Speaking Of Recessions And Depressions...

You know, I'm getting a little tired of the hysteria being thrown around about the disaster-in-process that is the current American economy.  Let's put things into perspective by looking at a couple of previous major downturns, shall we?  In particular, I want to focus on the end of the Carter years and the Great Depression in the 1930s.

[Liberals: we're going to look at some facts, so try something new and stick with me]

2009
Unemployment rate: 7.2%
Stock market decline: 39%

Carter
Unemployment rate: 10.4% (at peak)
Stock market decline: 23%

Great Depression
Unemployment rate: 25% (37% of non-farm workers)
Stock market decline: 89%

I think we can all agree that things aren't exactly rosy right now, but they're hardly as catastrophic as the Great Depression.  The stock market hasn't recovered now in part because they're keying off of government announcements on a daily and weekly basis.  The stock market bounces when new appointments are made or when new bailouts are announced, and since government makes its decisions based on political factors rather than business factors, it's anyone's guess what's going to happen next.  Thus, the volatility.  The problem, then, is the fact that government is more or less controlling (whether intentionally or inadvertently) the free market when the two should be largely separate.  While there are undeniably a number of broad implications and connections, there certainly shouldn't be daily micromanagerial effects on the market based on what Obama's press corps says.

This is what we get when free markets get socialized: the free market no longer responds to market forces, but to government policies.

Now, let's look at what happened in terms of recovery.  In the 1930s, Hoover and FDR implemented higher taxes, increased spending, and isolationist trade policies.  Those things dragged down the recovery and stretched it out for several years longer.  It was only the WWII production boom that truly brought the economy out of its funk.  Obama is proposing the same kind of higher taxes, increased spending, and isolationist trade policies that FDR implemented in the 1930s.  In contrast, Reagan implemented major tax cuts in the early 1980s and steadfastly refused to inject too much government into the markets, ushering in two decades of steady growth and prosperity.

By the way, did you know we also entered a recession in 2001 after the 9/11 attacks?  You probably didn't, because we didn't really feel it.  Why not?  Because Bush cut taxes right about then, which resulted in another 5-6 years of economic growth (as high as 8-9% per quarter) along with historically low unemployment (below 5%).

Now, what do you think we should do in the current economic scenario?  Should we go the route of more taxation and more government interference, or should we go the route of lower taxation and less government interference?  If history is any guide, it's a no-brainer.  We're nowhere near another depression yet, but if Obama and the Dems implement the policies of FDR (i.e. 'the new New Deal'), they could certainly bring one on.

There's my two cents.


Sources:
http://www.bls.gov/CPS/
http://www.data360.org/dsg.aspx?Data_Set_Group_Id=274
http://en.wikipedia.org/wiki/Great_depression
http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929
http://stockcharts.com/charts/historical/djia1900.html
http://en.wikipedia.org/wiki/Black_Monday_(1987)