1937 – the year that gives economists nightmares
What is the year haunting economists; the one they fear politicians are about to repeat? Not 1929 – we've already had our great crash. Nor 1933 – all those bank rescues, interest-rate cuts and emergency spending have staved off a depression. No, the year economic historians are talking about is 1937, when Washington declared the crisis over, began cutting spending and raising interest rates – and pushed the still- fragile US economy into a severe relapse...
... The wrecked public balance sheet does need to be fixed, but when it comes to timing, the Tories – indeed, all parties – should heed the Depression historians. Historians such as Christina Romer, who is the world authority on how America came out of its slump (and Barack Obama's top economic adviser). The 30s are often painted as one long, slow grind, but Romer points out that the four years after Franklin Roosevelt brought in the New Deal in 1933 saw record GDP growth.
Then the forces of caution and conservatism kicked in. Selwyn Parker, an historian of the Great Crash, notes that Jack Morgan (he of the Wall Street banking dynasty) described free-spending Roosevelt to other bankers in 1937 as a "madman". At the same time, US central bankers began to fret about inflation. The result in 1937 was a squeeze on lending, a hike in taxes and slashed spending – a combination that Romer believes "effectively added two years to the Depression"...
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... The wrecked public balance sheet does need to be fixed, but when it comes to timing, the Tories – indeed, all parties – should heed the Depression historians. Historians such as Christina Romer, who is the world authority on how America came out of its slump (and Barack Obama's top economic adviser). The 30s are often painted as one long, slow grind, but Romer points out that the four years after Franklin Roosevelt brought in the New Deal in 1933 saw record GDP growth.
Then the forces of caution and conservatism kicked in. Selwyn Parker, an historian of the Great Crash, notes that Jack Morgan (he of the Wall Street banking dynasty) described free-spending Roosevelt to other bankers in 1937 as a "madman". At the same time, US central bankers began to fret about inflation. The result in 1937 was a squeeze on lending, a hike in taxes and slashed spending – a combination that Romer believes "effectively added two years to the Depression"...