- Copertina rigida: 254 pagine
- Editore: Simon & Schuster (11 novembre 2014)
- Lingua: Inglese
- ISBN-10: 1451686455
- ISBN-13: 978-1451686456
- Peso di spedizione: 481 g
- Posizione nella classifica Bestseller di Amazon: n. 289.537 in Libri in altre lingue (Visualizza i Top 100 nella categoria Libri in altre lingue)
The Forgotten Depression: 1921: The Crash That Cured Itself (Inglese) Copertina rigida – 11 nov 2014
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"Mr. Grant is an excellent writer, and The Forgotten Depression is a carefully researched history of this dramatic episode. . . . Mr. Grant's chronicle makes difficult economic concepts easy to understand, and it deftly mixes major events with interesting vignettes. . . . People who believe in the inadequacy of the current macroeconomic orthodoxy will find him to be an articulate spokesman." (The Wall Street Journal)
“Learned, beautifully written, and timely.” (Llewellyn H. Rockwell, Jr., Chairman, the Mises Institute)
“Grant engagingly tells the tale of this extraordinary episode, which has been shoved down the memory hole because it doesn't comport with reigning economic orthodoxy.” (Forbes)
“The Forgotten Depression is a loving tribute to laissez-faire . . . Grant pens his tale with a wry humor reminiscent of John Kenneth Galbraith in The Great Crash. . . . a timely reminder that our forebears knew of other, more efficacious, remedies to cure financial hangovers than the hair of the dog.” (Reuters)
“A riveting and instructive tale. . . . the depression of 1920-21 has not received the scrutiny it deserves. The instructive lesson of the story is that the federal government “met the downturn by seeming to ignore it—or by implementing policies that an average 21st century economist would judge disastrous”—and the hands-off approach actually worked. . . . Once read, The Forgotten Depression will be hard to forget.” (Barrons)
“Grant unearths a forgotten depression to pose the iconoclastic argument that the government’s best response to economic turmoil is to keep its hands off. A veteran financial writer, Grant handles abstruse issues with a light touch and a sure hand, gleaning wisdom in such unexpected figures as Charles Dawes, first director of the federal budget, and Warren G. Harding.” (Charles Rappleye, author of Robert Morris and Herbert Hoover, a Biography (forthcoming))
“Are markets self-correcting? What, if any, role should government play when the Hidden Hand falters? Even as much of the world struggles through The Great Recession, James Grant offers a libertarian dissent from interventionist dogma. You don’t have to agree with Grant’s economics to admire the rigor of his thought, the grace of his prose, or the sweep of his argument contrasting what went right in the 1920s, and wrong in the 1930s. This is a true rarity, a first-rate work of history that is as relevant as the morning headlines.” (Richard Norton Smith, author of On His Own Terms: A Life of Nelson Rockefeller and An Uncommon Man: The Triumph of Herbert Hoover)
“Grant makes a strong case against federal intervention during economic downturns.” (Pittsburgh Tribune Review)
“It is a matter of libertarian faith that the Great Depression was prolonged rather than alleviated by Keynesian economic policy, and Grant's intent is clear: The invisible hand reigns supreme, the market knows what's good, and government meddling usually ends badly. . . . interesting reading indeed.” (Kirkus Reviews)
"[An] amusing economic history of the Progressive Era." (Publishers Weekly)
“Mr. Grant’s history lesson is one that all lawmakers could take to heart.” (Washington Times)
“Grant has written an elegant history of the 1920-1921 depression.” (Robert Samuelson The Washington Post)
James Grant is the founder of Grant’s Interest Rate Observer, a leading journal on financial markets, which he has published since 1983. He is the author of seven books covering both financial history and biography. Grant’s journalism has been featured in Financial Times, The Wall Street Journal, and Foreign Affairs. He has appeared on 60 Minutes, Jim Lehrer’s News Hour, and CBS Evening News.Visualizza tutta la Descrizione prodotto
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Grant’s thesis is that left to its own devices an unfettered price system without the intervention of government policy gives the economy the ability to shake off the effects of a depression. In this case study Grant admires the stand-offish policies of Presidents Wilson and Harding. If anything fiscal policy was extremely contractionary and the nascent Federal Reserve was tightening credit well into the contraction. It is as if Grant is channeling his inner Andrew Mellon, the attributed author of my title quote. And remember the 1920-21 decline was severe with wholesale prices dropping by an astounding 56% and unemployment rising well into the double-digits. As a side-bar Grant notes that a small haberdasher in Kansas City failed. The co-owner was one Harry S. Truman.
To Grant the key to the pricing mechanism working was the ability of wages to exhibit downward flexibility With wages falling with prices, businesses adjusted to find profitability with a much lower cost structure. Although the downward spiral did feed on itself for a while, a new equilibrium was quickly found, at least relative to the early 1930s and our recent experience this decade. By contrast in 1929 it was government policy to keep wages up, and hence all of the adjustment had to fall on the quantity of labor.
What Grant seems to undervalue is the role of the Fed in easing credit in 1921 that helped the economy find a bottom. To be sure the inflow of gold, responding to the U.S. economy’s improved competitive position, made their life much easier, but the fact remains that Fed policy became highly expansionary as 1921 progressed.
Grant is correct in arguing the recovery in 1922 laid the basis for the great boom that was to follow. It also made policy makers complacent about the recuperative powers of the economy. When the next crunch came in 1929 the outcome wasn’t nearly as favorable. To Grant it was Hoover’s wage maintenance policies that were at fault; to the economic mainstream it was the workings of the gold standard. Nevertheless Grant tells a compelling story about a long forgotten episode in American history.
His portrayal of the dynamic responses to changing prices by self interested, profit-seeking actors elegantly proves his case with every turn of the page. It echoes theory originally proffered by Adam Smith and Frederick Hayek. By highlighting the efficacy of macro-policy free response to a depression, the country experienced its briefest economic contraction since then.
Had I fully agreed with Grant's premise (as reflected in the book's title) I imagine I would have given the book four or five stars. But I feel he is trying to extrapolate from this episode a hands-off policy that can and should be universally applied to all downturns. While I agree that hands-off is the best approach, I feel that 1) it was not truly the approach taken in 1921, and that 2) each downturn, while sharing similar features with others, is unique and cannot always be analyzed in isolation from the entirety of economic events that precede (and follow) it, and especially cannot always be analyzed or "corrected" in isolation from the entirety of the global economy.
I think Grant is half right: this is the last major American downturn that government didn't attempt to spend it's way out of. But it may also be the FIRST downturn that our government attempted to INFLATE it's way out of, since it was the first major recession the Fed was called on to "fix" (with the Fed itself being a key cause of the slump).
To the degree the Fed succeeded, any existing malinvestment and excess debt that was not allowed to clear (along with newly spurred malinvestment and debt) was simply carried forward into the next, even more severe boom/bust cycle. And to the degree that new lending revived and renewed prior speculative activity, a wartime economy that became overly finacialized transitioned directly into a peacetime economy that was ALSO overly finacialized. That notion is consistent with ABCT... and that seems to be David Stockman's take, too.
It was also the take of a very few economists predicting the crisis that would become the Great Depression (Akerman 1929: in "... a boom period that began already in the middle of 1921 [under] American monetary policy... savings capital had been attracted to speculative investments, which are now beginning to prove unprofitable") or economists analyzing causes of it (Phillips 1937: "... the boom and its consequent depression was the price paid for the experimentation with currency management by the Fed... when the post-war deflation of prices had not been completed").
I continue to be puzzled why Grant and many Austrian economists regard the end of the 1920-1921 slump as a purely laissez-faire recovery. When I read Murray Rothbard, I get a very different view. A laissez-faire recovery could only occur absent the Fed and its monetary exertions, which did indeed play a role in the recovery. In addition, a true laissez-faire price mechanism is not really at work in global economy of sterilized gold flows and manipulated exchange rates.
Certainly there was no fiscal stimulus, but Rothbard paints a picture of a very active Fed before, during and after the crisis. It does not seem far-fetched to suppose the Fed began a policy of loose(r) money in response to what was happening in 1920-1921 and that response not only helped cut short the downturn but helped ignite the continued credit boom of the 1920s, and the subsequent bust.
It seems clear to me that Rothbard sees the roots of the Great Depression in Fed policies that INCLUDE the Fed's response to the 1920-1921 slump. In other words, an active monetary policy was NOT a non-response on the part of government, and the 1921 Depression is NOT truly "The Crash That Cured Itself".
If anything, the 1921 Depression seems to echo the Dot-Com Recession to the extent that an effort to suppress interest rates and boost lending shortened the slump by feeding a subsequent boom. Is it not fair to say that both busts were partly "cured" by artificially created booms rooted in cheap money? And that by limiting the severity and length of both busts, the collapse of the subsequent credit bubbles perhaps led to even more pain than would have been experienced if government (via the Fed) truly HAD let both original busts run their natural course?
Rothbard (p. 138, America's Great Depression):
"The first inflationary spurt, in late 1921 and early 1922--the beginning of the boom--was led by Federal Reserve purchases of government securities. Inflation was promoted by a desire to speed recovery from the 1920-1921 recession.
Soon, Secretary Mellon was privately proposing that business be further stimulated by cheap money.
One of Benjamin Strong's major motives for open-market purchases in 1921-1922 was to stimulate foreign lending. The 1921-1922 inflation, in sum, was promoted in order to relieve the recession, stimulate production and business activity, and aid the farmers and the foreign loan market."
Rothbard describes, at least in part, a Fed-led cure and not an all-natural cure. And since the Fed's inception, it's only "cure" for reaching escape velocity from a downturn is to offer up a new dose of the very disease that feeds the boom/bust cycle: credit expansion. One must remember the approach to this particular event had plenty of historical precedent: war had led, as it always did, to a price inflation that was unprecedented EXCEPT during war, and it was quite natural that prices (and wages) must be allowed to fall.
The severe and rapid price deflation experienced in the slump was itself not fully a market phenomenon. When price inflation and speculative lending continued and even accelerated after the war, the Fed had forced its own hand and found itself countering years of inflationary policy with a strategy that was purposefully and decidedly deflationary. This stance of tightening was held well into the slump, contributing to its sharpness.
But to the degree prices fell, they did not all come that close to returning to pre-war levels. Was further price deflation preempted by the Fed? One could argue the prices the Fed then artificially held "stable" through the remainder of the 1920s were not true "price-mechanism" prices to begin with! And while embracing deflation and letting the price mechanism work seems a pretty obvious approach in the early 1920s after the price had recently doubled, how would such an approach seem obvious in the late 1920s, when no such price inflation had occurred?
If anything, Austrians should use this episode not to trumpet how market forces work well when left to their own devices, but rather to show the utter failure of this freshly instituted mode of central banking (and, more importantly, the utter failure of the freshly instituted reserve-currency mode of global money that replaced the international gold standard). Not even a decade from its founding, that Fed proved: 1) that it would cave to political pressure, and, for example, abandon its watch on inflation during and after a war, if the U.S Treasury so desired; 2) that the Fed, whether in pretense of being proactive or reactive, would never really know if it was doing too much or too little, too soon or too late, since it was lacking a crystal ball (let alone access to market signals and information in real time); 3) that it would work in concert with other central banks to help THEM inflate and tinker with exchange rates; and 4) Fed efforts at price stabilization are folly (as I believe the ultimate collapse of "The Great Moderation" will one day confirm).
Grant does indeed spend some time discussing how "price stability" came to be pushed by leading economic minds (Keynes, Fisher) as a proper goal of central banking, and he makes a good case against that line of thought. But I don't think Grant is hard enough on the Fed.
As a pusher of the drug "credit" during WWI and after, the Fed found that some of the sharp pain it caused by withdrawing easy access to the drug could then be relieved by renewing access to even greater infusions of the drug. But as was discovered only a few short years later in the Great Depression, a credit-buzz can (and will) end badly.
I don't think this is the first time Grant has slightly contradicted himself in this area. In a truly brilliant speech to the Fed, he noted the Fed in its efforts to help finance WWI almost immediately strayed from its supposed design to "respond to the community, not try to anticipate or lead it... (and not to) override the price mechanism but yield to it."
Grant then notes that after 1922, the first full year of recovery, the 1920s began to roar, because the natural price mechanism was allowed to work to end the slump. But was it? To begin with, the Fed had to raise rates to kick-start the natural decline of prices that were expected to follow WWI inflation. And the Fed began it's proto-QE of open-markets ops DURING the recovery, not after it, as Grant claims. Rothbard says B. Strong knew this would be expansionary, and quotes him in a letter to that effect.
Even without this evidence of a primitive type of QE, Grant has already conceded the Fed had become an agent of price distortion, an institution of interventionist policy, during the war. It loosened, loosened some more, then it tightened, then it loosened. At no point did it say "we take our hands off the reins." And to the extent having hands on the reins yielded little or no control over market forces, who is to say what effect those policies had on market participants? Expectations of what the interventionists might say or do can be just as important as what they ACTUALLY say or do.
But most importantly, I think the slump and recovery has to be viewed in the context of a world economy wrecked by wartime inflation rather than viewed as a purely domestic event that can be isolated and analyzed in terms of domestic government policy. In global terms, the war had already effectively destroyed the market price mechanism, because international gold flows were out of kilter and subject to government intervention by every central bank in the world. The best one can claim is that, for a very brief period, the national price mechanism was largely allowed to work in a global economy where the international price mechanism was entirely manipulated. In reality, "natural" prices began being distorted right along with the end of the classical gold standard, in 1914.
I think the chapters in which Grant addresses the tendency of prices to fall steadily with productivity gains had the potential to be his most enlightening chapters, but he did not go into depth in discussing how Fed monetary inflation stabilized those prices in the 1920s, feeding asset price inflation and giving an illusion of financial stability. The lesson is, a fairly stable price level in a regime of massive credit expansion (today as in the 1920s) may be a sign of financial INstability, because if the new credit is not driving up consumer prices and wages then it must be driving up asset prices.
While he mentioned the massive inflows of gold into the country, Grant didn't discuss in detail how the gold-exchange standard resulting from the 1922 Genoa conference was poorly coordinated and how each country retuned to its own version of the gold standard, with Britain overvaluing and France undervaluing their currencies. The failure by both France and the US to monetize gold inflows further threw the global price mechanism out of kilter as the 1920s came to a close, effectively creating a "gold shortage" where none truly existed. I would have liked to see Grant tie together the dynamics of the American economy and other national economies, rather than mention them briefly as separate and contrasting systems. If the price mechanism, the "hero" of Grant's book, had truly been working on a global scale in the 1920s, quantities and global flows of goods, gold and capital -- not to mention the prices of wages, goods, commodities and assets -- would have behaved very differently than they did.