We’re not going to have the replay of 1929, because we didn’t have Keynesianism, we didn’t have FDIC, we didn’t have unemployment insurance. Some people say that what made the Great Depression so bad was really the chain of bank failures in 1931-32. That had the effect of destroying vast amounts of wealth and scaring people away from keeping money in banks. And then deflation led to double-digit unemployment, and Hoover basically sat and watched Rome burn.
If anything, you can draw a parallel between January 2009 and March 1933.
FDR came into office in March 1933. On the day before his inauguration, Dow closed at 54. By the end of June, Dow passed 100.
Shovel jobs will not be an adequate replacement for the FIRE economy that we’re now losing.
They will be more than adequate. That FIRE economy you’re talking about was nothing more than borrowing money from the Chinese, giving many little pieces to guys on Wall Street, and giving the rest to an unemployed Hispanic homeowner in Chula Vista. If we replace THAT with shovel jobs paid for by borrowing more money from the Chinese, aggregate output of our society will increase.
