Well, here we are now at four (+/-) years into the current version of the Great Depression. Naturally, I meant to say “Great Recession” (since, as many of us already know, governments have stepped up their deficit spending enough to maintain the appearance of nominal – if not real and actual – growth).
In honor of the clock ticking away (and little else), I thought it might be “fun” to take a quick peek at some of the key historical events from the fourth year of that prior mess. And, please, remember that “this time is different”.
Hitler was appointed Chancellor in Germany
Radical Daladier became Prime Minister of France,
Roosevelt was inaugurated as President of the US and soon after announced:
the abandonment of the gold standard,
numerous banking holidays,
a number of new spending programs,
and passage of the Glass-Steagall Act,
Spanish anarchists declared a general strike, and
New emergency governments were formed in Spain and the Netherlands, among others.
I don’t suppose that there’s any point to making sweeping generalizations about history repeating itself, even if the year is yet young. Afterall, the cooperative actions of the world’s various central banks have surely helped to minimize the degree of economic, social, and political upheaval.
Still, the “real” story behind the notable political events of 1933 might be described as a growing mistrust of the banking industry….hmmm…and increasing desperate currency manipulations….hmmm….in response to issues such as growing sovereign debt and insolvency and debilitating balance of trade payments…hmmm.
So, just because you see the rise of either fascism and radical socialism in Europe; growing social unrest complete with labor strikes and masked anarchists breaking windows; or failing governments in places such as the Netherlands, Spain, or Greece; widespread currency manipulations and money printing by the likes of China, Japan, Europe, the US (and even hard-money Switzerland); or sweeping financial regulatory reforms, or even bankers being hung in effigy by angry mobs, well, none of that is any reason for concern, especially in regards to “history repeating itself”.
After all, the “recovery” is well under way and the storm is, therefore, passing as we speak. Besides, this time there really are critical differences.
For one, the USA is now the world’s largest debtor nation, not Germany or Brazil. And China is the world’s largest creditor nation, not the USA and Great Brittain. And, unlike that pesky anachronism gold, the global reserve currency is now the US dollar, which can be printed in infinite quantity by the worlds largest debtor. And, lest we forget, today nobody would dare to make the mistake of laying the blame at the feet of Jewish bankers.
Oh, well, I’m sure that’s just a coincidence and, surely, doesn’t reflect any continuing risk of latent anti-Semitism in this progressive age. And, besides, we now have an effective United Nations (not the anemic League of Nations) to keep watch over human rights concerns, especially on behalf of Israel.
And, of course – as we all know, Jewish or not, the Federal Reserve has really only helped to avert a disaster (and certainly not helped to cause one). After all, the inflationary erosion of 96% of the dollar’s value since the Fed’s creation in 1913 has nothing whatsoever to do with the steady accumulation of excess private and public debt or wealth inequality or deficit spending or competitive currency wars or trade imbalances or, in the end, of capital flight itself…what some believe might well have been the ultimate trigger for WWII.
Economist Fritz Machlup (who studied under Austrian school hero Ludwig von Mises) characterized these processes that led to WWII thusly: “…capital flight contributed to banking collapses as well as to obvious balance of payments difficulties, in that in order to carry out foreign exchange transactions, speculators withdrew deposits from banks and endangered the banking systems. If central banks tried to compensate with increased liquidity for such withdrawals, they lost reserves and their exchange rate was endangered. Governments reacted with exchange controls, “police measures, penal sanctions and confiscation” which diminished the propensity to save, to invest capital, and added to the psychological roots of capital flight.” So, yeah, nothing at all like what we see happening today with the Euro, for instance.
It is, then, pure hyperbole to suggest that just because the first shots of WWII were, in fact, fired by financial weapons (such as Hitler’s unilateral devaluation of the German mark and subsequent attack on the French franc), or that factors such as virulent nationalism along with socialist and communist political upheaval or even scarce resources (like oil) ultimately played a rather critical role in the escalation of eventual military actions. So, again, nothing to worry about there.
Now, to prove just how absurd it would be to suggest that 2012 has any substantive resemblance to 1933, I’ll refer you to this article by Paul Krugman who states, “It’s time to start calling the current situation what it is: a depression” and that efforts to contain and manage the crisis have “created immense anger, with many Europeans furious at what is perceived, fairly or unfairly (or actually a bit of both), as a heavy-handed exercise of German power“.
That Krugman is patently leftist in his orientation might excuse his obsessive focus on the rise of right-wing authoritarianism in Hungary (not to mention his anemic economic theory), which he characterizes as “a sample of what may happen much more widely if this depression continues.” After all, to Krugman any non-socialist political movement that would hope to impose limits on spending is, by his standards, a dire threat (not at all unlike King Kong or, perhaps, an alien invasion?).
Still, as unlikely as this surely sounds, I actually agree with him, especially when he notes that: “On the political as on the economic front it’s important not to fall into the “not as bad as” trap. High unemployment isn’t O.K. just because it hasn’t hit 1933 levels; ominous political trends shouldn’t be dismissed just because there’s no Hitler in sight.” (Assuming we’d actually recognize him.)
So now if it seems, perhaps, as if I’m acting as a Krugmanian Agent Provocateur, or perhaps living in a Krugmanian Dreamworld, or playing at a Krugmanian Shell Game, or possibly suffering Krugman Borderline Hysteria Disorder, you just know that you shouldn’t take any of this stuff very seriously. – HT