Comparisons to 1930s miss big picture
A new academic commentary out this week says most comparisons of the economy now to The Great Depression are flawed. Renita Jablonski talks to economics correspondent Chris Farrell about what would be a more accurate barometer.
Economics editor Chris Farrell (American Public Media)
More on America's Financial Crisis
TEXT OF INTERVIEW
Renita Jablonski: Think about all the comparisons we've heard about between The Great Depression and what's happening with the economy right now. A new academic commentary out this week from economists Kevin O'Rourke and Barry Eichengreen says most of those comparisons are flawed because they don't look at the bigger picture. In other words, looking at the U.S. isn't enough.
Our economics correspondent Chris Farrell is with us. Chris, why is this particular commentary something we should pay attention to?
Chris Farrell: Well, Barry Eichengreen and Kevin O'Rourke are two serious scholars, and Barry Eichengreen in particular at the University of California Berkeley is the leading scholar of The Great Depression, and the mark of his career has been looking at the period of the 1930's, The Great Depression, as a global phenomenon. He's the establishment, he's sober, he doesn't shout from the rooftops.
Jablonski: And he's looking at things like world industrial production, world stock markets, global trade. What's the key here?
Farrell: There are two keys here: One, it's a global phenomenon that he's looking at, just the things that you mentioned. And two, when you look at those things, they're diving faster now than in 1929 and 1930. Here in the U.S., we're having a little bit of a dialogue, are we starting to see the Ben Bernanke green shoots, are they starting to show up in the housing market. And what he's arguing is you cannot just look at the U.S., it's a little bit misleading. You need to look at the world, and when you go to China, Eastern Europe, Latin America, there's a lot more weakness. It is a global phenomenon, not a U.S. phenomena.
Jablonski: So, pun intended, this in effect could be pretty depressing when you look at this analysis, but . . .
Farrell: Haha, I was wondering when you were gonna say that, but go ahead.
Jablonski: There is an interesting silver lining to all of this when it comes to the response then and now.
Farrell: Right. The two that they emphasize is monetary policy has been aggressive. Central bankers around the world have cut their rates compared to the 1929, 1930 period. Secondly, governments have been far more aggressive on the fiscal side, the fiscal stimulus. We're having a big debate here in the U,S. about our fiscal stimulus and was it to big or was it too small, but when you go around the globe, governments are taking action. The third thing I want to emphasize is the recent G-20 meeting, where the IMF is getting increased funding. And one way of looking at the genius of the G-20 meeting is that it said this is a global phenomenon, hey, we've got this global institution over here, we're going to fund it better, and allow it to act quickly to stem a crisis if it emerges in Eastern Europe or in Latin America or somewhere in Asia.
Jablonski: We'll have a link to that commentary at our Web site, Marketplace.org. Thank you to our economics correspondent, Chris Farrell.
Farrell: Thanks a lot.
Comments
Comment | Refresh
From Olmstead Falls, OH, 04/09/2009
At this point, we truely do not know the extent of the damage being done. As an MBA in Cleveland, Ohio, I know that business and finance will put a favorable spin on "BIG" losses, yet to come. After all, how do you REALLY stop
deflation, the continuing drop in prices everywhere. Drop begets drop, no stop till we reach a natural sideways price, long term bottom. This economy will bottom as stocks do, and the last months Dow bottom WILL NOT hold through the end of the year. Ultimate down goal is 1000 on the DOW.
From OH, 04/09/2009
When is China going to let their currency float, and how much is China's currency manipulation still contributing to the monetary imbalances in around the world?
I have to suspect that sustained trade deficits of the magnitude we've had with China have contributed to the "shortage" of dollars in the U.S. It's no wonder we're printing more money.
If China would let it's currency rise, some of those dollars would flow back into the US.
04/09/2009
And what a darling organization the IMF is! It's our best chance of maintaining our hegemonic control over global finances.
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.