The problem with repeating the past...The words of the president seemed eerily familiar, the country was in the midst of a serious financial crisis, unemployment was out of control, and the word of the young, vibrant Democrat, filled the country with hope. His plan for the first 100 days of his term included a sweeping program to stimulate the economy, reduce the unemployed and help those in danger of losing their homes.
The cost would be staggering and plunge the country deep into debt.
The words were those of Franklin Roosevelt and I was struck by the similarity of the events and solutions to our current situation.
The following is from the White House’ website
(http://www.whitehouse.gov/about/presidents/franklindroosevelt/):“He was elected President in November 1932, to the first of four terms. By March there were 13,000,000 unemployed, and almost every bank was closed. In his first "hundred days," he proposed, and Congress enacted, a sweeping program to bring recovery to business and agriculture, relief to the unemployed and to those in danger of losing farms and homes, and reform, especially through the establishment of the Tennessee Valley Authority.
By 1935 the Nation had achieved some measure of recovery, but businessmen and bankers were turning more and more against Roosevelt's New Deal program. They feared his experiments, were appalled because he had taken the Nation off the gold standard and allowed deficits in the budget, and disliked the concessions to labor. Roosevelt responded with a new program of reform: Social Security, heavier taxes on the wealthy, new controls over banks and public utilities, and an enormous work relief program for the unemployed.”
Eerie isn’t it.
In 1933 Edwin P. (E.P.) Chase wrote what would become a Pulitzer Prize winning column, on the country’s financial situation. It too sounds eerily familiar, substitute the words home of automobile and it’s almost as if it could have been written this week.
It has been said that those who forget the past are condemned to repeat it. So in that spirit I’m reprinting Mr. Chase’s column… enjoy.
(DECEMBER 2, 1933)
Where Is Our Money? EDWIN P. CHASE Atlantic (Iowa) News-Telegraph
It is announced that at 10 o'clock tonight, Iowa time, William Randolph Hearst, well-known publisher, will broadcast an address on the subject which appears at the caption of this article.
The subject is a broad one and permits of many ramifications. Likewise the query is a live one and has been for several years with many people who formerly were in comparative affluence and have found themselves suddenly in a position where money is a scarce article. The whereabouts of the money of the individual is perhaps beside the point in this comment, if we stick to the text, as doubtless Mr. Hearst's broadcast will deal with the whereabouts of the funds of the nation as a whole, rather than the financial plight of the individual citizen; but the subject in¬trigues one and suggests a line of thought relative to the part the individual has played in rendering himself particularly susceptible to the in¬juries inflicted by the period of economic stress.
Where is our money? Here in Iowa, if competent statistics are to be believed, during the ultra-prosperous years of the world war period when money flowed like water into the coffers of the farmer and the business man and everyone else, some 200 million dollars of good Iowa money went for stocks, shares in half-mythical concerns which were worth exactly their value as a piece of printed paper. During that period and shortly thereafter a good many hundreds of millions from the middle-west went into the first and second mortgage bonds of apartment hotels and the like, security issued on appraisals inflated to the nth degree. The most of these bonds are now worth just what the stocks we referred to are worth-the value of the paper and the printing contained therein. There is no way of estimating how many hundreds of millions of money the country over went up in smoke and vanished in thin air when it suddenly a dawned on us that even the most productive land in a section like ours is n not worth $300 or $400 an acre. It took only the simplest mathematics to arrive at that conclusion, for even at the prices brought by farm products at their peak, the return on the land in this section would not pay interest on an investment of $300 or $400 an acre. It can easily be recalled that during that hectic period it was considered a mark of provincialism not to buy a new automobile every year. A lot of fur coats and a lot of diamonds and a lot of expensive clothes for both men and women were indulged in by all classes. The wage earner suddenly awoke to the fact that by buying on the installment plan he could keep up with the Joneses and he not only spent every cent he could get his hands on in many instances, but he pledged the major portion of his wages or salary months ahead to pay for " automobiles and other articles which were worn out by the time he had completed the payments.
These are but a few instances, cases in point. One might go on indefinitely telling of the wild orgy of spending and of contracting obligations without thought of the pay day and with little or no thought of the " economic soundness of such spending. Then came deflation. We got down to cases. We danced and are still paying the fiddler.
Like children we have sought someone to blame for our plight and also like children we now seek some magic way to cure our ills and expect the government to provide the cure. The man who contracted debts does not want to pay them just now, because in some instances, he cannot pay them. In every way we have met the crisis, which was thrust upon us as though we had nothing to do with producing it. As a matter of fact, we had all to do with producing it.
In the proportion that the individual citizen went haywire with extravagance and reckless spending governmental units went on the same kind of an orgy and whooped our taxes 100 percent in ten years.
Bond issues were pyramided by communities with the same disregard of the coming of the payday which characterized the individual. We built great cathedrals of education, with motion pictures and swimming pools and all sorts of gewgaws and frills. We erected public buildings in many cases entirely beyond possible needs of communities for a hundred years. Just as private enterprise overbuilt in every direction, governmental building activities got out of bounds. The people have to pay the bill. The saturnalia of expenditure created fixed taxes, and taxes have a habit of certainty in good times and bad times alike. With our incomes and our business revenues depleted our tax bill in the main has remained the same. All an echo of the period of extravagance and wild-eyed inflation which brought about our troubles. We were talking about "two cars in every garage and a chicken in every pot," and we made much about the so-called American standard of living, whatever that meant. We insisted that all the various elements of our population should attain that standard, and we instilled into the minds of many people who could not afford it a desire for the things had by others more fortunate in life.
Oodles of people, who had no more business with an automobile than a wagon has with five wheels, bought cars. Oodles of people learned to live beyond their means.
It began to look as if it would not be long until there would be no one to do the work of the country, as all were seeking the same mythical standard to which we referred. And we still have the automobiles.
The bottom went out of things. Or it might be more appropriate to say that the top was blown off. Then the people of the United States commenced to take stock. Seeking someone to blame they listened to the fulminations of the politicians who represented the "outs" and who told that the way to cure their ills was to convert the outs into the "ins" and the ins into the outs. This they did, with their usual disregard of essentials and fundamentals. It became a pleasing fiction to attribute our plight to the tariff, and later to our money standard. The people were told that all that was necessary was to reduce the tariff, which protects American manufacture and agriculture, and all would be jake. Now they are being told that the way to put money into the hands of those who are penniless, and make it possible for the debtor to pay his obligations and start things moving on a normal basis is to cheapen our money. A lot of other experimental schemes are being worked out by an administration of which the people demand action.
We are spending huge sums of money, borrowed for the purpose, in an endeavor to squander ourselves back to prosperity. In the face of the fact that debt is one of the basic causes of our troubles, we are following the theory that incurring more debt would cure us.
And in the face of the fact that excessive taxation is another of the causes of our trouble we are laying the groundwork for more of the same, under the delusion that the application of all of these methods will relieve us of the trouble which we brought on ourselves, aided and abetted by worldwide economic upheaval.
We are a queer lot, we Americans. We expect whichever party happens to be in charge of the government to so manipulate the handling of public affairs as to afford us a cure for the results of our own folly. We seem to assume that it is possible for us to get well economically by the waving of some magic wand.
We think we can force prosperity, and to the majority of the people of the country prosperity means a return to the hectic days preceding the stock market crash of 1929. This theory disregards the fact that those hectic days were created by false and inflated values which in turn were created by a false and inflated philosophy.
In the creating of this inflation we disregard all natural laws of economics, so it is but natural for us to expect to cure the trouble by the same process. But it cannot be done. The only way back to solid ground and to a degree of prosperity and well-being commensurate with common sense and economic soundness will be by the application of thrift and hard work and the balancing of the a budget of every individual. The old haywire days are gone forever. But a large percentage of our population still believes in Santa Claus and good fairies. The cause of the present economic condition of the country, in a large measure, can be ascertained by every citizen by looking in the mirror. Each one of us contributed his share.
There is nothing new about all of this. It has been the history of things in the world since the earliest dawn of civilization. Particularly has it characterized every postwar period. Humanity never learns. We have not progressed so far in our t thinking, after all. Where is our money? The answer is not difficult. It can be told in one short sentence. We spent it.
Thanks to Mr. Charles E. Wheeler for reminding me of this and sending along a copy of the article.
