File under: Lies, damn lies, and statistics. Because it was an unusually sudden and steep downturn, to really get a sense of the severity of the "Roosevelt Recession," one has to look not at the annual GNP or GDP data, but at monthly measures, like Industrial Production. 1/n
Here's what the latter series looks like. As you can see, it shows that the '37-'38 recession did in fact undo a big part of the '33-'37 recovery, which had itself been disappointingly slow and (by early 1937) far from complete. 2/n.
Note how, setting aside the spring '33 "boomlet" (reflecting firms' attempts to build inventory in advance of coming NRA controls), there's no real progress until the NRA, the New Deal's keystone recovery program, lapses in '35. That's no coincidence:… 3/n
The driving force behind the '35-'37 recovery was not any New Deal policy but massive gold inflows from Europe, where the rise of Hitler led to increasing fear of political turmoil and another European war:… 4/n
Until they were struck down, by boosting prices, NRA codes kept the gold inflow from stimulated output as it otherwise might have. Nor can New Deal policies be absolved from blame for the Roosevelt Recession itself:… 5/n
Economic historians have long understood--as most contemporary observers (including many New Dealers themselves) did--that while the New Deal was a great source of "relief," and included many long-term kinds of "reform," it did little to promote "recovery." 6/n
The now trendy claim that the New Deal succeeded in ending the Great Depression is bad revisionist history. That its proponents often accuse critics of the New Deal of misrepresenting the facts, and of consisting only of die-hard Hoover apologists, only adds insult to injury. 7/n
For the straight dope, with numerous references to relevant research, keep up with my Alt-M series on "The New Deal and Recovery":…
For "stimulated" please read "stimulating."

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More from @GeorgeSelgin

22 Feb
Thread: Northern Ireland's First Trust Bank, one of the world's few remaining commercial banks-of-issue, will exit the paper currency business in 2022, leaving only three surviving Irish note-issuing banks:
Elsewhere, Scotland and Hong Kong also have three commercial banks-of-issue each. That's 9 surviving private note-issuing banks. What few may realize is that, little more than a century ago, currency systems based on multiple, private banks-of-issue were the norm.
Still fewer people realize that many of these competitive currency systems were remarkably stable and efficient. The Scottish system, for instance, had a far better 19th-c. record than England's, where the Bank of England enjoyed many exclusive privileges:…
Read 14 tweets
8 Feb
Thread: Fed officials are now saying that they'll be able to launch FedNow in 2023 rather than later:…
It's understandable that they should do everything possible to accelerate FedNow's launch: RTP, FedNow's private-sector rival, has been operating since 2017, and its network now covers well over 70% of all U.S. bank deposits, with new depository institutions joining every week.
Universal or "ubiquitous" coverage was one of the key objectives of the Faster Payments Task Force est. by the Fed in 2015. The Clearing House's RTP system answered that Task Force's recommendations. By late 2018 it had 50% network coverage.
Read 19 tweets
6 Feb
Unfortunately, the errors of the past, however persistent, don't absolve fiscal and monetary authorities from responsibility for avoiding, or trying to ovoid, serious errors in the opposite direction. Life would be easier if they did. But they don't. 1/n
It's particularly unwise, IMHO, to suggest that ANY positive stimulus, now matter how large, is worth trying because of past inflation undershooting. According to this logic, why not $5 trillion; or $10, or...whatever?
Of course, many politicians will wring their hands at the prospect of piling-on to any such gravy train. They like "doing more" for their constituents. The macro consequences of excessive stimulus aren't their problem. But for that very reason, someone has to look out for those.
Read 5 tweets
27 Jan
It's dandy that 100 DIs have agreed to take part in FedNow's pilot program. That's about as many as are now directly connected to RTP (w/ many others using it through correspondents). And some of the top 15 banks are conspicuously absent from the list. 1/n…
Absent are Bank of America, U.S. Bancorp, Truist, PNC, the TD Bank Group, State Street Corp., and Fifth Third Bank. All save State Street are connected to RTP. So even if FedNow started now and all banks on its list connected, RTP would the bigger network by a long chalk. 2/n
And of course FedNow won't actually be ready to launch for 3 more years: in the world of payments innovations, that's an eon! 3/n
Read 5 tweets
27 Jan
As this claim has met with some resistance, allow me to expand upon it with examples, both fictional.
Suppose, for the first, that I go into my district Federal Reserve bank, find one of its cash tellers (yes, the Fed has tellers), present her with a $20 Fed note, and say, Here is one your liabilities, for $20. I'd like those now."
Of course in reality the teller would call security--itself evidence that the $20 is no ordinary IOU! But suppose instead she doesn't. Instead, she says, "No problem." Then an awkward pause ensues.
Read 7 tweets
27 Jan
An answer, in a thread, because others may gain something by it.
The first thing you must do, if you wish to understand the value of an irredeemable fiat money like today's USD, is to entirely expunge the word "backing" from your economics vocabulary. Trust me, it is good for nothing but mischief.
It's true that the dollars the Fed creates are, for accounting purposes, "liabilities." It's also true that, the market value of the liabilities of most financial firms, such as ordinary banks, depends on the value of the assets backing those liabilities.
Read 18 tweets

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