Bill Mitchell — The Balanced Budget silly season is upon us again

"Again" in the post title  refers to the US in 1936 when FDR was persuaded by Treasury Secretary Henry Morgentau to adopt a policy of fiscal conservatism after years of fiscal liberalism on the advice of Fed chair Marriner Eccles. While the policy recommended by Eccles had been working, its reversal was soon followed by a reversal in the economy, too, in the recession of 1937. Bill catches us up on the history to show why the supposed medicine of fiscal discipline is actually poison for the economy.

Bill Mitchell – billy blog
The Balanced Budget silly season is upon us again
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Austral

1937?

"Buy the dip" again, figuring on a Greenspan to Bernanke to Yellen put, or is this 1937, and the beginning of the second leg down with looming deflation?

Robert J. Shiller — Parallels to 1937

The depression that followed the 1929 stock-market crash took a turn for the worse eight years later, and recovery came only with the enormous economic stimulus provided by World War II, a conflict that cost more than 60 million lives. The global situation today is not nearly so dire, but there are parallels, particularly to 1937.

Project Syndicate
Parallels to 1937

Robert J. Shiller | 2013 Nobel laureate in economics, Professor of Economics at Yale University, and the co-creator of the Case-Shiller Index of US house prices

Matias Vernengo — Currie and the 1937-38 recession

Someone please send this message to the people in charge now.

Naked Keynesianism
Currie and the 1937-38 recession
Matias Vernengo | Associate Professor of Economics, University of Utah

Steve Keen — 1937 Redux?

Of course I know that my argument, if it is heard by politicians at all, will fall on deaf ears – and that’s despite the fact that, for once, virtually all economists agree that government surpluses now would be a bad idea (though using very different arguments to mine).

It’s far easier for politicians to treat a nation’s accounts as no different than a household’s – and campaign about reducing government waste – than it is to comprehend the feedbacks that may cause fiscal consolidation to reduce aggregate demand by far more than it reduces the government deficit.

Steve Keen's Debtwatch
Will politicians cause a Roosevelt Recession in 2013?
Steve Keen

Amity Shlaes — 2013 Looks a Lot Like 1937 in Four Fearsome Ways

The obvious question is why an announcement by Obama or Roosevelt to cut back just after the election doesn’t reassure those who dislike government expansion.

Wary Markets

The answer is that the markets, which observe a giant march forward and then a step backward, don’t believe the step back is permanent. Giants are giants. Expansionists tend to revert to expanding government, as FDR did, most drastically, in World War II. The mandate matters more than the austerity chatter.

Fascinating post about the depression within a depression in 1937 that gets it almost 100% wrong. That's no big accomplishment in today's journalism, but it is still remarkable that ideological blinders can be so effective at numbing one's brain.

Bloomberg
2013 Looks a Lot Like 1937 in Four Fearsome Ways
By Amity Shlaes

UPDATE: Noah Smith tweets: "Amity Shlaes is a battalion commander in the Republican War on Reality."

1937 Essay by Then Senator Harry Truman

Greed, By Senator Harry S. Truman, Congressional Record, Bee. 20, 1937

reprinted in

American Affairs, JANUARY, 1946 Winter Number, Vol. VIII, No. 1 (p.6)

"ONE OF the difficulties, as I see it, is that we worship money instead of honor. A billionaire, in our estimation, is much greater in these days in the eyes of the people than the public servant who works for public interest. It makes no difference if the billionaire rode to wealth on the sweat of little children and the blood of underpaid labor. No one ever considered Carnegie libraries steeped in the blood of the Homestead steelworkers, but they are.

We do not remember that the Rockefeller Foundation is founded on the dead miners of the Colorado Fuel and Iron Company and a dozen other similar performances. We worship Mammon; . . .

It is a pity that Wall Street, with its ability to control all the wealth of the nation and to hire the best law brains in the country, has not produced some financial statesmen, some men who could see the dangers of bigness and of the concentration of the control of wealth. Instead of working to meet the situation, they are still employing the best law brains to serve greed and selfish interest. People can stand only so much, and one of these days there will be a settlement. We shall have one receivership too many, and one unnecessary depression out of which we will not come with the power still in the same old hands. . . .

Our unemployment and our unrest are the result of the concentration of wealth, the concentration of population in industrial centers, mass production and a lot of other so-called modern improvements."