Great Depression Comparison

Many people think of the Great Depression as: stock market crashes, depression immediately ensues, with soup lines beginning in Nov '29. In fact, it took a few years for everything to play out. (I am currently looking at a chronology of 1929-1933 to get a better understanding of how things occurred.) Although 1929 was scary, 1930 saw a little bit of a recovery. It was 1931 that was the real disaster, with hundred of bank failures and contracting credit. And, while Treasury Secretary Mellon sat on his hands and talked about liquidating everything, Hoover did try to take some action Many of his measures were similar to those that we have recently proposed (ie., they were not large enough to make a big difference). It took the concerted effort of dozens of programs in the New Deal to turn things around -- at least a little.

Today, things are again playing out slowly. (If a bailout package doesn't pass, this will change. Everything will speed up, and we will see a week with a 1000 point loss for the Dow. Banks will collapse in scores. The economy will be paralyzed.) When the bailout package passes this weekend, things will slow down. The markets will likely go up for a few weeks. Then, two areas will become the concern. One, Wall Street will analyze how the bailout is working. It likely won't work as well as needed, so confidence will slowly decrease. Two, the real economy numbers (GDP, unemployment, durable goods production, houses prices, etc) will likely decline, causing worries and further decline. The economy right now is structurally unsound, so we are going to see a lot of pain. The extent of it will be a reverse function of the ingenuity of our policymakers.