The 1933-1937 "recovery" (unemployment rate, Congress, wages, arsenal)
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Anybody who has studied the Great Depression knows that things bottomed out in 1932 and a recovery, largely driven by government spending began in 1933. During this period, all economic indicators on Wall Street looked good. GDP was rising, the stock market was soaring, banks were turning profits, etc. This "recovery" lacked one thing though...jobs. Though things looked good on Wall Street, there was a very different picture on Main Street. The unemployment rate remained above 15% throughout this recovery before soaring back up again when reality hit in 1937. I see this as a very similar scenario to what is happening in this country right now. Mark my words, there will be another crash before this thing is over, equal to or worse than what we saw in 2008, and with the public barely surviving, it will feel a lot worse no matter how bad it actually is. It may happen this year, next year or in three years, but until this crash happens and flushes out the system, there is no hope of a real recovery.
Good to see someone else with there head firmly set in reality. But it wont play out the same way because everyone has read the history books. It will be different but bad.
Good to see someone else with there head firmly set in reality. But it wont play out the same way because everyone has read the history books. It will be different but bad.
The first blow was indeed softened by the extraordinary low interest rates, as opposed to the rate hikes that occurred in 1931. In addition, government programs that weren't in place such as unemployment insurance has made this downturn feel less severe than the 1930-32 recession. How it will play out from here I really do not know but history is a good guide as the current economic situation is pretty much a repeat of the Depression, albeit with different government responses. Obama's response is very similar to FDR's response in initiating mass government spending to stimulate the economy, which points to a second crash when the government runs out of money ala 1937. Hopefully at that point something big will happen to drive up production and create jobs and pull us out of this once and for all. It took a world war last time, but its difficult to tell what it will take this time. If not, we could be in it for the long haul as if it had not been for World War II, our economy would have only gradually recovered until the depression would have finally ended circa 1950.
This looks more like a decline of an empire or country than a depression, but still a bad situation. The upcoming years should be interesting at least. The next major turn date in the Martin Armstrong economic confidence model is 2011.45 or mid June 2011.
Anybody who has studied the Great Depression knows that things bottomed out in 1932 and a recovery, largely driven by government spending began in 1933. During this period, all economic indicators on Wall Street looked good. GDP was rising, the stock market was soaring, banks were turning profits, etc. This "recovery" lacked one thing though...jobs. Though things looked good on Wall Street, there was a very different picture on Main Street. The unemployment rate remained above 15% throughout this recovery before soaring back up again when reality hit in 1937. I see this as a very similar scenario to what is happening in this country right now. Mark my words, there will be another crash before this thing is over, equal to or worse than what we saw in 2008, and with the public barely surviving, it will feel a lot worse no matter how bad it actually is. It may happen this year, next year or in three years, but until this crash happens and flushes out the system, there is no hope of a real recovery.
There are a few disingenuos things about tjis comment. Unemployment in 1937 was 15% but you don't mention what it was in 1932 in the depths of the great depression. It was 25-30% and in some industrial states it was 50%. Getting the jobless roles down to 15% means that millions of people were put back to work . Now many of those jobs were created by the NRA (National Recovery Act) or were the indirect result of there being a great need for concrete steel and wood products for all those government projects like TVA, Bonneville, Grand Coullee, roads, airports, schools etc. For our economy to work it needs customers to buy stuff. What turned a Wall Street panic in 1929 to a Depression that most Americans were trapped in was that little panic erased most peoples money in banks. Most American banks failed and when they failed there was no Federal gevernment insurance or an orderly bank takeovers or bail out. We had it lucky in 2008 if we had the same little government as in 1929 most of us would have woke up to find our CDs, savings acounts, annuities, 401(k) etc zeroed out before our eyes but the bills would still be there. The problem FDR and his government faced was hoiw do you replace all that consummer demand that wasn't there any more? The answer was you got to buy stuff to replace that lost demand and get people back to gainful employment. Gainfully employed people buy cars , clothing, homes and more. They bought stuff that made America a better place and incidentally laid the basis for the Arsenal of Democracy. Now you need to also explain why nation went into recession in 1937-8. Why do you think FDR had to scrap the NRA? Well the United States Supreme Court got a case challenging the NRA's constituionality and found it unconstitutional in part because it gave the government the power to set prices, wages, modifify or break private contracts, seize private property etc.. Hence, the most powerful dpression fighting tool was lost. Why do you think FDR wanted to pack the Supreme Court?
This is a good little summary of the fallacy that FDRs policies got us out of the depression. Hogwash. Just as obama's are prolonging and making worse the present day recession, so did FDRs. Democrats never learn from past mistakes.
In May 1939, U.S. unemployment still exceeded 20%. The New Deal, by forcing taxes up and discouraging entrepreneurs from investing, probably did more harm than good.
Sound familiar? Congress said NO to the ND revival.
If our government was broke in 1937 where did it get the money to begin the huge transfer from civilian manufacture to weapons production in 1939 to 1945? I am getting tired of sanrene’s blather about entrepreneurs and investors and other Heroes of Capitalism when a full employment modern economy seemingly has to be at war to not be depressed.
We can get through this Republican created (raygun to the bushlet) but it will require another National Recovery Act as well as dissolving our false empire and using the military industrial capacity to make things for posterity (improved railroads, parks, and such like) instead of wasting the money protecting the Saudi’s from themselves. We also need to restore the tax codes of the 30’s to recover the money hoarded by the plutocrats.
The first blow was indeed softened by the extraordinary low interest rates, as opposed to the rate hikes that occurred in 1931. In addition, government programs that weren't in place such as unemployment insurance has made this downturn feel less severe than the 1930-32 recession. How it will play out from here I really do not know but history is a good guide as the current economic situation is pretty much a repeat of the Depression, albeit with different government responses. Obama's response is very similar to FDR's response in initiating mass government spending to stimulate the economy, which points to a second crash when the government runs out of money ala 1937. Hopefully at that point something big will happen to drive up production and create jobs and pull us out of this once and for all. It took a world war last time, but its difficult to tell what it will take this time. If not, we could be in it for the long haul as if it had not been for World War II, our economy would have only gradually recovered until the depression would have finally ended circa 1950.
The only way government "runs out of money" is if it holds itself within a budget and avoids borrowing or printing money. The 1937 government attempted to do that, the current government is, for the moment, only talking about it.
The view that World War II brought us out of the Depression is correct, but what was it about total war that would bring us out of an economic depression? It was the spending by government in order to administer the war. The current administration (and the last one) is spending money... a lot... with the theory that profligate spending kept us from an economic depression and will keep us from a double dip recession.
The spending by the current administration is the big difference between now and then (at least until the U.S. entered the war in 1941).
If our government was broke in 1937 where did it get the money to begin the huge transfer from civilian manufacture to weapons production in 1939 to 1945? I am getting tired of sanrene’s blather about entrepreneurs and investors and other Heroes of Capitalism when a full employment modern economy seemingly has to be at war to not be depressed.
We can get through this Republican created (raygun to the bushlet) but it will require another National Recovery Act as well as dissolving our false empire and using the military industrial capacity to make things for posterity (improved railroads, parks, and such like) instead of wasting the money protecting the Saudi’s from themselves. We also need to restore the tax codes of the 30’s to recover the money hoarded by the plutocrats.
This is a great question and one that I wondered about until I did some research into it. In 1939, we started investing a lot more into manufacture of weapons for England. This was very profitable and when the US entered the war in 1941, we continued manufacturing them for our allies and also ramped it up for our own use.
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