tag:blogger.com,1999:blog-4290163255778893789.post7753879974144259694..comments2024-03-16T05:19:07.061-04:00Comments on Retirement Blues: What the Hell Friday - The Depression of 1921Jazzbumpahttp://www.blogger.com/profile/07337490817307473659noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-4290163255778893789.post-25036208569246242932010-03-06T22:01:15.360-05:002010-03-06T22:01:15.360-05:00Interesting insights guys, and lots of new informa...Interesting insights guys, and lots of new information for me.<br /><br />I think J's comment about goods and commodity surpluses, and BT's about subsistence living for poor farmers are two faces of the same phenomenon.<br /><br />Tux - that's a heart-rending story about your grandmother. I don't know anything about my family's history during that era. <br /><br />Thanx, guys,<br />JzBJazzbumpahttps://www.blogger.com/profile/07337490817307473659noreply@blogger.comtag:blogger.com,1999:blog-4290163255778893789.post-86658549207112337262010-03-06T12:58:53.656-05:002010-03-06T12:58:53.656-05:00My beef about the Austrians is that they have this...My beef about the Austrians is that they have this neato-keen model that might apply to <i>some</i> economic downturns (like 1921), but insist upon applying it to <i>all</i> economic downturns even though the data says that the majority of economic downturns aren't the readjustment downturns that their model predicts. In 1921 we were coming off of WW1, a bunch of young men had just been made jobless by the shutdown of war industries and the demobilization of the Army, there was, in other words, a lot of loose resources sloshing around the economy. No banks collapsed in 1921 because the depression was so short that people didn't exhaust their savings paying back their loans, meaning that once demand picked back up, there was capital available to borrow to expand production. None of that was true in 1929, by 1933 half the banks had collapsed and the entire financial system was in tatters because as you point out, when real rates are so high for so long of a time, people simply can't pay back their loans taken out in inflated dollars in the new more-expensive deflated dollars. The deflation was so severe that half the country basically moved to the very inefficient barter system for most economic activity -- there simply was no green to be had, whether it was for paying taxes to the local county government or whatever. My grandmother remembered teachers being paid mostly in eggs and cornmeal because that's all that people had to give the county government for their taxes, and the county government couldn't just seize all their property and sell it at auction, because who would have bought it for enough money to meet back taxes given that the whole problem was that, well, nobody had money?<br /><br />The other thing that J points out is that the depression of 1921 NEVER ENDED FOR MUCH OF AMERICA. My grandmother grew up as a sharecropper's daughter in the 1920's. When the economy slid into the Great Depression, she never even noticed it, because they'd been in the Great Depression for most of the 1920's -- the price of cotton (their main cash crop) was in the dumps for both of those decades. They mostly were subsistence farmers, little different from some Guatemala peasant in the back country, growing most of what they ate and using their cash crop to pay the rent on the land and buy what little they absolutely needed in order to survive. <br /><br />So anyhow: If the Austrians ever bothered to test their little theory against data, they'd note that it was accurate for a few depressions, but not for the vast majority of them. But of course the Austrians don't believe in testing their theory against data, because if the data disagrees with their theory, it is the data, not their theory, that is wrong. Alrighty, then!<br /><br />- Badtux the Economics PenguinBadTuxhttps://www.blogger.com/profile/01345749557330760251noreply@blogger.comtag:blogger.com,1999:blog-4290163255778893789.post-69645163197270306492010-03-05T19:34:00.107-05:002010-03-05T19:34:00.107-05:00Interesting, jzb. Another factor (really historica...Interesting, jzb. Another factor (really historical, rather than macro.) overlooked by the apologists for capitalism, whether the austrian nut-bugs, or supply sider MBA-bots, concerns production, and the relation of production to deflation. <br /><br />After WWI there was a surplus of produced goods (not the same as surplus in terms of budget)--like massive amounts of grain, or industrial goods (check some US history data). That held throughout the 20s, and even 30s. Not sure what the right indicator is (if one exists), but at times the Fed asked, in fact ordered farmers NOT to sell goods, or burn crops, even slaughter cattle, etc, because prices were so low (and the money deflated). There wasn't sufficient demand, and gluts of items, usually (compounded by other problems,like banking, loans, employment). A mess. <br /><br />'21 was not that big of a problem for wealthy, but it was for the farmers and workers--of course, the sh**t really hit the fan in '29, when there was nothing to support the speculation and credit, which forced some govt. intervention/planning....at least, that's what a somewhat historical analysis suggests...<br /><br />So, you are correct insofar that the austrian nuts (or supply siders) don't quite understand the need for some govt. planning, at least as a way to avoid massive unemployement and poverty, yet... many rich boy GOPers don't mind high unemployment, at least in short run (tho' eventually there aren't enough consumers to buy products...).Jhttps://www.blogger.com/profile/11567400697675996283noreply@blogger.com