Underlying all the finger-pointing about what went wrong and the nervous apprehension over how to fix the economy is a feeling that generations of us have never had--being unable to control our own future.
The hopeless faces in those Dorothea Lange and Walker Evans photographs of the Great Depression are alien to 21st century Americans, but some of their dread is seeping into the debate now as a confident economist like Paul Krugman offers his nightmare scenario:
"It takes Congress months to pass a stimulus plan, and the legislation...is too cautious. As a result, the economy plunges for most of 2009, and when the plan finally starts to kick in, it’s only enough to slow the descent, not stop it. Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy--well, you can see where this is going.
"So this is our moment of truth. Will we in fact do what’s necessary to prevent Great Depression II?"
Evidence that the Obama administration shares that feeling can be seen in the news of an extraordinary offer of immediate $300 billion in tax cuts for individuals and businesses to gladden the hearts of Congressional conservatives and bring them on board quickly for stimulus legislation.
"The End of the Financial World as We Know It," an analysis of the meltdown in the New York Times this weekend claims that "18 months into the most spectacular man-made financial calamity in modern experience, nothing has been done to change...bad incentives that led us here in the first place.
"Say what you will about our government’s approach to the financial crisis, you cannot accuse it of wasting its energy being consistent...In the past year there have been at least seven different bailouts, and six different strategies. And none of them seem to have pleased anyone except a handful of financiers."
There is a growing sense now that this is our last chance to get it right and as a result, in the months ahead, America will be fighting against both economic and psychological depression.
Showing posts with label Great Depression. Show all posts
Showing posts with label Great Depression. Show all posts
Monday, January 05, 2009
Friday, October 10, 2008
Lessons From the Great Depression
We have been here before, and we should learn from the past.
On March 4, 1933, Franklin D. Roosevelt took the oath of office and told Americans, "(T)he only thing we have to fear is fear itself...nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance...
"Values have shrunken to fantastic levels, taxes have risen, our ability to pay has fallen, government of all kinds is faced by serious curtailment of income, the means of exchange are frozen in the currents of trade, the withered leaves of industrial enterprise lie on every side...the savings of many years in thousands of families are gone."
But FDR came to the White House ready to take action, and he did. When the next president moves into the White House in January, it may be too late to start.
What made the Great Depression a catastrophe, a leading economist points out, was "that some of the worst shocks occurred right before the 1932 presidential election. There then followed an extended interregnum between the election and inauguration of the new president when no one was in charge."
As Barack Obama and John McCain spend these next weeks trolling for votes, it would be comforting to see each of them set up a council of economic advisors to work on a set of specific measures that the winner would announce on November 5th to start putting a 21st century New Deal into motion.
As Hillary Clinton used to say in another context, the new President has to be ready to move on Day One.
On March 4, 1933, Franklin D. Roosevelt took the oath of office and told Americans, "(T)he only thing we have to fear is fear itself...nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance...
"Values have shrunken to fantastic levels, taxes have risen, our ability to pay has fallen, government of all kinds is faced by serious curtailment of income, the means of exchange are frozen in the currents of trade, the withered leaves of industrial enterprise lie on every side...the savings of many years in thousands of families are gone."
But FDR came to the White House ready to take action, and he did. When the next president moves into the White House in January, it may be too late to start.
What made the Great Depression a catastrophe, a leading economist points out, was "that some of the worst shocks occurred right before the 1932 presidential election. There then followed an extended interregnum between the election and inauguration of the new president when no one was in charge."
As Barack Obama and John McCain spend these next weeks trolling for votes, it would be comforting to see each of them set up a council of economic advisors to work on a set of specific measures that the winner would announce on November 5th to start putting a 21st century New Deal into motion.
As Hillary Clinton used to say in another context, the new President has to be ready to move on Day One.
Monday, October 06, 2008
No Bailouts for Jobless and Homeless
In the porkathon to pass the bailout bill, Republicans balked at two measures--to extend jobless benefits for the unemployed and allow bankruptcy judges to reduce penniless homeowners' mortgages.
So much for Main Street, where signs of a 1930s Depression are cropping up everywhere:
*New figures show 760,000 lost jobs this year. Of the 9.5 million Americans out of work, two million have been for more than six months. Nearly 6.1 million people are working part-time because worsening business conditions have led to fewer hours and less pay.
*With bank-account insurance increased from $100,000 to $250,000, the potential liability of the Federal Deposit Insurance Corporation for failing banks is now estimated to be $1.1 trillion. The FDIC's fund currently has about $45 billion, a five-year low.
*The number of Americans on food stamps, growing every month, was 28.6 million in June, according to latest government figures, reaching the level of late 2005, when Katrina and other hurricanes caused widespread suffering.
*Homeless families in Massachusetts motels have increased from 17 to 588 in the past year, with another 1,800 in shelters.
In my Depression childhood, everyone in our neighborhood was poor and many penniless until FDR and the New Deal began to bail us out with relief programs. In the 21st century, the government so far is concentrating on banks, investment houses and hedge funds.
We'll soon find out if the trickle-down theory works.
So much for Main Street, where signs of a 1930s Depression are cropping up everywhere:
*New figures show 760,000 lost jobs this year. Of the 9.5 million Americans out of work, two million have been for more than six months. Nearly 6.1 million people are working part-time because worsening business conditions have led to fewer hours and less pay.
*With bank-account insurance increased from $100,000 to $250,000, the potential liability of the Federal Deposit Insurance Corporation for failing banks is now estimated to be $1.1 trillion. The FDIC's fund currently has about $45 billion, a five-year low.
*The number of Americans on food stamps, growing every month, was 28.6 million in June, according to latest government figures, reaching the level of late 2005, when Katrina and other hurricanes caused widespread suffering.
*Homeless families in Massachusetts motels have increased from 17 to 588 in the past year, with another 1,800 in shelters.
In my Depression childhood, everyone in our neighborhood was poor and many penniless until FDR and the New Deal began to bail us out with relief programs. In the 21st century, the government so far is concentrating on banks, investment houses and hedge funds.
We'll soon find out if the trickle-down theory works.
Tuesday, March 04, 2008
A Head of State for Hard Times
Seventy-five years ago today, Franklin D. Roosevelt took office to end a Depression and face an oncoming war. Now, voters are choosing a President to resolve a war and stave off a Depression.
In these hard times, Americans will take their chances on the first woman or African-American or the oldest president ever. Back then, they were relying on the first Chief Executive who could stand only with braces on his legs and spent most of his time in a wheel chair.
"We have nothing to fear but fear itself," FDR said in his inaugural address on March 4, 1933, but that night, two million Americans were homeless and banks in 32 states closed and could not reopen the next morning.
Compared to then, the choice now is less daunting, but it nonetheless marks another turning point in how the country is to be governed and who will lead the way and set the tone.
Roosevelt, despite his infirmity, brought energy and hope to the White House and changed the direction of American politics for half a century. Nothing that momentous may happen in this election, but after eight years of disastrous leadership, something important is at stake again.
Tonight, we will get a clearer idea of who will be entrusted with the job of leading us through the first hard times of this century.
In these hard times, Americans will take their chances on the first woman or African-American or the oldest president ever. Back then, they were relying on the first Chief Executive who could stand only with braces on his legs and spent most of his time in a wheel chair.
"We have nothing to fear but fear itself," FDR said in his inaugural address on March 4, 1933, but that night, two million Americans were homeless and banks in 32 states closed and could not reopen the next morning.
Compared to then, the choice now is less daunting, but it nonetheless marks another turning point in how the country is to be governed and who will lead the way and set the tone.
Roosevelt, despite his infirmity, brought energy and hope to the White House and changed the direction of American politics for half a century. Nothing that momentous may happen in this election, but after eight years of disastrous leadership, something important is at stake again.
Tonight, we will get a clearer idea of who will be entrusted with the job of leading us through the first hard times of this century.
Friday, August 17, 2007
Panic at the Banks
In Los Angeles yesterday, the scenes were right out of a movie about the Great Depression 75 years ago--long lines of anxious depositors clamoring to get their money out of failing banks.
The panic was set off by news that the parent of Countrywide Bank, the biggest home-loan company in the nation, was caught in the current credit crunch and might be forced to file for bankruptcy. Despite reassurances to the contrary, crowds overwhelmed branch offices to the point that staff members were serving coffee to long waiting lines and taking names of people, asking them to come back later.
In the black-and-white movie, “It’s a Wonderful Life,” Jimmy Stewart uses his honeymoon money to calm panicky depositors and stay solvent. Things are different today. Filings with the Securities and Exchange Commission show that Countrywide Chairman and CEO Angelo Mozilo recently exercised options and then sold 672,000 shares of company stock, at a profit of almost $13 million.
With individual accounts insured by the FDIC for up to $100,000, there is less cause for worry today. But many holders of bank Certificates of Deposit are retirees, too risk-adverse to invest in the stock market and mutual funds.
They play the CD Sweepstakes Game on-line or call friends with computers to check on which Internet banks are offering a fraction of a percent more than others. For people who spent their lives dealing with bankers in brick buildings, the prospect of wiring or mailing money into thin air only adds to the anxiety.
While crowds besiege their offices, Countrywide is still running Internet ads to entice us into putting new money into those CDs. The more savvy will be asking why the bank’s executives are pulling their money out of the company stock.
The panic was set off by news that the parent of Countrywide Bank, the biggest home-loan company in the nation, was caught in the current credit crunch and might be forced to file for bankruptcy. Despite reassurances to the contrary, crowds overwhelmed branch offices to the point that staff members were serving coffee to long waiting lines and taking names of people, asking them to come back later.
In the black-and-white movie, “It’s a Wonderful Life,” Jimmy Stewart uses his honeymoon money to calm panicky depositors and stay solvent. Things are different today. Filings with the Securities and Exchange Commission show that Countrywide Chairman and CEO Angelo Mozilo recently exercised options and then sold 672,000 shares of company stock, at a profit of almost $13 million.
With individual accounts insured by the FDIC for up to $100,000, there is less cause for worry today. But many holders of bank Certificates of Deposit are retirees, too risk-adverse to invest in the stock market and mutual funds.
They play the CD Sweepstakes Game on-line or call friends with computers to check on which Internet banks are offering a fraction of a percent more than others. For people who spent their lives dealing with bankers in brick buildings, the prospect of wiring or mailing money into thin air only adds to the anxiety.
While crowds besiege their offices, Countrywide is still running Internet ads to entice us into putting new money into those CDs. The more savvy will be asking why the bank’s executives are pulling their money out of the company stock.
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