The GREAT Depression

Ever think about the phrase, the "Great Depression."

A depression is an economic downturn in which the economy shrinks by 10 per cent or more. In fact, the last depression the US has had was the Great Depression. Some people still think this recession (two quarters of negitive growth in a row) could become a depression. But the Great Depression wasn't called that merely because it was a depression, but because it was bigger than most depressions, which were quite common and frequent.

After Andrew Jackson abolished the Bank of the United States (which Hamilton created to regulate the nation's economy) and prior to the creation of the Federal Reserves System, depressions were common. There was a bad one in 1832. And another in 1837. During the 1840s and 1850, firing employees during downturns was commonplace. Downturns were so common some argued that free laborers were treated worse than slaves, since the slave could at least count on his owner to protect his investment by feeding him. The Civil War kept the economy roaring in the early 1860s. In fact, the 1870s and 1880s were so bad that enough people were thrown out of work to have them close the frontier. Nobody with a good factory job would face Minnesota winters to farm hard ground. The adoption of the anti-trust laws helped, but didn't solve the problem, particularly since any law is only as effective as the willingness of the executive to enforce it.

Most of the Presidents in the early 20th Century were Republicans, who opposed regulation of business.

The Panic of 1907 lead to the creation of the Federal Reserve System, which helped. But it was only with the imposition of the serious regulatory framework of the Great Depression that we stopped seeing Depressions.

Until now.

In the late 1990s, the Republican congress and the pro market Clintons repealed the Security and Exchange Acts of 1933, 1934, 1935. And a funny thing happened a decade later. Depressions returned!

The Rightest Religious (not to be confused by the Christian Fundies of the Religious Right) hold that pure market capitalism is their G-d of choice.

So, where am I going? I'm here to say, the Europeans, whose automatic safety net will ensure they run massive deficits as people lose jobs, are at least partially right. There is a need for more regulation.

The reason the Republicans gave for the repeal of the 1930s Securities and Exchange Acts was that US banks could not compete with foreign banks without it. You see, the Europeans did not regulate their banks as strongly as we did ours.

So we should consider seriously a coordination in regulations. That should end the argument that got us into the mess, ... at least for another generation.