We left off last week looking at the similarities between the spot we find ourselves now and the Great Depression. This doesn’t mean we will have another depression, a great depression, but we are going to have our day in the rain. We must examine the rainmakers of today Don and Kamala. We can juxtapose these candidates to the candidates of the Great Depression.
Herbert Hoover was a very smart and able man. He was the greatest mining engineer of his generation. He was Commerce Secretary in 1927 when the greatest flood on the Mississippi River took place. Hundreds of thousands were misplaced, threatened, starving and he reacted admirably. He asked the Red Cross for help and the railroads and was creative in helping those as the water slowly jumped its banks along the way down the great river. His efforts catapulted him to President in 1928. He was aware of great problems. This is from a letter that he wrote in July 1931 to a friend the Governor of Illinois Louis Emmerson courtesy of the Gilder Lehrman Institute of American History, “While Hoover wrote to Emmerson that “considerable continuance of destitution over the winter” and perhaps longer was unavoidable, he was trying to “get machinery of the country into . . . action.” Since the crash, Hoover had worked ceaselessly trying to fix the economy. He founded government agencies, encouraged labor harmony, supported local aid for public works, fostered cooperation between government and business in order to stabilize prices, and struggled to balance the budget…As the Depression became worse, however, calls grew for increased federal intervention and spending. But Hoover refused to involve the federal government in forcing fixed prices, controlling businesses, or manipulating the value of the currency, all of which he felt were steps towards socialism. He was inclined to give indirect aid to banks or local public works projects, but he refused to use federal money for direct aid to citizens, believing the dole would weaken public morale. Instead, he focused on volunteerism to raise money. Hoover’s opponents painted him as uncaring toward the common citizen, even though he was in fact a philanthropist and a progressive before becoming president. During his reelection campaign, Hoover tried to convince Americans that the measures they were calling for might seem to help in the short term, but would be ruinous in the long run. He asserted that he cared for common Americans too much to destroy the country’s foundations with deficits and socialist institutions. He was soundly defeated by Franklin D. Roosevelt in 1932.”
Boy was Hoover right about Americans going on the dole. We have generations of families that now treat the dole like their job. As if front porch sitting deserves a check. Herbert Hoover was a great man that turned out to be right, but was vilified for being true to the Constitution of America. He could have and perhaps wanted to take more steps beyond his office, but was limited by the nagging moral belief that we abided by our Founding Fathers vision. Franklin D. Roosevelt had no such moral issue. I don’t want to debate adherence to the Constitution but the policies and their effectiveness. Here is a quick run down on some of the policies that each enacted and in the spirit of fairness, keep in mind Roosevelt served over 3 times longer.
This from Investopedia, “Hoover implemented three major changes: first, an increase in federal spending of 42% that resulted in massive public works programs such as the Reconstruction Finance Corporation, second, taxes to pay for the new programs, and third a ban on immigration in 1930 to keep low skilled workers from flooding the labor market. The bleak reality forced Hoover to use legislation to prop up prices and wages by choking out cheaper foreign competition. He signed the Smoot-Hawley Tariff Act of 1930 into law following the tradition of protectionists and in the face of the protests from more than a thousand of the nation’s economists.
The act was initially intended to protect agriculture, but it swelled into a multi-industry tariff, imposing huge duties on more than 880 foreign products. Nearly three dozen countries retaliated, and imports fell from $7 billion in 1929 to just $2.5 billion in 1932. International trade declined by 66% by 1934. Not surprisingly, economic conditions worsened worldwide.”
Hoover simply didn’t understand the deluge of money that the 1920s had thrown into the system and the sudden reversal caught everyone unaware. Hoover increased spending by a large amount and that seems like the right thing to try and do to stimulate an economy. He tried to pay for it with taxes to keep the budget within reason which seems reasonable, and third he banned immigration putting American workers first. He further tried to protect Americans by putting up a wall of tariffs to protect Americans from foreign cheap goods and a wall on immigration protecting American jobs for Americans. He also wore a red hat that said Make America Great Again. Ok, I made up that last part, but this is basically Donald Trump’s platform. This is the Republican Way.
Trump wants to put up a wall on immigration, put tariffs on everyone, and spend a ton more money. Unlike Hoover he wants to lower taxes which only supercharges the debt as we found out during his first term. This from Wikipedia, “In the popular view, the Smoot–Hawley Tariff was a leading cause of the depression. In a 1995 survey of American economic historians, two-thirds agreed that the Smoot–Hawley Tariff Act at least worsened the Great Depression. According to the U.S. Senate website, the Smoot–Hawley Tariff Act is among the most catastrophic acts in congressional history.” Now this is where things are very different, that turned out to be deflationary because America was the manufacturing superpower of the era, but now we don’t manufacture very much besides war and dance videos for Tik-Tok. If we put tariffs up now it will be inflationary because unlike then there wouldn’t be an abundance of supply of things left untraded for but a shortage of stuff because we can’t or at least don’t make it because American labor costs too damn much. Another problem with dusting off the Hoover playbook, in 1930 the US debt was $16 billion vs a GDP of $102 billion or 17%. We could add debt, and we didn’t know it, Hoover probably could have skipped the tax cuts and used the stimulus, but he didn’t realize it. He was trying to pay for them and was a good steward of the people’s money. He tried protecting his people from other countries and their jobs from immigrants and they voted him out in a landslide. Thanks for nothing Herb.
Unlike Kamala mentally FDR was physically handicapped. His lust for power and control was not. When Roosevelt took office as President in 1932, technically 1933, the banks were on holiday, basically they were closed for withdrawals. What Roosevelt did over the next 8 years before the war have been celebrated for putting America to work, but introducing the financial nuclear bomb of social security, seizing gold and then revalued it as a blatant affront to your own citizens, and then creating so many government programs and the standard that the government will be there to rescue the common person during a time of financial upheaval. He knew the banks were failing and did nothing, and then created a legacy of government dependence out of the crisis. The new deal was the government owned your independence and you owed it. The man, who knew about bank failures and did nothing, and whose state caused the banking crisis then used that crisis to introduce socialism on an unsuspecting and untrusting public by declarative fiat. This man was revered so let’s see why.
The nation was in deep despair when Roosevelt took office in spring of 1933. Edward Robb Ellis relates this in his book A Nation in Torment, “In normal times 78,000 homes are foreclosed but in 1932 that number had jumped to 273,00 and in 1933 there was 1,000 a day…What happened when they were disposed? Many doubled up with relatives—or even tripled up until ten or twelve people were crammed into three and four rooms. “Human beings are like porcupines. They like to huddle close enough to feel one another’s warmth, but they dislike getting so close that the quills begin pricking.” Do you remember how many people had to share rooms and such after the great financial crisis? If you believe that we have a housing shortage in this country you would be mistaken. We have a living solitarily problem. We have continually warned about cities like Baltimore, San Francisco and Chicago having debt problems and Ellis has another example of how crazy life was when the government failed its citizens. “A Chicago municipal employee named James D. O’Reilly saw his home auctioned off because he failed to pay $34 in city taxes at the very time the city owed him $850 in unpaid salary.”
The scene was bleak with unemployment almost 25%, banks failing, and hope was lost. Enter FDR, and his first hundred days. This paraphrased from thebalancemoney.com “He reopened the banks after having auditors perform quick audits to make sure they were secure. He cut the pay of all government and military workers by 15% with this money going to pay for the programs. Wow, who knew I would support a policy so much. He taxed alcohol for added revenue which he would spend on the Civilian Conservations Corps. This program gave crappy jobs like planting trees, road maintenance and mending trails to many young men. It didn’t pay very much but it got them to work again and food in their bellies. So far, he had cut government spending, replaced it with government spending, raised taxes and then spent it again. If it was neutral then this would be a redistribution of resources and although federal employees didn’t like it I am sure, they would not be in any hurry to join the 25% in the unemployment lines so they took it. Everyone had to sacrifice, and they did. However, then Roosevelt took the gold. He confiscated the Constitution’s version of true money in gold and then 10 months later revalued it and he stole the purchasing power of the citizens that had saved for a rainy day. Trust with the government was broken irreparably. He wasn’t done: he created the Federal Emergency Relief Act which paid people to do jobs from construction to theatre, he subsidized farmers for not planting, the Emergency Farm Mortgage Act provided loans to save farmers from foreclosure, but what about the others, who got to pick and choose who wins and who fails? He created the Tennessee Valley Authority to create power stations, he created the Securities Act, he created the Abrogation of Gold Payment Clause which said the government no longer had to pay its debts with gold, which was funny considering they were getting all the gold. The Homeowner’s Loan Act to prevent foreclosures on what basis who the hell knows, the Glass Steagall Act separating investment banking from retail banking, a law that has closed up once again for the record, the National Industrial Recovery Act to create new public works like the Hoover Dam and the Emergency Railroad Transportation Act to coordinate the railways. The Civil Works Administration, The Gold Reserve Act revaluing the stolen gold, the National Housing Act, The Securities Exchange Act, and the Federal Communications Act. This was in the first 100 days.
Eventually these programs started reaching the Supreme Court and were ruled unconstitutional like the National Industrial Recovery Act, so FDR took a flamethrower again to the Constitution with new programs because the situation was hardly improving. The Soil Conservation and Domestic Allotment Act, Emergency Relief Appropriation Act of 1935, the Rural Electrification Act, the National Labor Relations Act/Wagner Act, and the god damned Social Security Act passed in 1935. Once this sugar rush wore off the nation dropped back into depression and in 1937 there was the United States Housing Act, the Bonneville Power Administration, the Farm Tenancy Act, and the Farm Security Administration. He created the Federal National Mortgage Association that sells mortgages on the secondary market to provide more funds for banks to lend, how did that work out in 2008 Frank? He created the New Agricultural Adjustment Act and the Fair Labor Standards Act. He also abolished mark to market accounting, allowing banks to not fairly and currently price the assets on their books just like the government would do in 2008.” It’s fair to say we have been eating the two scoops of poop FDR set out for us ever since. The debt almost tripled to $49 billion in 1941 when we entered World War II and the debt to GDP was 49% almost a tripling.
If you listen really close, you’ll hear the ghost of Osceola cry. It sounds an awful lot like the Inflation Reduction Act, The Chips Act, student loan deferment, rent deferment, foreclosure deferment, and now Kamala’s $25,000 grants to buy new homes. This is the Democratic way. Roosevelt had gone nuclear long before Truman did in 1945 on Japan. We will examine the legacy of this spending bomb next week.
Sincerely Yours,
C Thomas Printer
On this date in history… 10 years ago to be exact, Scottish voters rejected a referendum that would have made Scotland an independent country.
Also born on this date …. The soccer player Ronaldo, R9, the real one.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.