We keep hearing that things are different this time and we’re much better off than we were during the Great Depression. We hope that’s true. But one worrying sign is that back in 1930, a lot of people thought that things were much better than they were.
“What’s striking is the optimism: story after story says, in effect, that the worst is over and recovery is just around the corner,” Paul Krugman writes.
Yesterday the Wall Street Journal’s Real Time Economics blog pointed out the fascinating blog News From 1930, which tracks what the Wall Street Journal was publishing each day in 1930. Here’s a sample from yesterday that sounds so familiar it is spooky.
Col. Ayres, VP Cleveland Trust, predicts an abrupt recovery in stock and commodity prices by labour Day due to current consumption exceeding production. Distinguishes between two types of depression, “V”-shaped and “U”-shaped.
Reduction of the rediscount rate to 2 1/2 per cent is considered beneficial in several ways. It indicates credit will be easy for some time; should benefit many industries including farming, building, and construction, and make bond issues easier for corporations resulting in lower unemployment.
Stocks continued down, with big declines in the large trading stocks. Bears encouraged by the failure to hold Thursday’s rally after good news, and further breaks in the commodity market (wheat, corn, cotton). US Steel hit a new yearly low, followed shortly by Bethlehem Steel, Union Carbide, and American Can. Some rallying on the close on short covering. Volume not very heavy.
Commerce Secretary Lamont denies tariff will hurt trade. Notes that 80% of imports are duty-free or will have duty reduced or unchanged under the new tariff. Says flexible clause of tariff can be used to address remaining complaints of foreign countries. Notes that trade has increased for many years in spite of previous tariff increases. Treasury Secretary Mellon also has defended the tariff, and being the third richest man in the world he would certainly be opposed to it if he thought it was damaging to business.
Real Time Economics notes that while the tarriff is a lot different than stimulus, both are huge government interventions in the economy inteded to improve things. “That’s not to say the stimulus is comparable to Smoot-Hawley, just a reminder that success or failure is rarely clear in the short term,” Real Time Economics reports.
Uh-oh. Will bailouts and stimulus be our Smoot-Hawley?