On Fri, 14 Nov 2008, Doug Henwood wrote:
>> The new president may think his only task is to rescue the economy. But
>> like FDR, he may have to save capitalism itself.
>
> The economy is bad and likely to get worse, but a moment's perspective
> please. When FDR took office, the unemployment rate was 25%, GDP was
> down 25%, and 10,000 banks had failed - all after four years of Hoover
> and the Fed doing little or nothing. Now, the unemployment rate is
> approaching 7%, GDP is off about 2%, 20 banks have failed
True. But just to play devil's advocate, one could argue this last bit changes everything:
> and Washington is throwing hundreds of billions at the problem.
i.e, the big difference between us and the Depression is that we're consciously avoiding it and we, unlike FDR, have an economics, derived from that experience, that not only legitimates but prescribes huge expenditures in this situation. FDR needed a much bigger push to overcome much more resistance. He didn't have this year's Nobel Prize winner shouting Spend Half a Trillion Now! Better more than Less!
So for us, the mere fact of a liquidity trap and frozen markets could possibly provoke and legitimate as much public spending as 3 years of depression did for him.
Possibly.
Michael