Don't Get Depressed, It's Not 1929

Why all those Great Depression analogies are wrong. By Daniel Gross Posted Saturday, Nov. 22, 2008, at 7:35 AM ET It's difficult to avoid the comparisons between the current sad state of financial affairs and the Great Depression. "This is not like 1987 or 1998 or 2001," Merrill Lynch CEO John Thain said at a conference on Nov. 11. "We will in fact look back to the 1929 period to see the kind of slowdown we are seeing now." Time depicted President-elect Barack Obama on its cover as Franklin Delano Roosevelt. And in Washington, the buzz is all about what the new team will do in its first 100 days. What's next? Show trials in Moscow? All this historically inaccurate nostalgia can occasionally make you want to clock somebody with one of the three volumes of Arthur M. Schlesinger Jr.'s history of the New Deal. The credit debacle of 2008 and the Great Depression may have similar origins: Both got going when financial crisis led to a reduction in consumer demand. But the two phenomena differ substantially. Instead of workers with 5 o'clock shadows asking, "Brother, can you spare a dime?" we have clean-shaven financial-services executives asking congressmen if they can spare $100 billion. More substantively, the economic trauma the nation suffered in the 1930s makes today's woes look like a flesh wound. Juliet Lapidos explained the difference between a recession and a depression. David Greenberg recounted how FDR saved capitalism in eight days. He also asked whether our current crisis would be more like 1990 or 1929. Previously, Daniel Gross wrote about the annoying and alarming trend of faux optimism among the business media. "By the afternoon of March 3, scarcely a bank in the country was open to do business," FDR said in his March 12, 1933, fireside chat (now available on a very cool podcast at the Federal Deposit Insurance Corp.'s Web site). In 1933, some 4,000 commercial banks failed, causing depositors to take huge losses. (There was no FDIC back then.) The recession that started in August 1929 lasted for a grinding 43 months, during which unemployment soared to 25 percent and national income was cut in half. By contrast, through mid-November 2008, only 19 banks had failed. The Federal Reserve last week said it expects unemployment to top out at 7.6 percent in 2009. Economists surveyed by the Philadelphia Federal Reserve Bank believe the recession, which started in April 2008, will be over by next summer. (Of course, back in January the same guys forecast that the economy would grow nicely in 2008 and 2009.) But don't take it from me. Take it from this year's Nobel laureate in economics. "The world economy is not in depression," Paul Krugman writes in his just-reissued book The Return of Depression Economics. "It probably won't fall into depression, despite the magnitude of the current crisis (although I wish I was completely sure about that)." So what's with all the speakeasy-era speak? Financial executives invoke distant history in part to make up for their own recent shortcomings. If a force as powerful as the Great Depression has been unleashed on the global economy, how can a mere mortal like Merrill's John Thain be held responsible? The specter of the 1930s has also been deployed by political leaders to create a sense of urgency. "We saw a lot of overblown analogies in the run-up to the passage of the bailout bill," notes Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. President Bush's Sept. 24 address to the nation warned that "the entire economy is in danger," and that "without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold." It's understandable that we make comparisons to the Great Depression. Analogies help us place things in context. But very few of us actually lived through the Depression. Studs Terkel, the great chronicler of the voices of the Depression, died in October at 96. The historical distance from today to 1929 is as vast as the chasm separating 1929 from 1850. Dan Ariely, a behavioral economist at Duke University and author of Predictably Irrational, says, "The closer we are to something—an event, a person, an object—the more nuances we see." By contrast, the further away we are, the greater (and less accurate) the generalizations we make. And so when comparisons to the Great Depression are flashed on cable-news crawls, "it's all about the desire to fit everything into a snapshot," Ariely says. Ironically, the differences between the two eras can be summed up in a few sound bites. The world of 1929-33 was one that lacked shock absorbers such as Social Security and deposit insurance to insulate people from economic disaster. In the 1930s, some of the world's largest economies—Germany, the Soviet Union, Japan, and Italy—were run by leaders hostile to the very notion of market capitalism. Today, U.S.-style market capitalism is under assault from self-inflicted wounds, and Germany, Italy, and Japan (Russia, not so much) are working with the United States to cope with a common problem. Back then, we were cursed with a feckless Federal Reserve, and a wealthy Treasury secretary, Paul Mellon, saw the downturn as a force for good. "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate," he said. "People will work harder, live more moral lives." By contrast, today's Federal Reserve chairman, Ben Bernanke, is a student of the Great Depression, and the wealthy Treasury secretary, Henry Paulson, wants to provide liquidity to stocks, farmers, and real estate. A final difference: After the 1929 crash, the nation had to wait more than three years for a president who simply wasn't up to the job to leave the scene. This time, we've got to wait only two more months.

Yes

You can build a house, but that doesn't make it a home

TOP 5 REASONS WHY HOUSE OF BLUES SUCKS (And is a disgrace to the sacred ground that is the blues) 1. 2 ID Checks, pat down and purse check. They practically strip you before you get past the door. 2. No cameras. You pay an inflated ticket prices, but got forbid you try to remember the night. And if they find your camera, they charge you $3 to keep it behind the counter till the concert is over. 3. $5.50 for a can of Bud Light. I can't believe ANYONE has the audacity to charge that much. It's a flat out slap in the face to mark up drinks 400%. 4. Employees are kinda dicks...."Can't stand here!!!!" And too many VIP sections. FU elitists. That's not what music is about to me. 5. House of blues, w/ tonight's special guest, Fallout Boy. ???? In conclusion, I'm going to start a petition to make them repeal the word "Blues" from their name. Nothing about that place is in the spirit of the blues. John Hurt, Robert J - they'd be rolling in their graves if they knew this is a supposed altar to their legacy. If you can't drink cheap whiskey, dance with your girl, and bring a knife (just in case) in the joint, then it ain't the blues.

Dignity - available exclusively at K-Mart

I just had to point out some irony here this morning. If I were to ever record an album, and call it "Dignity," I would never then sell exclusive selling rights of any kind to "K-Mart." Yeah, Hillary Duff, a lot of Dignity - available for the right price. I long for a time when that word actually meant something to an artist.

Madonna's First Live Performance

"She's sold over 200 million albums worldwide, won seven grammy awards, and is the highest earning female singer of all time. But even Madonna had to start somewhere. In this exclusive WOW TV clip, Madonna is filmed during her first ever live performance."

The phone call (the pretenders) The Pretenders and Chrissie Hynde are awesome. What took me so long to realize this? She's my new female musical hero.

The Decemberists

Venus: "Colin Meloy discusses the perils of narrative songwriting, the political implications of making a war-themed album, and how fatherhood has affected his music by Ann Friedman The story goes that a poor Japanese man heals an injured crane he finds one day after a storm. Shortly thereafter, a woman appears on his doorstep, and they fall in love and marry. His wife offers to support them by weaving beautiful silk fabric to sell at the market, but only if the man promises never to watch her work. They make enough money to live comfortably, yet the husband greedily pushes his wife to weave more and more, oblivious to the fact that her health is deteriorating. Ultimately, the man gives into temptation and peeks behind the curtain in her weaving room. There he sees a crane sitting at the loom, plucking feathers from her body and weaving them into silk. The crane sees him, flies away, and never returns. Something about this simple tale resonated with the Decemberists’ Colin Meloy, who first read the story at a Portland bookstore several years ago and knew immediately that he wanted to write a song about it. Meloy eventually spun the folktale into several songs that mark the beginning and end of the Decemberists’ fourth full-length album, The Crane Wife. With several tracks that soar past the 10-minute mark, The Crane Wife isn’t exactly what you’d expect from a major-label debut (the band recently defected from longtime label Kill Rock Stars to join Capitol Records). The album has the familiar cast of characters and lit-major lyrics, but the sound — equal parts Steely Dan, Yes and Portland indie — marks a departure from the band’s previous efforts with its unapologetically gloomy tone. I called Meloy at his home in Portland, two days before he was set to embark on a national tour."