
Why all those Great Depression analogies are wrong. - peter123
http://www.slate.com/id/2205186/?from=rss
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byrneseyeview
I can't believe he would be so foolish as to cite safety nets as proof that
this won't be so bad. The biggest crashes so far have been in mortgage-backed
securities (created by government entities, owned by government entities,
insured by government entities, subsidized by taxes) and banks (heavily-
regulated -- it's not like there's a Fed equivalent for oil companies, that
would give Exxon millions of barrels of oil at a huge discount to market
prices if they asked nicely). Meanwhile, loosely-regulated hedge funds are
outperforming almost every other asset class.

Safety nets do not prevent crises; they delay and concentrate them. People
take safety nets into account -- if we knew, for example, that the government
wouldn't let stocks drop more than 20% without bailing us all out, we'd all
leverage our portfolios four to one (not strictly legal, but you can do it
fairly easily with derivatives). This would make the 20%-drop insurance plan
far too expensive, _and_ make stocks so overpriced that such a drop would be
inevitable. GSEs, deposit insurance, social security, and unemployment
insurance all have similar moral hazard issues.

The effective insurance plans are not the ones that reduce risk (assuming
behavior is the same). They are the ones that reduce actual risk relative to
apparent risk -- which means they could be the rules that _increase_ risk.
Unfortunately, "Effective, but superficially harmful" is a perfect description
of a policy that will never be enacted by a democratically elected government,
so we're stuck with what we have.

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olefoo
This is an excellent article and a good reminder that when it comes to the
economy, we are all only feeling up part of the elephant.

Just remember that the people who produce financial porn, and who get paid to
describe the deals and the play by play are not in the business of telling you
the truth; they are in the business of selling ads for financial services.

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quantumhobbit
Dostoevsky said, "All happy families are alike; all unhappy families are
unhappy in their own way."

The same can be applied to the economy. We aren't likely to repeat the
mistakes that led to the Great Depression. Instead we find new and interesting
ways to screw up. I doubt that this will be anywhere near as bad as the Great
Depression. However, the claim that this time is different shouldn't be as
reassuring as it sounds. We simply can't evaluate this depression(or recession
if you prefer) in terms of the last. Its apples and oranges.

~~~
david927
That's Tolstoy (Anna Karenina). But I agree with your point. It won't be my
grandma's depression, it will be my own.

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dilanj
"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." Golden.

~~~
byrneseyeview
A cheap shot. FDR ran on a platform of cutting spending, balancing the budget,
and repealing prohibition. Guess which one of these he actually did!

Guess which President was the first to decide that a program of massive aid,
make-work, and bailouts would be the best way to end a recession (hint: his
initials were not FDR). Guess which recession was the first to which the US
responded with such policies! Guess which recession was longer and more severe
than any before it!

~~~
Darmani
He actually did try to balance the budget for a while -- for the first several
years, whenever he raised spending, he raised taxes as well.

~~~
byrneseyeview
I don't think anybody runs on a platform of trying for a while, then giving
up, and doing the exact opposite of what was promised, only in a more extreme
fashion than any of your predecessors. If FDR could not keep his promises, he
still did a bad job -- being an incompetent who fooled people into giving him
authority doesn't make him morally superior to a mere liar.

~~~
pfedor
Well, there's also the possibility that he tried one thing for a while, which
didn't work very well so he switched to something different. As to whether he
did a good job or not, the fact that he was reelected three times seems to
indicate that he didn't do too badly.

~~~
byrneseyeview
Horseshit. People only say that kind of thing to rationalize supporting
everything someone does, even when that someone is a liar. Maybe FDR was
lying, maybe he wasn't. Maybe he secretly changed his mind without telling
anybody. Then, of course, you have to admit that the wrong guy won in 1932,
since what FDR ended up doing was more of what Hoover did: public works, bank
bailouts, and more government intervention in the economy.

 _As to whether he did a good job or not, the fact that he was reelected three
times seems to indicate that he didn't do too badly._

1972\. 2004. Do you have actual political beliefs, or do you just assume that
the average voter defines the morally correct view? Since the FDR who ran for
office in 1932 has basically nothing to do with the FDR who rant the country
thereafter, you have a lot of 'splainin to do. Somehow, the voters were right
to 1) vote for the guy who promised to reverse Hoover's policies, and 2) vote
for the guy who then changed his mind and continued them. Meanwhile, FDR was
right to 1) do exactly what Hoover didn't, and then 2) do exactly what Hoover
did.

I don't think there's even a name for beliefs this ludicrous.

~~~
pfedor
_People_ _only_ _say_ _that_ _kind_ _of_ _thing_ _to_ _rationalize_
_supporting_ _everything_ _someone_ _does,_ _even_ _when_ _that_ _someone_
_is_ _a_ _liar._

Why on Earth do you think I would need to rationalize supporting everything
president Roosevelt did? I wasn't even born then.

 _Do_ _you_ _have_ _actual_ _political_ _beliefs,_ _or_ _do_ _you_ _just_
_assume_ _that_ _the_ _average_ _voter_ _defines_ _the_ _morally_ _correct_
_view?_

I don't particularly care about the "morally correct" view, I do assume
however that voters have some sense of their own well being, and if they feel
things are getting worse they will more likely vote for change. That's why
democracy works.

~~~
byrneseyeview
I think most people are taught to idolize FDR, and that requires boiling
actual history down to a less complicated story. Since FDR either lied about
his principles, or had no principles to start with, it's hard to view him as a
hero. But if FDR is not a hero, and the Great Depression is an example of what
happens when the government meddles too aggressively with the economy, that's
a big problem for many belief systems.

 _I do assume however that voters have some sense of their own well being, and
if they feel things are getting worse they will more likely vote for change._

Why would you trust voters to elect the right person? Do you really think that
the people in office are the best for the job, rather than the best at
manipulating others into giving them the job?

 _That's why democracy works._

Democracy sucks. Name one company that would would be better managed as a
democracy than as a shareholder-oligarchy. Can you seriously imagine a company
that had a monopoly on taxing all of the wealth produced in the United States,
and still managed to operate at a $500 billion annual loss? Be serious.

