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Fed: Economy may not recover for another five to six years

The president has received a vote of no confidence from business leaders who, after having supported him for president, now describe him as anti-business. Obama was not happy with that charge, so he's been all over the country lately defending this policies, particularly his stimulus bill, insisting that it kept the economy from falling off a cliff. In fact, he's gone so far as to say the economy is on the rebound.

Oh, really? Then why is the Fed saying the opposite?

The euro rocketed to a two-month high of $1.29 and sterling jumped two cents to almost $1.54 after the Fed confessed that the US economy may not recover for five or six years. Far from winding down emergency stimulus, the bank may need a fresh blast of bond purchases or quantitative easing.

Usually the dollar serves as a safe haven whenever the world takes fright, and there was plenty of sobering news from China and other quarters on Thursday. Not this time. The US itself has become the problem...

The Fed minutes warned of "significant downside risks" and a possible slide into deflation, an admission that zero interest rates, $1.75 trillion of QE, and a fiscal deficit above 10pc of GDP have so far failed to lift the economy out of a structural slump.

"The Committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably," it said. The economy might not regain its "longer-run path" until 2016.

"The Fed is throwing in the towel," said Gabriel Stein, of Lombard Street Research. "They are preparing to start QE again. This was predictable because the M3 broad money supply has been contracting for months."

The Fed minutes amount to a policy thunderbolt, evidence of how quickly the recovery has lost steam. Just weeks ago the Fed was mapping out withdrawal of stimulus.

The Obama economic agenda is responsible for extending this recession, just as Franklin Roosevelt's agenda was responsible for extending the Great Depression. Obama's massive new programs will create so many new bureaucracies that they will require hundreds of additional taxes to pay for them, hence, the massive tax increases that kick in on January 1, 2011. The American people's consumption drives the economy, and when you pull money out of the pockets of taxpayers, you cripple the economy.


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Comments (67)

I would say in about 2 year... (Below threshold)
914:

I would say in about 2 years we will reach the end of the rainbow.

Just like the idiots in Sac... (Below threshold)
GarandFan:

Just like the idiots in Sacramento; when the Dimwits in Washington see the tax money coming in, THEY'LL SPEND IT! No pay down of debt. Just another 'enhanced' revenue stream for more social justice programs.

At least when the economy does tank, Barry and Company are going to face one highly pissed off electorate (except of course for the 33% of true beleivers).

Amazing when you consider t... (Below threshold)
John S:

Amazing when you consider the Federal Reserve, which is never frank on anything, says it will take the next Republican administration four years to fix the mess Obama has made. The latest financial "reform" alone creates more than 250 job killing regulations. I'm not sure what the 37 million un- and under-employed are supposed to do until then. Nine hours a week at McDonalds won't cut it.

"Fed: Economy may not recov... (Below threshold)
914:

"Fed: Economy may not recover for another five to six years"

The dems lose power and watch the DOW jump 4,000 point's in 2 afternoon's.

Hope and change.

Garand, the problem is that... (Below threshold)
ODA315:

Garand, the problem is that after the Repubs take back control of congress and the economy continues to collapse into a slit trench due to his policies our esteemed President (and his helpful media friends) will point the finger at the Repubs. "See, they obstructed my carefully planned recovery efforts and the economy is now WORSE than it was before they were elected. It's THEIR fault. Now, I need another 2 trillion in stimulus funds to fix their mess"

And the gullible sheep will buy into it.

Typical liberal, ignore rea... (Below threshold)
Wayne:

Typical liberal, ignore reality while stating what they want reality to be as fact.

What's astonishing is there... (Below threshold)
Caesar Augustus:

What's astonishing is there are people out there who actually are surprised by all this. Which certainly goes a long way towards explaining why Democrats win lots of elections.

In fact, he's gone so fa... (Below threshold)

In fact, he's gone so far as to say the economy is on the rebound.

Yup, it's all better now...he fixed the economy...

"Obama tells NBC in an interview that "nobody in the White House is satisfied" with continuing high unemployment.

But he also says the midterm congressional elections could come down to "a choice between the policies that got us into this mess and my policies that got us out of this mess.""

Aren't you relieved?

By the way, it's historical... (Below threshold)

By the way, it's historical fact agreed upon by a majority of economists and economic historians, that FDR's polices reduced and shortened the Great Depression.

That's how it is in reality land.

"That's how it is in rea... (Below threshold)
914:

"That's how it is in reality land."

A fool and reality are soon parted!! You and Barry are prime example's of this theorem.

So what happened with the D... (Below threshold)
JLawson:

So what happened with the Depression of 1920, Jim X?

Why didn't IT last 10+ years?

You know, much more 'help' from the folks in Washingotn, and we may never recover. Does aynone else think we need a Regulatory Reset back to 2005?

Why didn't IT last 10+ y... (Below threshold)

Why didn't IT last 10+ years?

Maybe because the 1920 depression was a one-year deflation coinciding with a transition from WWI to a peacetime economy, and the Great Depression was a complete and simultaneous collapse of private banking and the stock market, further ravaging jobs and causing more banks to collapse in a downward spiral.

Any other questions?

"Maybe because the 1920 ... (Below threshold)
914:

"Maybe because the 1920 depression was a one-year deflation coinciding with a transition from WWI to a peacetime economy, and the Great Depression was a complete and simultaneous collapse of private banking and the stock market, further ravaging jobs and causing more banks to collapse in a downward spiral."


Thanks for clearin that up. For a second there I thought You were gonna blame BOOOOOOSSSSSHHHH!!!


"By the way, it's historica... (Below threshold)
GarandFan:

"By the way, it's historical fact agreed upon by a majority of economists and economic historians, that FDR's polices reduced and shortened the Great Depression."

BTW, you're full of bullshit! As usual. Is this like 'the consensus' about Global Warming?
That's been shown to be a load of crap as well.

Even FDR's own Sec Treasury in 1939 stated the obvious - "All that money, WASTED!"

Barry wipe's his ass with T... (Below threshold)
914:

Barry wipe's his ass with T-bill's... But he's still not through pushin SHIT!!

It is like the consensus ab... (Below threshold)

It is like the consensus about global warming, actually. You don't want to believe it, therefore the actual experts who've studied the field for decades must be wrong.

And yes, FDR's treasury secretary didn't like FDR's policies. But when FDR tried things Morgenthau's way, by shifting from spending to paying down the deficit, this resulted in the pause in recovery known as the "1937 dip".

"Fed: Economy may not re... (Below threshold)
914:

"Fed: Economy may not recover for another five to six years"

That's being overtly optimistic. I'd even say 50 to 7o years out we will still be payin for his clownieism. Life with u Barry is gonna be.... Bluer than blue

"It is like the consensus a... (Below threshold)
ODA315:

"It is like the consensus about global warming, actually. You don't want to believe it, therefore the actual experts who've studied the field for decades must be wrong"

I'd feel a lot more confident in them if they hadn't "lost" raw data, manipulated other data, and conspired to present conclusions that didn't fit the data.

Silly me......

"I'd feel a lot more con... (Below threshold)
914:

"I'd feel a lot more confident in them if they hadn't "lost" raw data, manipulated other data, and conspired to present conclusions that didn't fit the data."


Yes. More hockey stick bending and less gesticulating,.

Since that *one* organizati... (Below threshold)

Since that *one* organization was cleared by an actual court of any wrong-doing, let alone any manipulation of data that would result in a different outcome - would that change your mind?

N0! I think for Myself.... (Below threshold)
914:

N0! I think for Myself.

Mr. X,"And yes, FD... (Below threshold)
SER:

Mr. X,

"And yes, FDR's treasury secretary didn't like FDR's policies. But when FDR tried things Morgenthau's way, by shifting from spending to paying down the deficit, this resulted in the pause in recovery known as the '1937 dip'."

How do you know it wasn't FDR's way? Were you there? Who was the "boss" and who takes responsibility? Why are Hoover's policies of "tax and spend" ignored and how were they different from FDR's? The unions want protectionism ala "Smoot-Hawley." Are you opposed?

BTW, When is the current president going to take responsibility? (For anything).

If you respond, please quit referring to unnamed "economists" and a supposed consensus. If you have studied Economics past high school, please use real facts to back up your arguments.

jim x, like his Obamassiah,... (Below threshold)
GarandFan:

jim x, like his Obamassiah, likes to rewrite history.

To actually quote Morgenthau:
"We have tried spending money. We are spending more money than we have ever spent before and it does not work. ...and if I am wrong . . . somebody else can have my job. I want to see this country prosperous. I want to see people get a job, I want to see people get enough to eat. We have never made good on our promises. . . . I say after eight years of this administration we have just as much unemployment as when we started . . . . And an enormous debt to boot!

Sound familiar jim x?

Jim X THINKS he understands... (Below threshold)
WildWillie:

Jim X THINKS he understands the workings of the historical depression but another commenter got him with the 1920 recession/depression which was in a lot of way worse. Could it be that FDR's policies actually made the depression go on longer then it would have without all that involvement?

Obama owns this recession and do the dem's. Remember, Reid and Pelosi were in power the last two years of Bush's administration. In my view, the dem's totally own the recession. Of course, Jim X will come back with statistics to show Bush's ancestors caused the 1920 dip, the 29 dip and the 2008 dip. Reid and Pelosi were in power since 2006. Explain that away Mr. x. Oh Yeah! Obama owns the oil spill also since he did not change the MMS. ww

How do you know it wasn'... (Below threshold)

How do you know it wasn't FDR's way? Were you there?

No. I've just read the history of people who were there.

If you want to know why I think this way, here's some great places to start:

http://en.wikipedia.org/wiki/Great_depression

http://en.wikipedia.org/wiki/New_deal

As for your specifics:

- FDR's policies differed from Hoover's both in scale and scope. Hoover in particular vetoed a bill offering unemployment help in cities, and had homeless veterans waiting for bonuses rousted out of DC at gunpoint. Whereas FDR instead famously sent his wife.
- The Smoot-Hawley tariffs certainly seem to have been a very bad idea. But tariffs themselves aren't inherently bad, within reason. I'm not sure exactly what current union policy you're referring to, but I'd have to know some more specifics before I could render and opinion.

the 1920 recession/depre... (Below threshold)

the 1920 recession/depression which was in a lot of way worse.

Since it happened in 1920 and then was over by the end of 1921, how was it possibly worse??

Could it be that FDR's policies actually made the depression go on longer then it would have without all that involvement?

Anything could be. But the preponderance of evidence and experts say differently.

"I'd even say 50 to 7... (Below threshold)
John S:

"I'd even say 50 to 70 years out we will still be payin for his clownieism..."

No, the U.S. will default, probably before the end of Obama's term. As for FDR and the Great Depression, he finally ended it by goading Japan into attacking Pearl Harbor, which he conveniently had left undefended. I wonder which U.S. city Bambi will "sacrifice" to an Iranian nuke to start World War III?

Mr. X,"- and had h... (Below threshold)
SER:

Mr. X,

"- and had homeless veterans waiting for bonuses rousted out of DC at gunpoint. Whereas FDR instead famously sent his wife."

You're kidding, right? Style over substance?


No, SER - good substance ov... (Below threshold)

No, SER - good substance over bad substance. FDR didn't consider the veterans deserving of a boot in the rear. So he *didn't* send people to roust them out, you see.

"But the preponderance of e... (Below threshold)
GarandFan:

"But the preponderance of evidence and experts say differently."

TRANSLATION: It's so, because I say it's so.

BULLSHIT!

jimx - "Anything coul... (Below threshold)
Marc:

jimx - "Anything could be. But the Anything could be. But the preponderance of evidence and experts say differently. of evidence and experts say differently."

Sum'bitch... that was mighty easy to pen wasn't it jim-bob.

Especially considering you didn't offer any links as evidence. Preponderance or otherwise.

Kust so there's no confusion...

Perponderance - noun
the fact or quality of being preponderant; superiority in weight, power, numbers, etc.: The preponderance of votes is against the proposal.

Synonyms - predominance, majority, mass, bulk.

The balls in your court... whatcha got?

TRANSLATION: It's ... (Below threshold)
TRANSLATION: It's so, because I say it's so.

BULLSHIT!

Translation: Because I don't like what you say, it isn't so because I say it isn't so.

Now go read:

http://en.wikipedia.org/wiki/Great_depression

http://en.wikipedia.org/wiki/New_deal

Marc, tell you what: for yo... (Below threshold)

Marc, tell you what: for you, I'll post the basic links again the third time.

http://en.wikipedia.org/wiki/Great_depression

http://en.wikipedia.org/wiki/New_deal

Now if you like, you can post your sources that you think prove the opposite. So I can shred them as usual, and hope your minds can actually change.

Wikipedia - the ULTIMATE so... (Below threshold)
GarandFan:

Wikipedia - the ULTIMATE source of knowledge.

jim x - Apparently you fa... (Below threshold)
Marc:

jim x - Apparently you failed to read, or ignored the definition of preponderance.

Posting a wiki link, even if done so three times, does not make anything close to preponderance.

But considering you enjoy that as "proof" perchance you can explain this quoted section of your link:

However, the U.S. did not return to 1929 GNP for over a decade and still had an unemployment rate of about 15% in 1940, albeit down from the high of 25% in 1933.
All the spending by FDR went for naught.

The single most reason unemployment went from 25 to 15% was increased war production.

P.S. I suggest you study FDR's formation of the NIRA (National Industrial Recovery Act. It in turn established the NRA (National Recovery Administration). [NOTE: both were declared unconstitutional 2 years later]

Marc,"The single m... (Below threshold)
ryan a:

Marc,

"The single most reason unemployment went from 25 to 15% was increased war production."

Really? During the worst years of the depression, between 1932-1933, the unemployment rate was at about 23-25 percent. By 1937 it was at around 14 percent. The drop from 25% to 14% is pretty substantial, and had little to do with war production as far as I can tell. US forces and military spending were pretty slim until 1940, when the numbers started to pick up.

The war effort didn't really kick into gear until around 1940-41, and you can see the big drop in unemployment that took place in 1942 (14.6 percent in 1940, 9.9 percent in 1941, and 4.7 percent in 1942). By 1943 it was down to about 2 percent.

But I am not sure how you can argue that the war effort accounts for the drops that took place between 1933-37. Unless you know something that I missed.

Of course, things got worse again in '38 before they dropped for good.

Source:

here.


"Wikipedia - the ULTIMATE s... (Below threshold)
ryan a:

"Wikipedia - the ULTIMATE source of knowledge."

Actually the wiki article on the New Deal isn't bad, and it shows that there had been a long debate between economists and others about the effectiveness of FDR's programs. It's a start for reading up on the subject, and it shows, as usual, that the story is less clear than people sometimes claim. But this just makes me want to go read more about all this, because by no means am I an expert on Depression Era Economic history.

jim x - Apparently you f... (Below threshold)

jim x - Apparently you failed to read, or ignored the definition of preponderance.

Marc, apparently you failed to read the article I posted.

Go down to this part:

Prolonged/worsened the Depression

In a survey of economic historians conducted by Robert Whaples, Professor of Economics at Wake Forest University, Whaples sent out anonymous questionnaires to members of the Economic History Association. Members were asked to either disagree, agree, or agree with provisos with the statement that read: "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression." While only 6% of economic historians who worked in the history department of their universities agreed with the statement, 27% of those that work in the economics department agreed. Almost an identical percent of the two groups(21% and 22%) agreed with the statement "with provisos"(a conditional stipulation), while 74% of those who worked in the history department, and 51% in the economic department disagreed with the statement outright.[74]

And as for it taking a while to return to where we were at 1929 - did you expect it would take a couple of good summers to recover from a massive blow to our entire economic system??

If it could have been done within a year or two, Hoover would have done it - and then been reelected.

Members were asked to eithe... (Below threshold)
GarandFan:

Members were asked to either disagree, agree, or agree with provisos with the statement that read: "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression."

Yeah, and I'll bet there was a sliding scale on how much you agreed, disagreed, etc. That's a horse shit way of examining an issue.

Given the 'liberal' bent of schools of 'higher education' today, I'm sure they approached these questions in an unbiased manner. If there is anything sanctified, deified and memorialized in the liberal lexicon it's that FDR was the savior. NOT HARDLY.

Ain't buying your bullshit jim.

This guy loves to hear hims... (Below threshold)
KenD:

This guy loves to hear himself talk. I wish he would give us all a break and shut up for at least one week.

Anyone who relies on wiki f... (Below threshold)
rich K:

Anyone who relies on wiki for factual arguments is intellectually lazy and should be ignored. Wiki is just crib notes for web junkies.
Hayek and Freidman disagreed with government stimulus policies and I think they qualify as authorities on the Hoover/FDR years

jim x - "If it could ... (Below threshold)
Marc:

jim x - "If it could have been done within a year or two, Hoover would have done it - and then been reelected."

And if FDR hadn't intruded Big Gov into so much of American life and business the American people and Congress never would have imposed term limits on the pres so soon after he finally was run out of town.

P.S. Nitwit, a survey conducted via one question is not a preponderance.

Some of my conservative fri... (Below threshold)
section9:

Some of my conservative friends don't see the forest for the trees.

FDR actually was a liberal who knew what he was doing. He was an Old Money Dutch aristocrat whose political acumen was masterful. And his understanding of the needs of the Forgotten Man was without parallel.

The contrast with Obama could not be more pronounced.

The New Deal actually employed 4 1/2 Million Men in WPA and CCC camps by the end of 1935. The electorate could actually see that the nation was on the mend. This is the chief difference between someone who knows what the heck they are doing and someone who passes the buck.

What prolonged the Depression were not the jobs programs; those gave people confidence; rather it was the Blue Eagle price fixing program that the Dollar A Year Men in Washington simply would not give up on. The complicated system of inflationary price fixing and farm price supports did not allow for the natural signals of the market-the pricing system, to work its way into the economy. The Depression, therefore, was prolonged by THAT ONE THING, and THAT ONE THING ONLY.

Pricing is vitally important. It effects everything. Price-fixing by government, which Obama is trying to effect now through his National Socialist Health Care Monster, can only damage those signals that the market needs to function. The political class never gets this. But the political class is only interested in the graft it can skim off the top, anyway.

It is worth noting that when price controls were removed, the flood of men returned from their staging areas for Operation DOWNFALL (the projected invasion of Japan, which never took place because of the atomic bombings) and the wartime regulation of the economy demilitarized, the American economy took off like a rocket. Most economists had expected a return to the Depression.

Obama's "Recovery Act" was filled with sweetmeats targeted at crony groups. He was offered the choice to do a New Deal style WPA thing, but his campaign contributors wouldn't have benefited, neither would have Pelosi and Ried's. Compared to Roosevelt, Obama's just a pimp for the interests who sent him, and a shameless buckpasser to boot. The Recovery Act has employed nowhere near the amount of people that the Propaganda Ministry (also known as the MSM) claims it has, and the public knows it.

Lastly, FDR was a shrewd observer of international affairs. He was fluent in German and listened to the Fuhrer's speeches on the radio. They were alarming, and convinced FDR that war was in the offing. He cleverly took parts of the WPA and steered them into Naval Shipbuilding. It is worth noting that some of the carriers that won the first delaying actions of the Pacific War, most notably Coral Sea and Midway, were, iirc, WPA projects, most notably Enterprise, Yorktown, and Saratoga.

So the notion proffered by Jim that war spending didn't get going until 1940 underestimates FDR's shrewdness. He started the naval buildup earlier, masking it under the WPA.

That's a horse shit way ... (Below threshold)

That's a horse shit way of examining an issue.

You are free to find some evidence that contradicts my quoted statement.

Since you can't, it stands.

Given the 'liberal' bent of schools of 'higher education' today, I'm sure they approached these questions in an unbiased manner.

Sure. Or, you could be wrong. The first theory requires a grand conspiracy involving tens of thousands of people. The second involves you being wrong. Which is simpler?

Anyone who relies on wik... (Below threshold)

Anyone who relies on wiki for factual arguments is intellectually lazy and should be ignored.

Hayek and Freidman have their opinion; the majority of experts have another.

Anyone who whines about Wiki but doesn't actually find anything factually wrong in it OR doesn't cite any other source, is ignored as of now.

P.S. Nitwit, a survey co... (Below threshold)

P.S. Nitwit, a survey conducted via one question is not a preponderance.

P.P.S. - Poopyhead, a majority of opinion on one side of an issue shows a preponderance. A very clear majority opinion on that one, specific issue. It's not my fault if you don't want to accept it.

Section9, I agree with most... (Below threshold)

Section9, I agree with most of what you see. I certainly wish Obama was more like FDR. Obama is of course also dealing with some things that FDR was not - the main difference is that FDR was elected during a much more dire situation, when people were facing actual starvation. And thus FDR had a lot more consensus and free hand to act.

That said, no excuses for Obama. I would love to see a lot more WPA-style programs, putting more people to work right now. Krugman himself has criticized Obama for not introducing enough stimulus spending in general, which I also agree with.

"Fed: Economy may not recov... (Below threshold)
914:

"Fed: Economy may not recover for another five to six years"


That of course is not taking into account the chance's of Barry being reselected by all the dead folk out there? He get's in again, were all so royally fucked it's going to take a pitchfork to bale us out.

"Anyone who relies on wiki ... (Below threshold)
ryan a:

"Anyone who relies on wiki for factual arguments is intellectually lazy and should be ignored. Wiki is just crib notes for web junkies."

Right. Because if you find the same passage or quote in an economics journal article it's somehow BETTER? Wikipedia can be a good start for looking into issues. But, as is the case with all research and investigation, it's important to look further and check various sources or lines of argument. All research requires care and skepticism, whether conducted online or in the hallowed stacks of libraries. But don't kid yourself and assume that just because something is in a book it's reputable. That's a pretty laughable stance.

"Hayek and Freidman disagreed with government stimulus policies and I think they qualify as authorities on the Hoover/FDR years"

Sure, they are absolutely authorities on the matter. But that doesn't mean that they are the divine authorities on all things that relate to economics (even though some people treat them as such). Hayek and Friedman certainly had their perspectives about Depression Economics, but then, there are lots of other perspectives as well.

And while Friedman-economics certainly dominated for years, some recent events threw many economists into disarray. Remember that little meltdown in 2008? Well, that created quite a little stir now, didn't it?

The point here is that trying to understand and control such a massive economy is not an easy job, and the history of economics has been full of debates. I'm not interested in supporting Friedman or Keynes or whoever just because some political pundit says that's the way things should be. The only way out of this is for the US to get past the political squabbles and start coming up with ideas and plans of action that actually address our economic issues. Leave all the ideological attachments at the door.

jim x - "Krugman hims... (Below threshold)
Marc:

jim x - "Krugman himself has criticized Obama for not introducing enough stimulus spending in general, which I also agree with."

Well good for you but you should know:

You're part of an ever thinning minority. And what's left of it contains partisan hacks, big spenders, and to put it simply loonys.

section( - "rather it was the Blue Eagle price fixing program that the Dollar A Year Men in Washington simply would not give up on. The complicated system of inflationary price fixing and farm price supports did not allow for the natural signals of the market-the pricing system,"

Funny jim x hasn't opined on the matter.

And won't the price fixing during the FDR years cost thousands of jobs as small businesses closed-up shop.

"I would love to see a lot ... (Below threshold)
Les Nessman:

"I would love to see a lot more WPA-style programs, putting more people to work right now."

Puh-leeze. You think people would like to take hard-labor 1930's-style jobs, just to earn some minimum wage salary? They'd say " Uh, I could make this much on Unemployment. Why should I bust my ass for the same amount?"

Suck the Unemployment teat for two years, then look for a job in the last couple of months before it runs out. That's the entitlement mentality of too many citizens and it's been happily fostered by big-govt fanboys. We're reaping what we've sowed.

@ jim xSome of you... (Below threshold)
Jebediah:

@ jim x

Some of your arguments are based on false assumptions. First off, economists and economic historians specializing in the Great Depression have been debating its causes, and the effectiveness of FDR's policies, for years. Moreover, even if, as you claim, there is a consensus one way or the other is not dispositive evidence of anything. The "consensus" among scientists before Galileo, Darwin, Einstein, etc., were all wrong.

Moreover, FDR was in office for 8 years before the economy finally picked up at the start of WWII. Throughout that time, the unemployment rate remained at double-digit levels. And the economy revived not due to his policies, but in reaction to wartime armament.

Not a very good record. To say that his policies shortened the Great Depression is speculative, at best.

@ jim xYou've also... (Below threshold)
Jebediah:

@ jim x

You've also omitted several other facts in your analysis. For example, you cite to the 1937 dip as proof put that even more deficit spending should be employed now. But a bunch of events conspired to tank the economy in 1937.

For one thing, the income tax rate was ratcheted up the year before. Second, the punishing undistributed profits tax imposed on businesses in 1936 served to squelch new hiring and spur layoffs:

http://en.wikipedia.org/wiki/Undistributed_profits_tax

At the same time, the Wagner Act was passed, which dramatically increased wages at a time when output was below normal, and employers started paying the new social security tax in 1937. So, the dip of '37 was not just a budgetary phenomenon.


@ jim xThe followi... (Below threshold)
Jebediah:

@ jim x

The following major events occurred at the onset of the Great Depression: 1. The Fed's failure to stem bank failures; 2. Fed's unduly tight monetary policy; 3. Smoot-Hawley Act of 1930, which killed global trade; and 4. Herbert Hoover's major tax increase in 1932.

Today, we hear calls on Capitol Hill and the White House to raise taxes and impose barriers to trade while the economy is still quite fragile. The Fed has done as much as it can to ease monetary policy, but can do no more, since the interest rate is effectively at zero.

How those policies can help at all at this time is beyond me.

We have already devoted $800 bln in stimulus funds, which has not improved unemployment at all. And the folks in charge, as you concede, have not utilized these monies to actually employ people. Rather, it's been used to pay off political constituencies such as unions.

And, why restrict our analysis to the Great Depression? In the early 80's, there was a worldwide recession the likes of which were also unseen since the 30's. Reagan and Thatcher resisted calls for Keynesian deficit spending, and the result was an unprecedented boom.

@ jim xThe debate ... (Below threshold)
Jebediah:

@ jim x

The debate about FDR's policies is quite robust, actually. Authors such as Amity Shlaes, Jim Powell and Burton Folsom have written books detailing how FDR's anti-business policies, hyper-regulation of the economy and tax policy effectively prolonged and exacerbated the Great Depression.

Unfortunately, I see history repeating itself with the Obama Administration. Indeed, former allies such as the Business Roundtable have come around to the realization that Obama and the Democrats are promoting policies detrimental to private employment and the economy as a whole.

Funny jim x hasn't opine... (Below threshold)

Funny jim x hasn't opined on the matter.

No, I haven't because I haven't researched it yet. Fear not, I will.

@ JebediahSome ... (Below threshold)

@ Jebediah

Some of your arguments are based on false assumptions.

Just because you disagree with them, doesn't make them false.

First off, economists and economic historians specializing in the Great Depression have been debating its causes, and the effectiveness of FDR's policies, for years.

Which is why I am pointing out the overwhelming majority consensus opinion.

.The "consensus" among scientists before Galileo, Darwin, Einstein, etc., were all wrong.

Yes - and we know that the previous scientists were wrong because Galileo, Darwin and Einstein theories were verified by other scientists' experiments and evidence.

Science has to go with the best evidence you have at the moment. When other, better evidence is presented, science shifts to accomodate this new information.

Otherwise someone could say "UFO's are definitely from Mars! And the consensus is definitely wrong, because I'm the next Einstein!" and no scientist would be able to refute it.

The best current evidence very much indicates that the majority opinion is true, that FDR's policies shortened and lessened the Great Depression.

Moreover, FDR was in office for 8 years before the economy finally picked up at the start of WWII. Throughout that time, the unemployment rate remained at double-digit levels. And the economy revived not due to his policies, but in reaction to wartime armament.

You want to talk about making a lot of false assumptions? Woo.

First, the **entire world** experienced a crushing depression. That's something that takes a minimum of years to recover from, no matter what else is going.

Second, to assume that if FDR *didn't* pursue his actions then the economy would have recovered quicker? That's a pretty **amazing** assumption.

And, since the one dip in the New Deal recovery was 1937, when FDR shifted policies, halted spending and tried to pay down the deficit - it seems pretty clearly an assumption that's contradicted by evidence *and* theory.

To say that his policies shortened the Great Depression is speculative, at best.

No, you have it opposite. Whether or not you want to accept it, the best current evidence is with the consensus - and so to say the opposite without evidence is speculative at the very least. And is actually more likely to be unfounded.

@ Jebediah - oh, and I hear... (Below threshold)

@ Jebediah - oh, and I hear this a lot too, and it doesn't make sense to me either.

And the economy revived not due to his policies, but in reaction to wartime armament.

The "wartime armament":

1. taxed the rich
2. invested in huge projects
3. created jobs for the poor and middle class

...which is **exactly** FDR's new deal policies. It's just building planes and ships instead of building dams.

And, why restrict our an... (Below threshold)

And, why restrict our analysis to the Great Depression?

OK, sure.

In the early 80's, there was a worldwide recession the likes of which were also unseen since the 30's. Reagan and Thatcher resisted calls for Keynesian deficit spending, and the result was an unprecedented boom.

...which in the US tripled our national debt without investing or at all significantly improving the state of the poor and middle class. Which made it a hollow economy, which by end of the Bush 1 administration resulted in a recession - and helped nix Bush 1's re-election.

What happened after that was Bill Clinton pursued the exact opposite of Reaganomics (which I love to recall was actually tagged "voodoo economics" by George Bush himself, when he ran against Reagan in the 1980 primary). Clinton *raised* taxes on the wealthy, *cut* them for the poor and middle class, and most importantly then invested that money back into the poor and middle class.

Which enabled us to have an economic expansion that far oustripped the Reagan years, AND have a budget surplus for the first time in decades.

The typical objections to this are:

- It was really just the internet. This is disproven by noting that the Clinton economy took off for a good solid 4 years before the Internet became anywhere near a significant portion of GDP, in 1996.

- It was because the GOP worked with Clinton. This is disproven by noting how Clinton ***shut down the government*** rather than agree to GOP cuts to spending programs.

The debate about FDR's p... (Below threshold)

The debate about FDR's policies is quite robust, actually. Authors such as Amity Shlaes, Jim Powell and Burton Folsom have written books detailing how FDR's anti-business policies, hyper-regulation of the economy and tax policy effectively prolonged and exacerbated the Great Depression.

Yes, they have. And Amity Shlaes in particular has been thoroughly debunked by Paul Krugman, for a particularly shoddy analysis that left out entire sectors of the economy to make her case.

http://krugman.blogs.nytimes.com/2008/11/19/amity-shlaes-strikes-again/

The consensus is where it is for a reason: there has not been evidence found to change it. If there is, you better believe it will change - because even *attempting* to prove FDR wrong means a successful career in conservative punditry, since at least 1933.

Here's a closer critique of... (Below threshold)

Here's a closer critique of Shlae's main arguments than the Krugman link in my previous comment:

http://www.slate.com/id/2169744/pagenum/all

The American people deserve... (Below threshold)
Bill Carson:

The American people deserve every single bad thing that happens to them for handing virtually dictatorial power to the Democrats. We're running down the road to socialism and screaming that we're not. Usually when you're that stupid, you have to pay a big price to get things turned around.

@ jim x- Yes, they... (Below threshold)
Jebediah:

@ jim x

- Yes, they have. And Amity Shlaes in particular has been thoroughly debunked by Paul Krugman, for a particularly shoddy analysis that left out entire sectors of the economy to make her case.

http://krugman.blogs.nytimes.com/2008/11/19/amity-shlaes-strikes-again/

Ohhhh, riiight. Krugman's critique - from the far left - is tantamount to a "debunking" of Shlaes' analysis. Now, why didn't I think of that?

Of course, you fail to mention those in support of her analytical model. Or that she relied on methodology employed by the Bureau of Labor Statistics, which excludes temporary, make-work jobs of the sort created by FDR:

http://online.wsj.com/article/SB122792327402265913.html

And what of the works published by Powell and Folsom? I hear nothing but crickets, jim x. You prop up your counterargument with selective examples. Poor form.

- The consensus is where it is for a reason: there has not been evidence found to change it. If there is, you better believe it will change - because even *attempting* to prove FDR wrong means a successful career in conservative punditry, since at least 1933.

Funny that you mention punditry, jim x. I specifically refuted your argument by highlighting FDR's misguided taxes(Undistributed Profits Tax in particular, hastily repealed2 years later) and interference with the economy (forcing employers to pay higher than market wages) which preceded the dip of '37.

Your response to the evidence above? Repeating the mantra that there's a consensus in your favor. Circular reasoning of the worst sort.

Sorry, not impressed by your debating skills.

I will respond to your previously posted whoppers, but after I get some sleep.

Best,

Jebediah

@ jim x Some of ... (Below threshold)
Jebediah:

@ jim x

Some of your arguments are based on false assumptions.
- Just because you disagree with them, doesn't make them false.

Yes, this is true. But they can be false assumptions, independent of my disagreement with them. Likewise, just because you disagree with my views does not disqualify them as lack of evidence against the so-called "consensus".

First off, economists and economic historians specializing in the Great Depression have been debating its causes, and the effectiveness of FDR's policies, for years.
- Which is why I am pointing out the overwhelming majority consensus opinion.

So far, you have cited one study from Wake Forest University. And, as argued below, a "majority consensus opinion" is not dispositive evidence of its veracity.

The "consensus" among scientists before Galileo, Darwin, Einstein, etc., were all wrong.

- Yes - and we know that the previous scientists were wrong because Galileo, Darwin and Einstein theories were verified by other scientists' experiments and evidence.
- Science has to go with the best evidence you have at the moment. When other, better evidence is presented, science shifts to accomodate this new information.
- Otherwise someone could say "UFO's are definitely from Mars! And the consensus is definitely wrong, because I'm the next Einstein!" and no scientist would be able to refute it.

Agreed. But the reverse is true as well. Otherwise, a scientist, or a minority of scientists, can be shouted down by a majority declaring "Any new theories are definitely wrong because the consensus is absolute truth", and no scientist would be able to refute the majority.

- The best current evidence very much indicates that the majority opinion is true, that FDR's policies shortened and lessened the Great Depression.

No, the best current evidence posited by economists and economic historians reflect that FDR's wage and price controls, excessive taxation and regulation severely discouraged businesses from hiring or manufacturing.

@ jim xSee, it's f... (Below threshold)
Jebediah:

@ jim x

See, it's futile to present your argument in favor of or against a particular viewpoint by simply relying on what is or is not the "consensus".

I can only wonder how Galileo felt when he was locked up for proposing a helio-centric, rather than earth-centered, universe/solar system. That's the better analogy, in my opinion.

How about debating the issues, and examining the facts and evidence, in a straightforward fashion. Otherwise, the debate devolves into who is right or wrong based on the views of others, regardless of their accuracy or veracity.

To be continued - I must get to work.

Good day,

Jebediah

It would seem to me that in... (Below threshold)
Liberty-Freedom:

It would seem to me that in a Free market capitalist society there is always going to be market up and downs based on circustances around the world that cannot be controlled. Govenment intervention and manipulation seems to maks the problem worse and creates a class of people even more dependent on government handouts. 99 weeks of un-employment seems to be a long time.

What would happen if there was a constitutional amendment for a balanced budget. A law that states the current debt must be paid off by a certain date. A new fairer tax code where each member of society must contribute rather than 50% of the population paying no taxes but receiving re-distrubted wealth via tax credits. Maybe a flat tax of 15%.

We have a had a war on poverty since the Johnson administration and I don't see that it has helped. We have more High School dropouts than ever, the inter-cities are crime ridden and yet all we hear is they need more money.

Maybe we should teach free market priciples in the classroom rather than socialist agendas and the populus would become self supporting rather than dependents of those who pay taxes.

@ Jim x200 economi... (Below threshold)
Jebediah:

@ Jim x

200 economists, including THREE Nobel Laureates, signed an open letter decrying Obama's stimulus in Jan. 2009:

http://www.cato.org/special/stimulus09/alternate_version.html

Contrary to your assertions, many leading economists have been dead-set against stimulus, and reject it as a means to combatting recession.

Even Christina Romer, a member of Obama's own Council of Economic Advisors, has written that we escaped the Great Depression not due to fiscal spending, but because of a great monetary expansion in the late 1930s.




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