Look to Depression history and learn

Jim Hader (Fence Post, Sept. 22) may be the only one who knows about a “Greater Depression” of 1920, which lasted only 10 months. On planet Earth, there is nothing that compares with the Great Depression creeping in by ’28, and highlighted by the crash of 1929. Thereafter, the Dow dropped 89 percent, from 381 to a low of 41, by 1932. Earnings growth was minus 45 percent in 1930 followed by minus 63 percent in 1931.

During that horrible stretch, many economic calculations were mathematically meaningless. The disaster persisted for years, with another downturn in 1937. In spite of President Coolidge’s tight money in the early 1920s, states were spending like drunken sailors, pumping money into the bloated economy, overwhelming any “Coolidge effect.” Then, about mid-decade, federal spending also soared for veteran benefits. Car and appliance sales were high. The booming economy came not from tight money. There was in fact a great flood of dollars during that decade.

Also, Coolidge’s lower tax rates did little to spur growth, and his rollback of business regulations included a series of trade tariffs against foreign competition. Later, other countries retaliated, and the result was a compounding of the 1930s downward spiral.

Major events often take years to materialize. Let’s not use Coolidge as an example of good governance, although the veterans benefits were made over his veto. The good times of the 1920s became a bubble that burst. Clinton gave us easy mortgages and took away the separation of financial houses by changing the Glass-Steagall Act of 1933. The resulting housing/lending bubble produced our current dilemma. Do Clinton lovers know that?

Richard Cichanski

Palatine