â??The most important issue before the American people right now is to overcome this crisis,â? said the president. â??What our people need is the restoration of their normal jobsâ?¦they need help in the meantime to tide them over until these things can be accomplished and that they may not go hungry nor lose their farms and their homes.â?
Although the language might sound familiar, that wasnâ??t President Obama, but Herbert Hoover, who, in a 1932 speech given three years after the stock market peaked and crashed, blamed obstructionist Democrats for delaying recovery.
Like our current leadership, Hoover pushed a battery of public works projects, government-secured loans, foreclosure reduction efforts, and higher taxes to bolster the economy.
As we pointed out last month, infrastructure expanded federal spending from 3.4% of GDP in 1930 to 9.8% in 1940. Hoover created a special committee on unemployment and Roosevelt pushed the WPA, yet unemployment still rose from 5% to over 20% by the end of the decade. The stock market wouldnâ??t eclipse its 1929 high for 25 years.
Dow Jones Industrial Average 1929 - 1950Source: Bloomberg, â??Oh Yeah?â? by Edward Angly
Nearly three years after our own stock market peak and plummet, government is again trying to overcome a â??crisisâ? by intervening to keep people in their homes and in a job. Weâ??re creating new health-care entitlements. And while Iâ??m delighted to see the equity market having climbed to a new multimonth high, itâ??s not just the similarities to Hooverâ??s policies that should prompt concern, but the accompanying swagger.
â??It is largely thanks to the recovery act that a second depression is no longer a possibility," the president told reporters last month, an assertion eerily similar to that of Hooverâ??s labor secretary, who promised in 1930 that â??The worst is over without a doubtâ? and that â??we have hit bottom and are on the upswing.â?
The stock market didnâ??t return to the level it was then trading for another 20 years.
Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC.
Trackback URL for this story: http://www.smartmoney.com/tb/Jdiq8N8.3D
What is a Trackback?It is a way to tell us that you have published something that references this story.
How do I send a Trackback? If you blog or mention this story on your website, you can use this Trackback URL to notify us about it. Some blogging software programs can help in sending a Trackback to us.
Click here to read more about Trackbacks.
RT @JonathanHoenig: A New Deal -- or a Raw Deal? http://bit.ly/9paryF
The Who had a song like this; something ab bosses and sameness RT @JonathanHoenig A New Deal- or a Raw Deal? http://bit.ly/9paryF #tcot #sgp
A New Deal -- or a Raw Deal? http://bit.ly/9paryF
Read Full Article »