Saturday, October 11, 2008

The Great Depression Analogy

In these days of financial panic people are wont to wonder aloud whether we are descending into another "Great Depression," and they refer, of course, to the depression of the 1930s. Might I say that such anaologizing is misplaced?

Maybe what will follow this financial panic will be something much worse than the 1930s. Maybe it will be only a "mild" recession. We don't know yet. Whatever it will be, it will be different from the 1930s because we are no longer living in the 1930s.

Today I watched the McLaughlin group and the moderator (McLaughlin) began with a description of the Great Depression. The title of his presentation was "October 29, 1929." He described the various features of the Depression: 13 million unemployed, 5,000 banks closing, factory closing, the dust bowl and of course, the stock market crash. He presented this as if to say on October 28, 1929, the country was prosperous, and on October 30, 1929, the country was on the brink of total economic collapse. It took three years for the depression to get as bad as "John" described it.

History cannot teach us much, except for maybe a bit of epistemological humility. We simply don't know.

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