Is This a Replay of 1929?
Posted in Main Blog (All Posts) on October 7th, 2008 4:28 am by HL
Is This a Replay of 1929?
WASHINGTON — Watching the slipping economy and Congress’ epic debate over the unprecedented $700 billion financial bailout, it is impossible not to wonder whether this is 1929 all over again. Even sophisticated observers invoke the comparison. Martin Wolf, the chief economics commentator for The Financial Times, began a recent column: “It is just over three score years and ten since the (end of the) Great Depression.” What’s frightening is not any one event but the prospect that things are slipping out of control. Panic — political as well as economic — is the enemy. There are parallels between then and now, but there are also big differences. Now as then, Americans borrowed heavily before the crisis — in the 1920s for cars, radios and appliances; in the past decade, for homes or against inflated home values. Now as then, the crisis caught people by surprise and is global in scope. But unlike then, the federal government is a huge part of the economy (20 percent versus 3 percent in 1929) and its spending — for Social Security, defense, roads — provides greater stabilization. Unlike then, government officials have moved quickly, if clumsily, to contain the crisis.