I have known for years that Allen wrote a volume on the 1930s, titled Since Yesterday, and thanks to the magic of e-reading and the Internet, I down-loaded it yesterday and started reading.
In the book, Allen takes another look at the Big Bull market and the crash, and with hindsight not available to him in Only Yesterday, he analyzes the Little Bull Market that followed in the winter of 1929 and 1930 , President Hoover's performance, Congress's behavior, and the attitudes of the well-to-do. It is, in a word, fascinating -- and scary.
Economists and historians of the crash often assure us that the parallels between the crash of 1929 and what is happening now are more imagined than real. Perhaps. But there are similarities that should give anyone caution. Great caution.
In 1929, unregulated financiers rigged a system that was guaranteed to collapse. They allowed -- encouraged -- margin buying in the stock market and extended credit to anyone who could ask for it. When the stock market hit snags - -as any market will -- the margin calls wiped out the overextended buyers, sent prices crashing and set off waves of other calls and sales. In the years leading up to the collapse of 2008 and 2009, people who had no business purchasing houses and real-estate valued far above their means to pay, were encouraged to line up for the asset that "never loses value" -- until it does.
Starting in 1980 and really taking off after the Repubs took control of the House and Senate in 1994, American finance has been characterized by the dialectic of privatizing profit and socializing risk. As taxpayers, Americans are on the hook to make up for wreckage caused by out of control and unaccountable financiers. The financiers, on the other hand, have insisted that anything that curtails their greed, such as paying taxes, is bad for America.
Actually, tax policy for the last two decades has worked against Americans investing in their own businesses in their own country. But the financiers -- and their Repub partners -- push on, insisting that tax cuts (particularly capital gains tax cuts) are just the thing for stimulating a slow economy, moderating an over-heating economy, jump-starting a stalled economy, or sustaining a booming economy. To listen to them tax-cuts will also cure the common cold.
What we know now -- after fighting two wars for 10 years, and giving out huge tax-cuts -- is that we are broke, in hock to other countries, and have the greatest income disparity we have seen in over 100 years. In 2000, much was made of Karl Rove's appreciation of William McKinley's policies and William McKinley's America. Rove has just about gotten us back there.
And what of the current President? When Barack Obama appeared on the national stage in 2004, I liked him. I liked him through the next 4 years and supported him whole-heartedly for President in 2008. All the while however, I had a nagging concern that he could be a Jimmy Carter; intelligent, far-sighted, and far better equipped to manage than lead. As I read Since Yesterday, it occurs to me that that description also applied to Herbert Hoover -- and in this economic instance, that is not an encouraging thought.
Hoover did his best after the crash and as the economy sludged to a stop in 1930 and 1931. Some of his programs to resolve the savagery of the depression became features of the New Deal. But Hoover did too little, too late. And I find the parallels with Obama frightening.
Hoover offered platitudes and reassurance that all would be well. Roosevelt offered assurance that we could overcome our troubles if we were willing to take the chances and make the changes needed.
Roosevelt had a Congress that was ready to do whatever it took, at first. In the later years of his administrations, the Congresses were more fractious. Obama had a more cautious Congress, but has missed multiple opportunities to call the Repub's bluffs. He has tried to hard to be be bi-partisan -- as if that were an end unto itself -- when he should have called Repub tactics for what they are; holding a gun to the head of the American people.
President Obama finally called the tactics for what they were when he called them "hostage-taking" -- as he pushed Democrats to accept the compromise he had just struck with the hostage-takers.
It may be that the tax compromise is a good thing. I suspect it is a trap. If Obama is to avoid the trap, and Hoover-dom, he will have to come out of the corner in this next round as the FDR we hoped he might be on a January morning in 2009.
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