Swirling Winds of Economic Depression

The Great Depression of the 1930's seems to be on a lot of people's minds these days. For months, government officials and economists have been going back and forth as to whether we are in a recession or depression. When all is said and done, if you've lost your job lately, does it really matter what "they" want to call it?

In some areas of the country, finding a job is as challenging as it was for the FBI searching for Jimmy Hoffa. That's right. You got my point. If you or someone you know is in the frustrating position of job hunting, this economic downturn sure feels worse than a normal recession. Listening to all the talking heads on TV, one feels like another depression is lurking right around the corner. Newspaper headlines in bold print warn of our economic doom as leaders in congress pass the hot potato back and forth, neither side really wanting to claim ownership of a plan to stimulate our economy with no guarantee of success. In the meantime, the job search continues as unemployment checks become a memory.

As during the Great Depression, we are in uncharted waters. A giant squid could emerge at anytime, stretch it's great tentacles around our throats and pull us down to certain doom to the bottom of the sea. Is this when we are suppose to shake in our boots. Wounds of the last eight years have not been properly healed and this all adds fuel to a country in need of a really big band-aid. No more scare tactics. We need honest and intelligent action.

What's interesting when going back in time to the depression of the 1930's and comparing their time with ours are the shared similarities of both eras. Even then, the discussions and finger pointing was about lack of regulation in the Stock Market, the banking institutions and other businesses. Then, as now, the general consensus is a public loss of confidence in the economy. Consumer spending tighten as jobs continue to disappear. Home foreclosures ending someone's American Dream. Each trapped in a growing storm of an F5 tornado. How we pull ourselves out will depend on if our leaders can learn the lessons of those who came before us.

"Black Thursday", October 24, 1929. The day the stock market crashed. Herbert Hoover was a staunch believer in the free market. Regulation was not something the government should do. The result of Hoover's policies was a run away market that plunged the world into an economic crisis the likes of which had never been seen before. Coming back to the present, deregulation of Wall Street and the banking industry seems to have come back to haunt us again.

The Great Depression was not without its own Bernie Madoffs. As the stock market tumbled and crashed like a house of cards, most of the stock and investments were discovered to be insolvent or just plain fraudulent. That was all it took for banks to dry up and crumble into the wind. They had, unfortunately, invested in these scams.

Hoover, with the help of Congress, decided an economic crisis was a good time to raise taxes so they could balance the federal budget. Good idea, but wrong time. This only added to the decline in consumer spending. There are two other policies economists believe are to be blamed that turned what could have been nothing more than a burp of a crisis into a ten year depression. The first one was the Federal Reserve's tight money policy. This policy basically closed the money supply. The second policy was a protectionism policy. The Hawley-Smoot Tariff Act was passed in 1930. In order to try and protect U.S. companies from foreign competition, the Hawley-Smoot Act raised tariffs on imported goods imported into this country. This turned out to be bogus. Foreign countries simply raised tariffs on our goods shipped overseas to their countries.

Back then, money hiding out in people's pockets and shoes could buy more as businesses tried to encourage consumer spending with lower prices. Of course, human nature hasn't changed over the years. Today, lack of consumer spending is only adding to a pot about ready to boil over. It seems like a catch-22. Consumers need to spend, companies need to sell. But with job losses mounting and uncertainty in the air, consumers do the prudent thing and hold on to their money which causes companies to lay off more workers.

Franklin D. Roosevelt took the reins from Hoover in 1933. The country breathed a sigh of release as a failed administration was replaced by one giving hope to the masses. One of the first things Roosevelt did was to enact his New Deal. His plan to create jobs and get America back on her feet. The New Deal created infrastructure jobs. Roads we drive on today were constructed under the New Deal.

In 1934, the Securities and Exchange Commission (SEC) was created. The job of the commission is to protect investors, watch over the markets to make sure they are fair, orderly and efficient and to make it easier for capitol formation. In other words; the SEC was created to regulate Wall Street.

People are still debating today whether the actions Roosevelt took helped or hurt the economic recovery of the country. No one really knows for sure one way or the other. In a way, that's sort of scary because that is our only insight into what may or may not work. We know for certain raising taxes and trying to balance the budget right now is a bad idea. Other than that, it's anyone's guess which path to chose. Economists are even unsure, although the feeling seems to be if the government is going to pass a stimulus bill, more money spent is better than less. Better get on that sympathy card for future generations. Sorry about the huge national deficit we left you, but we had no choice.

Yea or nay. I don't know. I'm still looking for Jimmy Hoffa.

A Short History of the Great Depression, Search Beat

Raymond Chandler, American Cultural History, Lone Star College-Kingwood