You guys are quibbling, which reinforces my opinion that Kenton is right here on the overall facts - that guest column was atrocious.
Japan had it's own issues, which weren't the same as either the Great Depression or our current problems. That's not to say there's no connection, but there are substantial differences, and substantial differences in the response. Japan was very slow to respond to their crisis, which began around 1989 - their equivalent to the Fed didn't lower interest rates for 17 months after the crisis started, and didn't got down to 0.5% for 4 or 5 years. In fact, they precipitated the crisis by sharply raising interest rates to stop the out-of-control speculation on land in Tokyo. Japanese banks started writing off their bad debts in the mid-1990s, but the government's bail-out didn't take hold until 1999, when the Resolution and Collection Corporation was formed to handle the disposal of bad loans.
So, if anything, Japan's example should make one more interested in taking decisive action quickly, instead of letting things drift on hoping they'll simply fix themselves somehow.
But this shouldn't devolve into an argument about the Great Depression or Japan. And Kenton's article is right; that guest column is crazy - for example, the tech bubble bursting in 2000 had *nothing* to do with microprocessor speeds or the pricing authority of Intel. Sheesh!
"Consider this: Between 1933 and 1936, unemployment fell by roughly 10%. Today's labor force is just over 155 million, so a 10% drop in unemployment would equate to 15.5 million jobs. That is a huge number of jobs."
In 1933, unemployment was > 20%, and today it is < 8%. How could we increase employment by 10%? Seems like a silly comparison with useless numbers.
Also, if you look at the unemployment figures you pointed to, you will note an up-tick starting after 1936. 1936 was when the second phase of the New Deal was passed.
Also, I'm not sure where you come up with the statement that "most economists consider the New Deal a success". Recent research from UCLA, http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx, claims that the New Deal prolonged the Great Depression.
Why you chose to not compare it to Japan's Lost Decade is beyond me. Japan tried through multiple rounds of stimulus spending to get their economy growing, but their stimulus have only caused stagnation. Why will this stimulus be any better?
To paraphrase FDR's Treasury secretary after years of spending, "we have spent, we are continuing to spend, and can spend more - but its not working". "Most" economists know that it was the industrial output for WW2 that brought the country out of the recession.
But there are other differences between the New Deal and the Obama Deal that stand out in stark contrast to today:
1) In the 40's, we didn't already have trillions in debt
2) In the 40's most people actually wanted to work.
Picture this. Take a bucket and fill it up at the deep end of the pool, then walk to the shallow end and dump it in there to try to increase the depth of the shallow end.
There is your stimulus package.
It's hard to see how dumping more than a trillion dollars from the Bush and Obama stimulus packages/bailouts into narrowly selected sectors of the economy and state and local governments is going to stimulate the economy in general. The truly bad news is that this money has to come from somewhere, and that somewhere is parts of the economy that have been working. So the net result is that we take money from the parts of the economy that have been working and give it to parts that either aren't working or not working as well. That sounds like both the US in the '30s and Japan in the '90s to me.
On the other hand, maybe Obama and Congress are right - it's time to spend any savings you have left because we're in for big time inflation to pay for it all. Might as well spend it now while it still has some worth (remember the late '70s).
In the last 60 years, average real GDP growth fell from 4% down to 3%, while the rate of increase in real total debt (public + private) went from 4% up to 6%. In the last 30 years, total debt as a percent of GDP went from about 200% to over 400%. This is not sustainable. It's not enough to just spend fiat money into the economy backed by an exponentially increasing mountain of debt. Roads, bridges, high-speed rail, and smart power grids are important enabling investments (necessary), but they're not sufficient for a thriving economy. We need intelligent investments in the productive capacity of the country. One investment that comes to mind is building a fleet of OTECs (ocean thermal energy converters) in international equatorial waters. We can meet the world's energy requirements, as well as enable a host of other industries: hydrogen from electrolysis (tankered like LNG); desalination for fresh water; food from aquaculture (shell fish, salmon, spirulina); and mineral extraction. No other country has a navy equipped to protect tens, and eventually hundreds, of OTEC platforms on the high seas.
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