It’s Not the 1930s, It’s Not Even Close
February 1, 2010
The odds of repeating anything like the Great Depression are low and shrinking by the day. It was never in the cards, as one of the key causes of the Great Depression was missing this time around–A dust bowl and natural disasters which crippled the American agricultural industry.
Brian Wesbury: "Since the financial turmoil began, many analysts, investors and pundits have fretted about a repeat of the Great Depression. However, it's important to put things in perspective. Real GDP fell for four consecutive years (and by a total of more than 25%) between 1929 and 1933. Unemployment reached 25% (see chart below). Nothing today even comes close. GDP is now rising and we expect unemployment has peaked.
The reason the Great Depression became so great was because government policies were outrageously bad. The Federal Reserve, which was less than two decades old at the time, made huge mistakes, and allowed the money supply to decline by a third between 1929 and 1933. At the same time, President Herbert Hoover increased the top marginal income tax rate from 25% to 63% in 1932 - a more than 50% reduction in the incentive to work and invest.
The odds of repeating anything like the Great Depression are low and shrinking by the day. It's not the 1930s, it's not even close."
