Earlier this year, when we were still picking candidates for each presidential party for the 2008 election cycle, I picked up a copy of The Forgotten Man: A New History of the Great Depression by Amity Shlaes. The chapters are long, longer than the hour of reading I aspire to each evening, and dense, sometimes full of mathematical comparisons that would be easier to understand in a graph, so I put it aside.
As I watched the major stock indices falter then drop, and the focus of the presidential campaigns turn towards the economy, I remembered that the same arguments on how to best stimulate the economy and solve a mortgage dilemma were explored during the Great Depression era and started reading this book again.
What drew me back was the timeliness of exploring the impact of government policies on economic recover and the way Shlaes brings the period to life with vivid characterizations of major and minor players. We learn that Hoover standardized the sizes of bricks, increasing efficiency. We learn about Roosevelt's successfully reached out to his audience with radio.
Money was scarce, and prices were dropping. To combat the scarcity, communities created their own monies, and eventually, contracts payable in U.S. dollars were no longer pegged to the price of gold. It is a story of capital, and the policies surrounding the shrinking monetary supply of the early 1930s.
Charming stories of populist back-to-the-land movements are interwoven with the all-too-familiar tale of housing prices dropping below the amount owed on the mortgage, and foreclosure sales further sending prices tumbling. Then, as now, the government debated strategies for mortgage relief that would help the economy and not unduly punish either of two key constituencies, the mortgagee and mortgager.
Executive pay was a concern; Congress passed a bill declaring that any company which paid executives more than $15K was not eligible for government loans, and a few years later, passed a vote for a fifteen percent pay cut for themselves. The "Soviet Experiment" was turning heads here in the United States, and years before McCarthy, some politicians looked to see what they could learn from socialist practices.
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