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The lessons of 1937
Idag är John Maynard Keynes mer relevant än någonsin, skriver Krugman bland annat. Han beskriver världsdepressionen i början av 30-talet som en efterfrågekris:
”Det som satte stopp för trettiotalsdepressionen i USA var ett massivt underskottfinansierat program för offentliga arbeten som kallas andra världskriget”.
Carl Johan Gardell, Understreckare SvD 13 augusti 2009
German Government Agrees on Historic Austerity Program
Right or wrong – whether this plunges the whole world into a deflationary abyss from which there is no escape or if, somehow, this has the desired effect of restoring financial stability over time
– it’s nice to see that there are at least a few elected officials in the world who question the idea of simply piling on more debt to cure the world’s economic ills.
Tim Iacono 7 Jun 2010
Deja Vu: Will the U.S. Undergo a Reprise of 1937?
Deflation took hold of the country for another two years and unemployment spiked to 20% and didn't drop below 15% until 1940. Property prices and stock markets languished below their pre-1929 levels until World War II shocked production back to life.
Roubini 16/12 2009
A lengthy recent analysis by RGE’s Mikka Pineda identifies striking similarities in U.S. inflation attitudes between the mid-1930s, when the U.S. began to show signs of recovery from the Depression, and 2009. Americans during the Great Depression voiced the same concerns about excess bank reserves, budget deficits, competitive devaluations and commodities speculation as they do today. Even dissenting arguments followed the same script in both eras. The eerie resemblance in the psychological and economic backdrop of the mid-1930s and 2009—both historic junctures when recovery was thought to have begun—raises concerns that the U.S. could be on the edge of a double-dip.
A stroll through the archives of TIME magazine and The New York Times reveals other similarities in the reactions of Americans today to fiscal and monetary easing and the reactions of their forebears of the mid-1930s. When the U.S. economy began to recover from the Great Depression, widespread fear of credit inflation, currency inflation and public debt inflation drove the Federal Reserve Board to hike reserve requirements by 50% and prompted Congress to slash spending. A premature retraction of economic stimulus, among other things, pushed the U.S. back into recession.
In terms of GDP growth, there was a brief recession lasting only about a year from autumn 1937. Business leaders at the time called it a mere “business recession” to whittle down excess capacity and high inventories built up in response to rising commodity prices. To everyone else, particularly those laborers considered “excess capacity,” the economy's fragile recovery took a big step back. Deflation took hold of the country for another two years and unemployment spiked to 20% and didn't drop below 15% until 1940. Property prices and stock markets languished below their pre-1929 levels until World War II shocked production back to life.
Today the U.S. is experiencing a similar situation with hawks calling for the immediate exit from both loose fiscal and monetary policy even amid high unemployment. Though past is not prologue, learning from past mistakes can make a considerable difference.
Krugman beskriver världsdepressionen i början av 30-talet som en efterfrågekris:
”Det som satte stopp för trettiotalsdepressionen i USA var ett massivt underskottfinansierat program för offentliga arbeten som kallas andra världskriget”.
Carl Johan Gardell, Understreckare SvD 13 augusti 2009
In an interview in Frankfurter Allgemeine, Robert Shiller forecasts that the next five years will be disappointing.
While the first wave of this crisis is over, he points out, there may be another wave coming with some delay, just as it happened during the 1929-1941 Great Depression.
Eurointelligence 31/8 2009
Die meisten Makroökonomen und Finanzmarktspezialisten waren zum Beispiel der festen Überzeugung, dass Finanzmärkte effizient sind, dass es keine Blasen gibt und dass wir die Marktpreise respektieren müssen als die kollektive Weisheit der Menschen, die jedermanns individuelles Wissen übersteigt. Es wäre lächerlich, den Markt in Frage zu stellen, dachten sie.
Das war einer der größten Fehler in der Geschichte des ökonomischen Denkens.
Full text at Frankfurter Allgemeine
There is no such thing as rational expectations.
Roosevelts New Deal på 30-talet gick ut på att med höjda inkomstskatter och utgiftsminskningar få balans i budgeten, som till slut uppnåddes 1938.
Då bröts uppgången och produktionen sjönk.
Först när balansmålet övergavs kunde ekonomin expandera tillräckligt mycket.
Danne Nordling, 20/2 2009
Leaving a financial crisis is like leaving an awkward social gathering: a good exit is essential.
In 1936-37, the Federal Reserve made a colossal mistake in its “exit strategy”.
Randall Kroszner, FT August 11 2009
The writer is Norman R. Bobins professor of economics at the University of Chicago’s Booth School of Business and a former governor of the US Federal Reserve
A fundamental misjudgment by the Fed was to assume that, as the economy revived, banks would manage liquidity exactly as they had prior to the banking crises earlier in the decade and hold only the legally required minimum. When the Fed sharply increased reserve requirements in 1936 and 1937 (see chart 1), banks responded by calling in loans to build a liquidity cushion above legal requirements, thereby sharply contracting money, credit and economic activity.
The recovery from the Depression is often described as slow
because America did not return to full employment until after the outbreak of the second world war. But...
Christina Romer, chairwoman of Barack Obama's Council of Economic Advisers and a scholar of the Depression,
The Economist print June 18th 2009
But the truth is the recovery in the four years after Franklin Roosevelt took office in 1933 was incredibly rapid.
However, that growth was halted by a second severe downturn in 1937-38, when unemployment surged again to 19%
The fundamental cause of this second recession was an unfortunate, and largely inadvertent, switch to contractionary fiscal and monetary policy.