Posted by
jim0943 on Wednesday, November 05, 2008 9:07:50 AM
We must learn from history and not repeat it.
The great depression began in late 1929 and lasted about 10 years..thru most of the 1930's. During this period there were unprecedented levels of unemployment and large drops in consumer spending that resulted in related drops in the production of goods to be sold. Unemployment reached a peak in 1933 when 1 out of every 4 able workers could not find any work. Prices fell on everything but, even so, not much money was left to spend since wages also fell for those who still had jobs and what money people did have they were afraid to spend on anything but the bare necessities.
The great stock market crash occurred in late October 1929 about a year after Herbert Hoover was elected president (
in November 1928) but the stock market didn't actually hit its bottom until mid 1932.
Government attempts to prop up the economy after the crash basically continued to make things worse throughout the decade of the 1930's
One key example was that in June 1930 congress enacted the Smoot Hawley Tariff Act placing large tariffs on imports. The hope was that doing this would increase demand for products produced here in the USA. Unfortunately this resulted in a large reduction in farm and other exports (which basically were cut in half). Further, as a result of reduced US imports from other countries, those other countries experienced economic problems which resulted in them retaliating with their own tariffs, further reducing US exports. Global protectionism ruled and world trade suffered greatly as many long-standing international economic trading relationships were damaged. This was all harmful to the US economy, which was already struggling, including adding to the already rising unemployment.
The combination of many factors (including the stock market crash and these tariffs) caused many people and businesses to default on loans and have to declare bankruptcy. Subsequently many banks failed (over 5,000 banks failed between 1929 & 1932)
The government infused large amounts of money into supporting the banking system but problems persisted
Facing huge budget deficits and unwilling to curtail expenditures (in fact with a desire to spend more), at the recommendation of Treasury Secretary Andrew Mellon, Herbert Hoover proposed the Hoover Revenue Act of 1932 which drastically raised income, estate, excise and sales taxes and also increased postal rates.
Many people offer many different reasons for and disagree about what actually caused and exacerbated the great depression but almost all believe and acknowledge that the large reduction of US exports and the huge federal tax increases were major factors.
In the aftermath of 1929 those in government (first Herbert Hoover & then Franklin Roosevelt, who was elected in 1932) advocated creating massive federal government programs to spend taxpayer money to help revive the economy via public works and welfare programs. Many believe this government interference actually prolonged the depression but others disagree.
While many things today are very different, there are unfortunate and frighteningly striking similarities between what happened then and where we are today as well as with what Obama and the extreme left leaning congress wants to do now.
We have already seen at least part of a stock market crash and we have also seen massive attempts by the federal government to intervene in an economic crisis. We have also seen a number of bank failures as well as failures of other large businesses. In the early 1930's there was much less of an expectation of having the federal government bail out everyone. Today, too many have an entitlement mentality that says the government needs to be involved in all problem-solving...leading to totally unrealistic expectations about what can (or should) be done in an economic crisis.
It is entirely likely, under the new administration, that restrictions will be placed on international trade and income taxes will be increased. Those goals are among the desires of the far left who helped elect this president and congress (especially labor unions and those who favor income redistribution). It will be difficult to ignore the demands of their base. However, even beyond the base, Obama and many who are in the new congress see these steps as good things to do...not bad things. They will ignore history and say that things are different now.
Just in the past few months, the federal government has already spent (or agreed to spend) more than a trillion dollars trying to "rescue" the economy. We do not have a lot of ammunition left to throw at these problems. We are in very dangerous territory. I do not trust this economy under their control. I fear a worse case scenario.
And none of this even contemplates the devastating impact of another damaging attack on the US by terrorists.