At some point in the not to distant past I wrote and entry here or on my blog page. I made a reference about being nervous about how our President seemt to miss some of the lessons that history has taught us.
My mother responded (in email rather than a comment) and asked:
Question: in your statement re "his disregard for history" What do you mean? please explain
Following is my observation: -
1928 the stock market takes an amazing rise - faster than the rest of the economy. Companies are building like crazy.August
1929. The bubble is too big. A recession begins. Auto sales are down and construction drops off significantly.
October 1929 - The stock market crashes.
1930 & 31 - Fed slashes the prime rate in an attempt to get things going. People start electing Democrats. Unemployment grows into double digits.
1932 - The Fed starts printing money. Tax rates are increased in an effort to get the "rich" to pay for more programs (and "create" jobs).
1933 - Roosevelt decides to redistribute wealth from the rich to the poor. He also starts spending all kinds of money trying to fix the economic problems.
===== Meanwhile in another part of the world ======
Germany is spending money that it doesn't have (like crazy). It finaced WW1 with deficite spending. It was forced to pay retrubution after the war resulting in more spending (without matching tax increases). The result was the country went into hyper inflation that continued until they invaded Poland in 1939....
Side Note: A bit over 40 years later the folks in Brazil failed to consider history and repeated the German mistake (which caused hyper inflation) again by deficite spending and expanding their money supply. From 1980 to 1994 they proved, once again, that if you choose to spend and not match the spending with increased taxes your economy is doomed. -- Now back to our regularly scheduled review of history in the 30's...
=============================================================
Unemployment never gets out of double digits and the crappy economy continues right up to the time when Germany invades Poland to start the 2nd world war.The war pretty much wipes out everyone but the USA and we emerge as the worlds only economic super power.-----
Now let's compare and contrast that with current day events -----
In March of this year Obama gave the thumbs up and the Fed monitized a trillion in debt - yet the government continues to spend money we don't have at record levels. In an effort to keep taxes low (for now) they are borrowing or monitizing all this debt.
History tells us that move is a fools game and we can't win. George Bush started this Government folley when he increased our federal spending by nearly 800 billion dollars annually.
Obama has upped the ante and out spent Bush's stupidity by 125% in his first hundred days! Bush increased the national debt by 2.5 trillion (funding wars and such) during his 8 year term.
Barak has already committed to spending $4.9 trillion more than we will take in over the next 6 years (and that doesn't touch the cost of nationalized health care).
It seems to me that Barak is making the historically proven wrong choices of Roosevelt, Germany and Brazil. Last time it took a major war (and millions of deaths) to end the mess.
What are we willing to sacrafice this time?
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5 comments:
This from my step-father:
This is historical nonsense.Roosevelt was elected in 1932.Fed policy was not to drop but to raise interest rates.During the first four years of the Roosevelt administration there was steady GDP growth.It was only in 1936 when Roosevelt(a person who subscribed to traditional ideas about balanced budgets )tried to put the budget into balance prematurely that the economy faltered again.It took government spending for WWII to finally put the economy on a sustained growth path.This idea that itwas increased taxes on the rich and redistribution is just baloney.There is such a thing as taxes that are too high but the taxes being levied in the post war did not stunt economic growth.It was one of the best periods of growth in the country's history and of course the decade of the 90s was the best.Better than anything produced in the tax cutting 80s or the current decade.
The real story about taxes is that you can't talk about tax policy without talking about spending. In the long run you have to pay for what get or what you borrow.Most of the national debt increased in the 1980s and the current decade when the cuts were not accompanied by spending decreases.Now all of a sudden these bozos have become budget hawks.They used to say that deficits didn't matter.
My Response:
As far as what I wrote / you wrote:
I never disputed that Roosevelt was elected in 1932 (nor did I discuss what the fed was doing during the first 4 years of Roosevelt's administration).
That's the amazing thing about arguments like these. The opening statement of the rebuttle is that "This is historical nonsense" and then, rather addressing any of my historically accurate statements about the cause of the depression (that I believe got Roosevelt elected) the response is statements from a parallel reality.
This is historical nonsense. Roosevelt was elected in 1932. - Not sure what the point if this statement is but I never intended to imply that he was elected in any other year. My timeline below doesn't even mention him prior to 1933.
Fed policy was not to drop but to raise interest rates. - Given that none of my points about what went wrong (it started in 1929) were addressed I'll assume you agree to my points from that time. Now let's look at the prime rate during the Roosevelt Administration.
I got on the internet and went to the Federal Reserve Economic Database and looked up the prime.
1932 to 1933 the prime dropped by 50% and Moody's AAA bond rates (from the same source) went from 5% to 4.4%.
1933 to 1934 the prime dropped another 50% from the high (pretty much to zero) Moody reported AAA bonds around 4% and by 1935 they were down around 3.4%. That seems like a drop to me.
During the first four years of the Roosevelt administration there was steady GDP growth. - I get that (and never disputed it) but no reasonable person would argue that those were good economic times. Given that the economy flat lined a few years earlier I expect some sort of "growth" was unavoidable.
It was only in 1936 when Roosevelt (a person who subscribed to traditional ideas about balanced budgets) tried to put the budget into balance prematurely that the economy faltered again. - First, I'm not buying that life in these United States was wonderful from 1933 - 1936 and then took a sudden down turn in 37 because Roosevelt wanted to balance the budget. The way I see it, things pretty much sucked the whole time. You are right that Roosevelt believed in a balanced budget but his quest to spend his way out of the depression coupled with a desire to balance the budget caused him to make the mistake that I believe resulted in the hiccup you speak of.
Further, the national debt to GNP ratio increased significantly during his tenure even though the "regular" budget was balanced because his "spend our way out of the recession" strategy was coming out of the "emergency" budget and he funded all that with debt.
Roosevelt cranked up the printing presses and increased the money supply by over 50% between the time he took office and the end of 1936.
Frankly, if I was to be fair in all this I would probably have to argue that the deficite spending of Hoover (he took the debt to GNP ratio from 16 to 33 percent and Roosevelt then brought it up to nearly 41%) was an even bigger factor in this whole mess than what Roosevelt did to the money supply but both were badness.
(not enough room for all of it in the last post)
It took government spending for WWII to finally put the economy on a sustained growth path. - I completely disagree with this statement. I will not argue that the spending was unnecessary becasue WWII was very significant but if the government spending was really what "fixed" the economy then the people in the USA would have seen economic prosparity at unprescidented levels during the war (when we were spending at a level like we had never spent before).
Life here was just the opposite. If you follow that same logic you might need to argue that the current Bush war spending would have done just the opposite of what we saw at the end of his term.
The truth is that life sucked all through those crazy "spend more than we make" years and did not start to improve until we throttled back the deficite spending (starting in 45 we were paying that debt down and there were crazy lots of jobs trying to replace all the stuff we destroyed during the war).
This idea that it was increased taxes on the rich and redistribution is just baloney. - That's fair and I'll roll over on this point. I actually may have mis-represented myself somewhat here.
First, I think the problem wasn't that we increased taxes (but I still contend that efforts to restribute wealth is counter productive and immoral) as much as it was that we spent more than we took in.
Perhaps I should have argued that we needed to increase taxes even more so we could keep up with the foolish "I need to spend my way out of these problems that were caused by Hoover spending too much" We could have another debate over the wisdom (or morality) of thinking we should punish the rich for their success and reward the poor for their failure to produce but that's not in scope here...
(and more)
There is such a thing as taxes that are too high but the taxes being levied in the post war did not stunt economic growth. It was one of the best periods of growth in the country's history and of course the decade of the 90s was the best. Better than anything produced in the tax cutting 80s or the current decade. - I absolutely agree that Ronald Regans efforts to reduce government in the late 1980 did result in amazing economic prosparity in the 1990s. He supported business growth and cut taxes and the result was to take us from 12.5% inflation down to 4.4%. Unemployment dropped by a third but the thing that really made the prosparity that lasted so long was that he did it by imporving business in the private sector (rather than trying to do it in a Government that doesn't produce anything). Actually I need to recoginze Clinton in this too. Wild Willy Billy didn't get rid of the fiscal policies of Alan Greenspan and still had some pretty decent economic practice. Had it not been for Regan's bad choices in borrowing money to increase the military it would have been even better. I really can't address if the spending really saved us by bankrupting the Soviet Union but beyond that he really did position us for a great decade in the 90s. (But I will argue that economic prosparity came from crazy lots of work rebuilding the planet and we grew inspite of the taxes)
The real story about taxes is that you can't talk about tax policy without talking about spending. In the long run you have to pay for what get or what you borrow. Most of the national debt increased in the 1980s and the current decade when the cuts were not accompanied by spending decreases. Now all of a sudden these bozos have become budget hawks.They used to say that deficits didn't matter. - I'm so pleased that you closed with this because we end on the same page. You are ABSOLUTELY right when you get to the bottom line. From Truman through Ford the national debt came down. It pretty much flat-lined during the Carter administration and then Regan / Bush inceased it by 2.3 trillion upto around 65% of GDP. Clinton did a good job of turning it back around (took it back down to around 60%) and during most of his term Bush Jr. wasn't doing much damage but during the last year he started making the same mistakes I was talking about in my original message to mom.
(and finally)
Perhaps Regan's policies around deficite budget would have been a point I could have compared against because Obama is going to make Regan's deficites look like it was nothing. The comparision wouldn't work though, becasue Regan's efforts to reduce government (everywhere but in the military) and cut taxes offset the deficite spending folley then Clinton made it even etter by dumping money back into debt reduction.
For me, This isn't a republican / democrat thing. As I said in my earlier post, Bush Jr. was screwing things up in a major way by interfering in the natuarl order of business (doing stupid things like distributing wealth through his "I'll give you $8,000 of some other persons hard earned savings for your next house" and his "You've proven that you can't compete in the auto industry so I'll reward you with billions of dollars taken from the savings accounts of people who don't deserve to be punished". (and don't even get me started in rewarding banks for poor management)
This is economics and monitary policy. I believe (and we will just have to disagree on this) that big government is not as good for the country as successful business is. I believe a practice of spending more than you take in is badness. I think a belief that you can spend your way out of debt is so rediculious that it doesn't even deserve discussion. Finally, I believe Obama is even worse than Bush when it comes to economic stupidity (and I wouldn't have guessed anyone could be). He has already printed more money than Roosevelt did. He already surpassed the errors Bush Jr and openly plans to exceed the deficite spending of Regan in the 80s.
I fear the worst is yet to come.
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