Friday, February 27, 2009


Chuck Cooper - Dreams of my Father's Depression

Gordy offers an excellent assessment of the situation, prompting me to this thought experiment. Suppose that all of a sudden people stopped buying stuff that they don’t need? The car can run another year or two, the old TV still runs, clothes, well, you get the idea. Life goes on without all that stuff, with no great hit to the pursuit of happiness.

Unfortunately, things aren’t that rosy. You can do without stuff, but not without a job. Consumer demand collapses, businesses lay off workers, and scared people reduce “needs” to the real basics. That is the downward spiral you are reading about now. People aren’t going to start buying what they don’t need until something arrests the spiral. How do we do that?

For the various reasons Gordy lists, this could be the big one. Bigger than 1982. Maybe more like the 1930s. We know what it took to end that one. Or like the panic of 1873, which if you read about it, sounds very familiar. Or the panic of 1893. Over expansion and bubbles. Each of those depressions lasted the better part of a decade, and ended only with events that led to large infusions of capital. Huge farm exports and the Klondike gold rush, respectively, were major factors in turning the corner.
Speaking of WWII, that huge government spending for which ended the great depression, wasn't that producing stuff that was promptly shipped overseas to get destroyed? From a purely economic standpoint, pretty much like digging holes and then filling them back in, only without the pain. It worked. Could all that quibbling about the details of the stimulus package be missing the point?

A little history study might quiet the critics of the massive deficit spending now getting under way. Dreams of our fathers.

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