`Depressing" is the adjective we're hearing a lot when it comes to the U.S. economy. There are reports of how the University of Michigan's consumer-sentiment poll is lower than at any time in the past quarter century. Senator Obama speaks of how, in some places, "the jobs have been gone 25 years and nothing's replaced them." A recent Pew survey suggests that fewer Americans see their lives improving than at any point in almost half a century. The gloom is so thick that it feels positively German. And that's just our domestic press. The Brits have long since decided that doom is around the American corner. Covering Bear Stearns Cos., a reporter from the Independent wrote, "Wall Street traders said they had never experienced such fear."
The suggestion behind such talk is that the current situation isn't merely depressing. It is that the slowdown is like the Great Depression of the 1930s. You almost expect Senators Obama and Clinton to repeat the lines from President Roosevelt's inaugural address of 75 years ago: "The only thing we have to fear is fear itself."
The analogy is absurd. This economy is to the Great Depression what an April drizzle is to Hurricane Katrina. So far, the Dow has declined about 12% from its record high of last fall. In the Depression, it dropped more than 80%. Unemployment is about 5%. In the Depression it was 25%. Maybe 2% of mortgages are in trouble, and abandoned homes line some parts of Cleveland Heights. During the Depression, more than half of Cleveland was underwater. Today, one big bank has collapsed. In 1931, 1,400 banks collapsed. Even a comparison with more recent periods is a stretch.
Today, everyone is concerned about the consequences of the Bear Stearns rescue. On the right, critics argue that the Federal Reserve's decision to make funds available to Bear created moral hazard on a scale that can bring down our markets. These critics forget that in 1984 Washington actually nationalized a big bank. That bank was the nation's seventh largest, Continental Illinois. Yet the Reagan Revolution didn't stall. In the late 1970s and early 1980s, the Dow languished in the 800s for a period longer than it takes to collect a college degree. Unemployment in 1982 was close to 10%. Yet you didn't hear too much talk about the New Deal or FDR's speeches.
Posted by John Ray. For a daily critique of Leftist activities, see DISSECTING LEFTISM. For a daily survey of Australian politics, see AUSTRALIAN POLITICS Also, don't forget your summary of Obama news and commentary at OBAMA WATCH