The depression: sloping away?

News from the economic front either trails or mimics the Great Depression. The problem for us is that we do not know which is the right path. Some use the anodyne and specious argument that good news on a rise in confidence is some biblical adjuration to get out and spend more, thus letting all the policymakers off the hook. This blog, tracking news from 1930, lays that specious gem to rest and stakes it out.

The difference between now and then is the scale of governmnet intervention, with its attendant effects upon the downturn. The trajectory will differ, the problems do not: meaning that we face the same banking bust and overhang of debt, neither of which have been solved. Graphs from the Council of Foreign Relations show that some of the indicators are not as bad as the 1930s, that house prices have fallen much further, and that the general price level has not fallen as far. Of interest is how this also compares with pre-war recessions.

Government intervention will make a difference in the downturn. It has done so, but like Smoot Hawley, it is too early to tell how far the relief of short term pain translates into long term loss.   .