Original_To:  BITNET%"POLITICS@OHSTVMA"
Newsgroups: bit.listserv.politics
Date:         Mon, 9 Nov 1992 01:43:00 EDT
From:         CLARK@EVMSVMS.BITNET
Subject:      Great Depression - a shorter lecture

I must respond to all this stuff about Hoover and the Great
Depression.  I can be pretty partisan about political arguments,
but when it comes to history, we need the facts.  I promise, it's
shorter than the one on the Catholic Church.


A basic explanation of the Depression must begin by noting the
Stock Market crash.  During the "Long Boom", prices on the
exchange had continued to spiral upward - creating a false paper
profit.  Then, in October 1929, the British raised their interest
rates in an effort to bring back capital lured abroad by American
investments.  Foreign investors began to dump their securities,
and an orgy of selling followed, right up to the 29th, when
16,410,030 shares of stocks were sold in a frenzy.  Losses, even
in blue-chips, were fantastic.  By the end of 1929 - two months
after the crash - stockholders had lost $40 billion in paper
values, or more than the total cost of WWI to the U.S.

No other industrialized nation suffered as did the U.S.  By the
end of 1930 there were 6 - 7 million unemployed; two years later
that figure had about doubled.  Over 5,000 banks collapsed in the
first three years of the depression.  Thousands of farms and
homes were lost.

Another basic cause of the depression was overproduction by both
farm and factory.  It began as a depression of abundance, not
want.  The nation's ability to produce goods had clearly outrun
its capacity to consume or pay for them.  Too much money was
going into the hands of a few wealthy people, who in turn
invested it in factories and other agencies of production.  Not
enough was going into salaries and wages, where purchasing power
could revitalize and be quickly felt.

Overexpansion of credit through installment-plan buying
overstimulated production.  These "easy terms" caused many
consumers to fall deep into debt.  Normal technological
unemployment (the result of new labor-saving machines) also added
its burden to the abnormal unemployment spectacle.

Add to that the economic crises abroad.  Europe had never fully
recovered from WWI;  the 1931 collapse of a Viennese banking
house began a chain reaction of financial collapse that included
the U.S.  International trade dried up, hastened by the Hawley-
Smoot Tariff of 1930.  European uncertainties over reparations,
war debts, and defaults on loans owed to America caused tensions
that reacted unfavorably on the U.S. (ironically, many of these
conditions had been created or worsened by Uncle Sam's narrow-
sighted policies).

Human-made disasters were not the only causes.  In 1930, a
terrible drought scorched the Mississippi Valley.  Thousands of
farms were sold at auction to pay back taxes.  Farm tenancy or
rental was spreading at am alarming rate among both blacks and
whites.

By 1930 the Depression had become a national calamity.  Through
no fault of their own, a host of industrious, hard working
citizens had lost everything.

I will not go further ( unless of course someone asks).  I simply
wanted to point out that when someone says "Hoover raised taxes,
and the depression got REALLY bad", they're oversimplifying to a
great degree.  In fact, they're wrong.  I've tried to outline the
major causes of the depression so that people would not run
around thinking that Clinton's policies alone could equal another
Great Depression.

Oh, and the responsibility DOES lie with the historian, and not
with the economist.  You wouldn't want the elephant in charge of
the peanuts, would you?


Hopeful that I am successfully fulfilling my appointed role,

I am

-T.


"Mellon pulled the whistle
Hoover rang the bell
Wall Street gave the signal
And the country went to hell"

-popular jingle, circa 1930.