The Ownership Society vs. the Great Depression - (Dick McDonald with the FACTS! - reliably so!)

DICK McDONALD BLOGSPOT.COM ^ | MAY 28, 2005 | DICK McDONALD

[CHARLITE]

Many of the older generation still have emotional scars from the Great Depression seared into their souls. Even Baby Boomers had parents that lost everything and imparted that fear into their children. It made them life long Democrats and gave that party an almost uninterrupted congressional run from 1932 until 1994. When faced with a suggestion that a New Social Security plan would improve that system, they have a knee jerk reaction to reject it emanating from deep within. I am convinced that no amount of logic, facts or argument will ever change that reaction. It is planted too deep.

However, if Americans do one thing right, it is the post mortem. They will beat a proposition, a problem or an unfortunate outcome to death until they satisfy themselves that they have it right. It may take decades, but they religiously chart that course to understand the future and not repeat the past. And so it is with the Great Depression. In summary, everything that could go wrong did go wrong and those attempting to fix it did just about everything wrong. And today we are still paying for the after effects of FDR's New Deal. But don't blame FDR, many of the errors were just follow ons to policies established or outlined by Herbert Hoover. It was the era of communism and the prevailing thought throughout the world's elite involved big government solutions. They didn't work then any better than they do now. But who knew then?

In short, they raised taxes, they tightened credit, they raised interest rates, they imposed high tariffs on foreign goods and started a trade war. They passed so many anti-business laws that by the time the Japanese attacked Pearl Harbor, Democrats had only managed to reduce the unemployment rate from its 33% high in the early thirties to 17%. They did , however pass the Securities and Exchange Act of 1934 and although they didn't really understand it at the time, a Social Security plan that is a significant deterrent to recessions and depressions.

What our post mortem shows is they failed to understand that in a recession/depression you have to lower taxes, lower interest rates, relax credit, open trade and give business some slack. George W. Bush learned that lesson and instead of a four year depression when the internet bubble broke, the accountants turned out to be pension-stealing scoundrels, the Wahhabi's took down two Manhattan skyscrapers and we started two wars, we only had four months of economic downturn.

By all rights we should have had a meltdown in the business cycle after the hot burn of a 20-year Reagan-induced boom. We had all of four months. A tribute to the success of our post mortems. And a tribute to a country that continues its exceptionalism. Especially when we have a leader that does things right instead of a poll taker who slathers at the public trough. The public in America are the most uninformed, misdirected and uneducated lot on Earth and will make the wrong decisions nine out of ten times (of course with the help of LDO's from the MSM). That is why a Reagan and a W are hated, they lead, they don't follow. They don't read the NYT. They are not misinformed, inexperienced or uneducated.

And so today we grapple with an emotional group that are intractable on Social Security. They thunder that in stocks, "all was lost" and "you can never convince me otherwise". To hear them tell it, you would think the entire population of America jumped out of a window on the fifth floor. Times were bleak, but to be truthful, the facts belie their wail. Yes the S&P index of 500 stocks dropped 65% from an overly inflated 24.35 on 12/31/28 to 10.01 on 12/31/33. But 10.01 was greater than any year from 1020 to 1923. But one must remember that 40 years earlier, the index was at 4.41. So from 1893 to 1933, the index went up 227%. A retiree would still have been in positive numbers.

The fall in stock prices was the most publicized event of the Great Depression, but the figures don't lie. The index did not go to zero. Everything was not lost. And today, 5/28/2005 the S&P stands at 1,199 an increase of 11,970% from 12/31/33. The truth of the matter was a combination of factors caused the Great Depression. Paramount among them was the lack of money in people's hands. There was no transfer payments like Social Security that can be relied on to be spent every week. Businesses shut down with tight credit and a population with no cash. FDR put the finishing touches on this infamous anti-business period and we all learned a great lesson we don't have to repeat. That is what makes us exceptional. That is why we are not going to suffer another massive depression. We understand the economy better than we ever have and now with Sarbanes-Oxley, we have the accountants and corporate officers signing off on their financials which if they fudge ends them in the Federal Penitentiary. That is why the safety of stock investments has a bright and lasting future. But just don't try to discuss it with a Depression baby. Emotion trumps facts and always will.