3 thoughts on “The Forgotten Depression”

  1. Posted 02/03/2015 at 17:11 | Permalink

    Thank you David for adding onto my reading list. What was implied but left unsaid in your post, however, was that the 21st century policy makers are very good at kicking the can further and further in the long grass. But at the onset of the next recession that will inevitably come in a not too distant of a future, the policy makers will no longer have the customary fiscal and monetary stimulus tools available to them. It’s very difficult to stimulate an economy with a starting point of negative interest rates, even though the impact of interest rates on investment is debatable itself as a concept. The longer that market forces are not allowed to act and correct imbalances, the harder the adjustment when the time comes.

  2. Posted 02/03/2015 at 22:44 | Permalink

    Indeed, I think I am correct in saying that the ‘austerity’ budget of 1931 in the UK cut spending and balanced the budget and the UK economy subsequently grew steadily from 1932 onwards for many years (while maintaining approximately balanced budgets).

  3. Posted 03/03/2015 at 21:53 | Permalink

    Yes, HJ, I think you are right about the UK in 1931. Indeed there were similarities between that episode and sterling leaving the Exchange Rate Mechanism in 1992. (The problem wasn’t leaving the ERM on ‘Black Wednesday’ but joining it in the first place.) The reason, though, why I do think the Forgotten Depression of 1920-21 in the US is so noteworthy is the glaring contrast with the Great Depression, which has such a high profile.

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