    So far, there hasn’t been a drought and food remains very cheap. But today inflation-adjusted corn prices are 25% of what they were at the peak in 1974. Solar activity might be on the verge of turning down, and many seasoned investors believe that we might be surprised at just how high food prices end up going.

    This won’t look exactly like the 30s. But it’s still very early. Broad credit growth only started properly slowing late 2007, and there are lags of 6-18 months before changes in credit growth hit the real economy. Let’s hope we don’t screw things up further through bad policy.