15 ms·

Business Booms and Depressions Since 1775 (1943)

261 points by throw0101d 2y ago

DavidPiper 2y ago
Could somebody ELI5 for me why, during periods of both prosperity decline, the economy movement is stable for the most part, but in order to cross over from decline->prosperity or prosperity->decline, there is a huge and sudden swing? 1837 and 1873 appear to be bubbles bursting (maybe) - is every sudden downswing a literal, practical panic? And why are the upswings just as sharp? What is happening practically during those moments that make the swings so sudden compared to economic activity "during" a prosperous or downturn period?
- debacle 2y ago
  There's a momentum to consumer confidence and credit crunches. Folks were talking about the 2008 crash for about 18 months before it happened. We're staring down something on the horizon now, and I'm sure someone more economically minded than me can envision what it is, but will it hit in 1 year, 3, 5? Everything is usually sunshine and roses until it's not, and then things stay conservative until there's some sort of all clear.
- marcosdumay 2y ago
  People are moody, and will ignore the problems and keep pushing further investment / work harder / we need to hire now! or nobody can make money / why bother going to work / fire people or get bankrupt! for way longer than it makes sense.
la64710 2y ago
Things are bad now. Specially the job market for white collar jobs. It is hyper competitive.
carimura 2y ago
Has anyone tried to take this and bring it forward to today?
deleted 2y ago
[deleted]
abeppu 2y ago
I've always heard that deflation is awful and must be avoided. Following WWI, this marks a period of "13 Year Deflation" from ~1918 - 1931, but this includes a period marked "prosperity" from 1922-1929, though commodity prices then dive as the depression deepens. But what conditions made deflation and growth possible together in the 1920s?
- logicchains 2y ago
  >I've always heard that deflation is awful and must be avoided. Because most modern economists are state-funded and the state benefits handsomely from the ability to print money. If you look back before economics got institutionalised you'll see a consensus that inflation is far worse than depression; plenty of states have been destroyed by debasement of the money supply (as far back as the Roman Empire artificially devaluing its currency leading up to its collapse), but there hasn't been a single one destroyed by the value of its people's money increasing. Because deflation can only be transitionary; people need food and housing and other necessities, so there's a limit to how much they can reduce spending, and once that limit is reached the economy has just shifted to a new equilibrium, one with less spending and more savings than before. Inflation on the other hand (when it's caused by printing money/defacing the currency) has the power to destroy 100% of the populace's wealth, as we saw in Weimar Germany and Zimbabwe.
- creshal 2y ago
  > But what conditions made deflation and growth possible together in the 1920s? a) It was a correction to the very unusual war years, which saw unprecedented levels of government investments, price controls, and money printing b) It also led to a lot of money getting invested in dubious overseas markets, which directly led to the Great Depression
- tim333 2y ago
  Deflation is just prices going down. There is a difference between the good years with prices going down but people have loads of money to spend and the bad ones of prices going down because everyone's broke.
- godzillabrennus 2y ago
pocketarc 2y ago
The most surprising thing to me about this is just how... common these market moves are. Seeing so many big swings, even in the early days of the country, really drives home the idea that actually, things aren't as bad as they always seem when you're going through them.
- riffic 2y ago
  business cycles are natural and periodic like a pendulum swing.
  - PheonixPharts 2y ago
    There's another name [0] for the "business cycle" and it doesn't rely on superstition either. Unfortunate that theory predicts those crises will trend getting worse and worse until the eventual breakdown of the system. 0. https://en.wikipedia.org/wiki/Crisis_theory https://en.wikipedia.org/wiki/Crisis_theory
    - pictureofabear 2y ago
      This sounds a bit like a blind squirrel finding a nut or the no true Scotsman fallacy. If the system doesn't break, then clearly the crisis wasn't big enough just yet... but eventually it's going to break!
  - kjkjadksj 2y ago
    Its why the rich always get richer too. They have the capital to buy into inevitable downturns and ride the bull run into orders of magnitude increases of wealth. Everyone else just loses their job and has to pay for rent and food out of savings and loses their generational wealth in the process.
    - WalterBright 2y ago
      The money the rich people have to buy into the dips has dipped right along with it.
riffic 2y ago
cycles are natural. instead of fighting it and treating the system as a fragile too big to fail egg, maybe we embrace the pendulum and think more about antifragility? Taleb's antifragility concept, if it's an obscure matter.
- kjkjadksj 2y ago
  Easier said than done. People have 401k instead of pensions now. Everyone and everything is too overleveraged in the market to not be so affected by it. If they weren’t so leveraged you could imagine volitility dropping like a stone and these cycles becoming smaller with less participants trying to eek out a big return.
  - kwere 2y ago
    Its common knowledge that you should have around 50% of your assets in fixed income generating assets by the time your retire to not be forced to liquidate stocks in a downturn.
- barrenko 2y ago
  It's just our usual "avoid the small fires because of discomfort until a big one burns LA equivalent of money to the ground".
adverbly 2y ago
I'd recommend looking at the full PDF(make sure you zoom out or scroll horizontally as its very wide): https://fraser.stlouisfed.org/files/docs/publications/1943chart_busibooms.pdf?utm_source=direct_download https://fraser.stlouisfed.org/files/docs/publications/1943ch... Incredible visualization. Insane given they didn't have computer screens at the time. What stands out the most to me is that the 30s were really, really bad. Way worse than anything that came before.
- rybosworld 2y ago
  I also think it's interesting that the 2008 mortgage crisis was very close to becoming just as bad as the great depression, but fiscal policy prevented that. It's easiest to see this in side by side charts. The magnitude of stock market losses and economic data was tracking almost exactly with the great depression, until the central banks intervened. Global stock markets: https://cepr.org/sites/default/files/styles/flexible_wysiwyg/public/image/eichengreen_update_fig2.gif?itok=HYh4KxRY https://cepr.org/sites/default/files/styles/flexible_wysiwyg... U.S. Unemployment: https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/images/Furman5.jpg https://obamawhitehouse.archives.gov/sites/whitehouse.gov/fi... Global Industrial production: https://cepr.org/sites/default/files/styles/flexible_wysiwyg/public/image/FromMay2014/degrauwe24septfig1.png?itok=cxtWmj8i https://cepr.org/sites/default/files/styles/flexible_wysiwyg... We're still feeling ripple effects from 2008, but things aren't nearly as bas as they could have been.
  - PheonixPharts 2y ago
    > but fiscal policy prevented that. That fiscal policy prevented collapse in 2008 by creating an unimaginably large asset bubble we're still living in. > We're still feeling ripple effects from 2008, but things aren't nearly as bas as they could have been. Those aren't ripple effects, it's the strain from an unsustainable "solution" to a crisis we still haven't really felt yet.
    - seuraughty 2y ago
      What would you have done differently than the treasury and fed did?
deleted 2y ago
[deleted]
jgbmlg 2y ago
Just because an economist puts a name on an economic trend like "secondary post war depression" doesn't mean they understand it. The economy goes up, it goes down, it goes up, it goes down, it goes up, it goes down, economists usually don't know why or how.
- kjkjadksj 2y ago
  I like reading stock news twice a day. Once, during trading when they have no idea what is happening in the trenches. And then again in the evening, to see what creative narrative msnbc came up with to justify a total about-face from what they wrote a few hours earlier.
  - prewett 2y ago
    I regularly see some article on the iPhone stock app saying something like "Dow (rise|plunge) on <reason>, markets wrapped", five minutes after open. Look guys, "markets wrapped" means "it's after close" and that doesn't happen for another 6:55 hours... Not to mention -1% is not a "plunge", it is well within the normal variance.
- banish-m4 2y ago
  Wat? Macroeconomic observations don't individually track every single microeconomic occurrence and assign a root cause that "Bob did it". There are many possible factors leading to recession but no singular root cause because it's macroeconomic, some include: - OXPC: Over-expansion of productive capacity - Contraction of credit - Contraction of demand - Knock-on effects of layoffs harming other sectors
seventyone 2y ago
Beautiful. Buy a copy and frame it. https://www.ebay.com/itm/355379334117 https://www.ebay.com/itm/355379334117
sixhobbits 2y ago
This time is different
- throw0101d 2y ago
  > This time is different Actually, it is/was: post-WW2 there was no deflationary period. And in general, post-WW2, wild swings as illustrated rarely happened. This is because we have monetary flexibility (i.e., no gold standard) and fiscal tools (Keynesian economics).
  - AnimalMuppet 2y ago
    Post-2008 tried really hard to be a deflationary period. Instead, the Fed intervened ($4 trillion evaporated, and the Fed created another $4 trillion through QE), and we got a flat decade. Compared to the 1930s, that was a massive step up.
antisthenes 2y ago
Well illustrated in this poignant clip from Margin Call (2011): https://youtu.be/IAqAl292ozs?t=101 https://youtu.be/IAqAl292ozs?t=101
zachmu 2y ago
Ah to have been born in the Era of Good Feeling
buildsjets 2y ago
It's alright, 'cause the historical pattern has shown how the economical cycle tends to revolve in a round of decades. Three stages stand out in a loop. A slump and war, then peel back to square one and back for more. Bigger slump and bigger wars, and a smaller recovery. Huger slump and greater wars, and a shallower recovery. You see the recovery always comes 'round again. There's nothing to worry for, things look after themselves. There's nothing to worry, if things can only get better. There's only millions that lose their jobs and homes, and sometimes their accents. There's only millions that die in their bloody wars, it's alright. It's only their lives and the lives of their next of kin that they are losing. Don't worry, be happy, things will get better naturally. Don't worry, shut up, sit down, go with it and be happy. Thanks to Stereolab!
- sneilan1 2y ago
  Are you referring to the band Stereolab?
  - TeaBrain 2y ago
    Besides the last line, their entire comment is just a quote of Ping Pong by Stereolab.
jongjong 2y ago
Interesting to note that after the Federal Reserve Bank was established in 1919, the crises have only gotten more severe... This is ironic given that the Fed was established to increase stability. Not surprising though. It's a well known fact that debt/leverage increases volatility. What the Fed did is remove the limits which constrained the amount of debt in the system... For all we know, we could have been living an inefficient economic lie for 30 years and not realize it so long as new debts are taken out faster than the old ones are repaid... But what about when the borrowing slows down? Where will debtors find the liquidity if not from freshly injected credit? That's what's been happening over the past few decades. New borrowers monetizing the pyramid schemes of old borrowers... What happens when the economy runs out of suckers to enter at the bottom of the pyramid and the government is in perma-bailout mode. Zimbabwe rings a bell.

261 points by throw0101d 2y ago

Could somebody ELI5 for me why, during periods of both prosperity decline, the economy movement is stable for the most part, but in order to cross over from decline->prosperity or prosperity->decline, there is a huge and sudden swing? 1837 and 1873 appear to be bubbles bursting (maybe) - is every sudden downswing a literal, practical panic? And why are the upswings just as sharp? What is happening practically during those moments that make the swings so sudden compared to economic activity "during" a prosperous or downturn period?

debacle 2y ago
There's a momentum to consumer confidence and credit crunches. Folks were talking about the 2008 crash for about 18 months before it happened. We're staring down something on the horizon now, and I'm sure someone more economically minded than me can envision what it is, but will it hit in 1 year, 3, 5? Everything is usually sunshine and roses until it's not, and then things stay conservative until there's some sort of all clear.
marcosdumay 2y ago
People are moody, and will ignore the problems and keep pushing further investment / work harder / we need to hire now! or nobody can make money / why bother going to work / fire people or get bankrupt! for way longer than it makes sense.

la64710 2y ago

Things are bad now. Specially the job market for white collar jobs. It is hyper competitive.

carimura 2y ago

Has anyone tried to take this and bring it forward to today?

deleted 2y ago

[deleted]

abeppu 2y ago

I've always heard that deflation is awful and must be avoided. Following WWI, this marks a period of "13 Year Deflation" from ~1918 - 1931, but this includes a period marked "prosperity" from 1922-1929, though commodity prices then dive as the depression deepens. But what conditions made deflation and growth possible together in the 1920s?

logicchains 2y ago
>I've always heard that deflation is awful and must be avoided. Because most modern economists are state-funded and the state benefits handsomely from the ability to print money. If you look back before economics got institutionalised you'll see a consensus that inflation is far worse than depression; plenty of states have been destroyed by debasement of the money supply (as far back as the Roman Empire artificially devaluing its currency leading up to its collapse), but there hasn't been a single one destroyed by the value of its people's money increasing. Because deflation can only be transitionary; people need food and housing and other necessities, so there's a limit to how much they can reduce spending, and once that limit is reached the economy has just shifted to a new equilibrium, one with less spending and more savings than before. Inflation on the other hand (when it's caused by printing money/defacing the currency) has the power to destroy 100% of the populace's wealth, as we saw in Weimar Germany and Zimbabwe.
creshal 2y ago
> But what conditions made deflation and growth possible together in the 1920s? a) It was a correction to the very unusual war years, which saw unprecedented levels of government investments, price controls, and money printing b) It also led to a lot of money getting invested in dubious overseas markets, which directly led to the Great Depression
tim333 2y ago
Deflation is just prices going down. There is a difference between the good years with prices going down but people have loads of money to spend and the bad ones of prices going down because everyone's broke.
godzillabrennus 2y ago

pocketarc 2y ago

The most surprising thing to me about this is just how... common these market moves are. Seeing so many big swings, even in the early days of the country, really drives home the idea that actually, things aren't as bad as they always seem when you're going through them.

riffic 2y ago
business cycles are natural and periodic like a pendulum swing.
- PheonixPharts 2y ago
  There's another name [0] for the "business cycle" and it doesn't rely on superstition either. Unfortunate that theory predicts those crises will trend getting worse and worse until the eventual breakdown of the system. 0. https://en.wikipedia.org/wiki/Crisis_theory https://en.wikipedia.org/wiki/Crisis_theory
  - pictureofabear 2y ago
    This sounds a bit like a blind squirrel finding a nut or the no true Scotsman fallacy. If the system doesn't break, then clearly the crisis wasn't big enough just yet... but eventually it's going to break!
- kjkjadksj 2y ago
  Its why the rich always get richer too. They have the capital to buy into inevitable downturns and ride the bull run into orders of magnitude increases of wealth. Everyone else just loses their job and has to pay for rent and food out of savings and loses their generational wealth in the process.
  - WalterBright 2y ago
    The money the rich people have to buy into the dips has dipped right along with it.

riffic 2y ago

cycles are natural. instead of fighting it and treating the system as a fragile too big to fail egg, maybe we embrace the pendulum and think more about antifragility? Taleb's antifragility concept, if it's an obscure matter.

kjkjadksj 2y ago
Easier said than done. People have 401k instead of pensions now. Everyone and everything is too overleveraged in the market to not be so affected by it. If they weren’t so leveraged you could imagine volitility dropping like a stone and these cycles becoming smaller with less participants trying to eek out a big return.
- kwere 2y ago
  Its common knowledge that you should have around 50% of your assets in fixed income generating assets by the time your retire to not be forced to liquidate stocks in a downturn.
barrenko 2y ago
It's just our usual "avoid the small fires because of discomfort until a big one burns LA equivalent of money to the ground".

adverbly 2y ago

I'd recommend looking at the full PDF(make sure you zoom out or scroll horizontally as its very wide): https://fraser.stlouisfed.org/files/docs/publications/1943chart_busibooms.pdf?utm_source=direct_download https://fraser.stlouisfed.org/files/docs/publications/1943ch... Incredible visualization. Insane given they didn't have computer screens at the time. What stands out the most to me is that the 30s were really, really bad. Way worse than anything that came before.

rybosworld 2y ago
I also think it's interesting that the 2008 mortgage crisis was very close to becoming just as bad as the great depression, but fiscal policy prevented that. It's easiest to see this in side by side charts. The magnitude of stock market losses and economic data was tracking almost exactly with the great depression, until the central banks intervened. Global stock markets: https://cepr.org/sites/default/files/styles/flexible_wysiwyg/public/image/eichengreen_update_fig2.gif?itok=HYh4KxRY https://cepr.org/sites/default/files/styles/flexible_wysiwyg... U.S. Unemployment: https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/images/Furman5.jpg https://obamawhitehouse.archives.gov/sites/whitehouse.gov/fi... Global Industrial production: https://cepr.org/sites/default/files/styles/flexible_wysiwyg/public/image/FromMay2014/degrauwe24septfig1.png?itok=cxtWmj8i https://cepr.org/sites/default/files/styles/flexible_wysiwyg... We're still feeling ripple effects from 2008, but things aren't nearly as bas as they could have been.
- PheonixPharts 2y ago
  > but fiscal policy prevented that. That fiscal policy prevented collapse in 2008 by creating an unimaginably large asset bubble we're still living in. > We're still feeling ripple effects from 2008, but things aren't nearly as bas as they could have been. Those aren't ripple effects, it's the strain from an unsustainable "solution" to a crisis we still haven't really felt yet.
  - seuraughty 2y ago
    What would you have done differently than the treasury and fed did?

deleted 2y ago

[deleted]

jgbmlg 2y ago

Just because an economist puts a name on an economic trend like "secondary post war depression" doesn't mean they understand it. The economy goes up, it goes down, it goes up, it goes down, it goes up, it goes down, economists usually don't know why or how.

kjkjadksj 2y ago
I like reading stock news twice a day. Once, during trading when they have no idea what is happening in the trenches. And then again in the evening, to see what creative narrative msnbc came up with to justify a total about-face from what they wrote a few hours earlier.
- prewett 2y ago
  I regularly see some article on the iPhone stock app saying something like "Dow (rise|plunge) on <reason>, markets wrapped", five minutes after open. Look guys, "markets wrapped" means "it's after close" and that doesn't happen for another 6:55 hours... Not to mention -1% is not a "plunge", it is well within the normal variance.
banish-m4 2y ago
Wat? Macroeconomic observations don't individually track every single microeconomic occurrence and assign a root cause that "Bob did it". There are many possible factors leading to recession but no singular root cause because it's macroeconomic, some include: - OXPC: Over-expansion of productive capacity - Contraction of credit - Contraction of demand - Knock-on effects of layoffs harming other sectors

seventyone 2y ago

Beautiful. Buy a copy and frame it. https://www.ebay.com/itm/355379334117 https://www.ebay.com/itm/355379334117

sixhobbits 2y ago

This time is different

throw0101d 2y ago
> This time is different Actually, it is/was: post-WW2 there was no deflationary period. And in general, post-WW2, wild swings as illustrated rarely happened. This is because we have monetary flexibility (i.e., no gold standard) and fiscal tools (Keynesian economics).
- AnimalMuppet 2y ago
  Post-2008 tried really hard to be a deflationary period. Instead, the Fed intervened ($4 trillion evaporated, and the Fed created another $4 trillion through QE), and we got a flat decade. Compared to the 1930s, that was a massive step up.

antisthenes 2y ago

Well illustrated in this poignant clip from Margin Call (2011): https://youtu.be/IAqAl292ozs?t=101 https://youtu.be/IAqAl292ozs?t=101

zachmu 2y ago

Ah to have been born in the Era of Good Feeling

buildsjets 2y ago

It's alright, 'cause the historical pattern has shown how the economical cycle tends to revolve in a round of decades. Three stages stand out in a loop. A slump and war, then peel back to square one and back for more. Bigger slump and bigger wars, and a smaller recovery. Huger slump and greater wars, and a shallower recovery. You see the recovery always comes 'round again. There's nothing to worry for, things look after themselves. There's nothing to worry, if things can only get better. There's only millions that lose their jobs and homes, and sometimes their accents. There's only millions that die in their bloody wars, it's alright. It's only their lives and the lives of their next of kin that they are losing. Don't worry, be happy, things will get better naturally. Don't worry, shut up, sit down, go with it and be happy. Thanks to Stereolab!

sneilan1 2y ago
Are you referring to the band Stereolab?
- TeaBrain 2y ago
  Besides the last line, their entire comment is just a quote of Ping Pong by Stereolab.

jongjong 2y ago

Interesting to note that after the Federal Reserve Bank was established in 1919, the crises have only gotten more severe... This is ironic given that the Fed was established to increase stability. Not surprising though. It's a well known fact that debt/leverage increases volatility. What the Fed did is remove the limits which constrained the amount of debt in the system... For all we know, we could have been living an inefficient economic lie for 30 years and not realize it so long as new debts are taken out faster than the old ones are repaid... But what about when the borrowing slows down? Where will debtors find the liquidity if not from freshly injected credit? That's what's been happening over the past few decades. New borrowers monetizing the pyramid schemes of old borrowers... What happens when the economy runs out of suckers to enter at the bottom of the pyramid and the government is in perma-bailout mode. Zimbabwe rings a bell.