is our economy recovering ? - crash of 1920 versus crash of 1929
I highly recommend reading the full article at ...
... which analyses a lot of financial data released this week
(snip)"Q. What happened in the crash of 1920 that didn't happen in the crash of 1929?
A. First, don't think that it was that different back in the Twenties. It wasn't. More complicated today, sure, but the underlying forces that were at work then are still at work now.
The market crashed in October, 1920 (down 33%) and unemployment was almost 12%, yet the 1920-1921 recession lasted only 18 months. The 1929 crash started in September, 1929 and peaked in November, with a stunning 52% loss in the Dow. Yet, the market started to rally in November, but never got off the ground. The market continued to slide until June, 1932 having lost 89% of its peak value.
The difference between the two events? In 1920, Warren G. Harding was president. In 1929 it was Herbert Hoover. In response to his crash, Harding, at least by today's standards, did nothing. Hoover was the consummate interventionist and implemented many policies that trashed the economy and started the Great Depression. Roosevelt nurtured it until he died. The Dow did not recover its 1929 peak until late 1954!
Maybe I'm just being simplistic. Maybe I don't understand Keynes. Maybe free market Austrian theory is bunk. Maybe there are sky hooks. Maybe everything will be just fine.
On the other hand, maybe Obama, Summers, Geithner, Romer, and Krugman are naive. Maybe they don't have a clue of any economic theory other than Keynes. Maybe they wear rose colored glasses when they examine the history of Japan and the Great Depression. Maybe they believe in sky hooks. (snip)
Re: is our economy recovering ? - crash of 1920 versus crash of 1929
Maybe it was another bubble.