One of the really fascinating aspects of our culture is our notoriously short memory. We have the capacity the live through a major national event, then almost immediately put the experience out of mind, only to re-live it a generation or two later. Maybe that comes from being such a young, brash nation. This sometimes happens in matters of international conflict and war, but it more often occurs when it comes to our financial calamities. During the period following the Civil War our national economy was a roller coaster of boom and bust cycles that were occurring with regularity about every ten years.
The big boom time happened in the 1920's. Of, course this led to the big bust period known as the Great Depression. Many of the behaviors of the 20's were similar to the events we saw in the years leading up to our second biggest financial crisis: the Great Recession of 2008. Looking back to the 20's we would have seen bankers accumulating too much power by artificially inflating their assets. We would have seen Wall Street investors using those inflated assets as collateral on cash-heavy venture investments, and a disproportional accumulation of wealth at the top. And we would have seen a series of conservative Presidents and Congressmen allowing it all because they felt it was wrong to regulate business. For the leaders of that time, it was quite a departure from progressive policies of Teddy Roosevelt, but the pendulum had swung their way and all the fat-cats had a great time in the "roaring twenties".
We all know what happened next. The Crash of '29 happened because it became apparent all that phony wealth wasn't real. Panic, and runs on banks set in because it was obvious that the economy was a false economy-confidence was gone. Suddenly, everything was worth next to nothing. All economic activity came to a halt- unemployment reached disaster levels-millions of Americans became impoverished and lost hope. That's a simple version- but an essentially accurate one. If this is eerily familiar, it is because we are re-living those events now. But there is more to the story!
After the Depression was realized, Hoover and the Republicans in Congress believed that the best way to handle the crisis was to cut government spending (along with other measures) and balance the budget. That was exactly the wrong course. Those policies deepened the Depression. When Franklin D. Roosevelt took office two and half years after the Crash he reversed course and set about creating government programs (and YES, spending money) to put people back to work. Government jobs programs began to reverse the misery of the Depression. In addition, Roosevelt initiated stringent banking and revenue reforms that stayed in place until just recently. The elite rich hated him for this- but the people elected him four times! Economists have spent lifetimes examining the Great Depression, and there are many theories. Most theories provide a much more in-depth theoretical explanation than I could explore here. But the essential truth of the story is the same today as it was then.
We're at a crossroads again, as we were then. Fortunately, we didn't have to wait two years for new leadership- only four months. I had hoped our President would have been bolder than he was in the beginning (as FDR was in his day) but at least his stimulus package did stop the downward spiral. I still maintain a hope that he will not let the Republican party do what they did before. Today the conservatives in Congress are screaming for impossible budget cuts, as their fore bearers did. The real key to recovery is strong middle-class spending spurred by jobs creation. The Republican Party got control of the House in 2010 on the banner: "JOBS JOBS JOBS" and haven't done one thing except keep repeating the magical thinking that says we need more rich people and fewer regulations to get more jobs. It is a recipe that's never worked. Yet, these cries represent the same ideology that betrayed us before; because it's an ideology that only benefits the rich while exploiting the rest of us. Sadly, it is all too familiar. If you want to know who wins with the conservative plan- just follow the money that goes to elect the conservatives to Congress.
The different thought for us now is to stop and take the time to remember the past- and vow not to re-live it. Thanks for looking in.
I was so hopeful in 2008 that we would have a new deal type plan to move industry and infrastructure toward more environmentally conscious practices... conversion to renewable power, etc. I guess we weren't quite ready, but I think it was a big missed opportunity to make some good things come of such a terrible time.
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