Hoover and FDR
Apr 13th, 2009 | By Don Stott | Category: Featured, Gold, Macro Economics
It seems as though history continues to repeat itself. During the first ‘great depression,’ Herbert Hoover was President at the outset. He instigated the things FDR would later enlarge upon, none of which worked. Now we are in the beginning of the second ‘great depression,’ and it’s almost exactly the same scenario. George Bush started the plunge downhill with his $720 billion TARP nonsense, which most of the Republicans voted for, including John McCain, but not of course, Ron Paul. Now, with Obama as President, he is enlarging the things Bush started, just as FDR enlarged the things Hoover began, and history is repeating itself. Now, instead of $720 billion, it’s said that it will be $10 trillion before it’s over, and I hope being “over” doesn’t mean the entire US economy, but it might well be. As in the days of Hoover and FDR, none of the ’stimulus’ worked, as it still won’t. Henry Morgenthau, FDR’s Secretary of the Treasury, said that all the spending “hasn’t worked,” and he was correct. It took WW II to get us out of the first great depression, and we can pray that it won’t take the same to get us out of the second great depression.
One big difference, as I have written before, is that during the Hoover-FDR first great depression, there was absolutely no inflation. None. Why? Because the dollar was backed by gold! It was illegal to print trillions of paper dollars during the first great depression. That’s why FDR tried to get everyone to turn in their gold. He could then spend more gold-backed dollars. Also, there were no credit cards, no interstate roads, and virtually no air travel. Stocks were being sold with little or no down payment, just as homes were being sold for the same requirements during the second great depression. During the first great depression, there was no trillion dollar credit card debts. During the first great depression, stocks plunged as they have done now, but perhaps a little bit further. Then, there was no PPT or plunge protection team to keep the stock market artificially high; and you can bet your bottom dollar that the PPT has been busy of late.
Speaking of stocks, can anyone give me a reason why they have gone up a thousand points, other than the PPT? 650,000 or more each week are getting laid off, businesses by the thousands go bankrupt or close each week, prompting even more layoffs, and the chain reaction continues. One of my clients says that stocks are going up because during a hyper inflation, everything goes up, and that is a good point, but there are no profits anywhere, so I think that argument my not be totally true. I honestly do believe that gold and the Dow will cross eventually, with the Dow on its way down and gold on its way up. Gold and silver will NEVER go to zero like paper assets (sic) can and have done and will continue to do. With hyper inflation, gold and silver will be made to go up even further than other prices, I believe, because more and more people are seeing the beauty of tangible beautiful, historic money, in the form of gold and silver, and there is only so much of it out there. As it becomes more and more difficult to get, due to increased demand, prices of metals will have to go sky high in dollars.
We drove over 3200 miles last week, mostly in Texas, and going to and from there. The Blue Bonnets are out and beautiful, but even in Texas, the economy isn’t good at all. While Texas houses haven’t plunged like Las Vegas, California, and Florida, it’s because they never got that high in the first place. Still, layoffs are plentiful, and tourism, motels, and other non-essentials are hurting…even in Texas. Closed auto dealerships are plentiful, and in one wonderful German restaurant, which used to have people waiting around the block on a Friday evening, we were seated instantly. The second great depression is going to leave an unemployment rate of close to 20% before it’s over and all the spending and bailouts are merely postponing the inevitable, and making it worse with hyper-inflation. The term “trillion” was unheard of a couple of years ago, as far as deficits are concerned, and now that term is thrown around like penny candy at a fair 50 years ago.
Silver is down a buck an ounce from a week ago and gold a hundred bucks. Great buying opportunity, because they won’t stay there. Silver is an unbelievable bargain. In 1980, when gold was $850, silver was $50, or a 16 to one ratio. If the ratio was 16 to 1 now, as it was then, and has been throughout history, silver would be $55 an ounce, not $12.25. It will happen. because history cannot be denied. It you’ve got the place to put it, get silver!
Parting Shot:
Seems like our first missive from Linda Brady Traynham resonated with many of you. Most of the responses were like this one…
“Linda Brady Traynham is to be commended for her insightful and pertinent observations of the small town. It is taking place here in Canada also, and impacting our lives in ways that we are not fully cognizant of, such as the local production of food. Perhaps the current economic malaise is a blessing in disguise in that it will force some balance into this social equation.”
And more in that vein…
“I read Linda Traynham’s article and agree with much of what she says. Most small towns however, don’t have a Dell problem, they have as Kunstler says a Walmart problem or an illegal immigrant problem. It is no doubt too late for suburbanites to relocate en mass to small town America. It takes a long time to be accepted into a small community. They will find themselves culturally lost and unable to support themselves. In my opinion unless you have a great deal of money where you are right now is where you will endure ‘the long emergency’. People would do well to prepare to supply the basics for themselves. Most will not. If Kunstler is right, and I expect the future to be closer to his model than to the “charge it” manner of the recent past, many will not survive. A man can rationalize anything when he is hungry. Perhaps if we are really lucky we can make America what it was. I wouldn’t bet the farm on that if I were you.”
Agreed.
But there was some dissent…
“I think Ms. Traynham missed the point, as did Jim Kunstler. (I have read his The Long Emerency and, while I like his addressing of the problem, he touches on the answer, but does not think it out.) Deactivating urban and suburban sprawl will be done, in my opinion, by Malthus’ henchmen. Ms. Traynham is right, the problem cannot be moved to the small town. The problem must be eliminated. When the cities die, it will be messy It will not be a clean, government run evacuation and the establishment of a million small towns like Mayberry. As Ms. T noted in the Dell scenario, you can’t move the big city to the small town. It doesn’t work.
“Jim Kunslter couldn’t address this issue either. He simply did a hand wave and said that by 2025, most Americans would be living in small towns. He never said they would be populated by big city transplants. You have to read between the lines. He did give a hint in his heading, ‘Reality Bites but Entropy Devours.’
“In Jim Kunslter’s final chapter, he discusses a new, smaller America, but he never mentions the anticipated population of this America. Or where the difference lies. From my reading of the tea leaves, I would anticipate a decrease in USA population of 100,000,000 to 150,000,000 souls. This would allow Jim’s change to go forward and would fit into the Malthus scenario of population control. When Nature gets out of balance, it takes corrective action. And it is ruthless.
“To be prepared for the future also requires a degree of ruthlessness. From Kunstler’s writings, I suspect he does not have what it takes. From Traynham’s comments, I suspect she is unwilling or unable to carry her thoughts to their logical conclusion. Survivors will have to develop a strong affinity with Nature and do the same.”
I won’t argue with the Malthusian implications because they just seem too likely. What seven billion bipeds believe is sustainable probably doesn’t line up with what Nature thinks is sustainable.
Actually, Shooters, James Howard Kunstler sent me this objection to the notion that he believes a return to town and country is the solution for the metroplex hordes…
I”‘ve said that our suburbs and colossal metroplexes are entering failure mode. But what I actually have said is that necessity will require us to return to traditional modes of occupying the landscape, namely villages, towns, cities that are scaled to the energy realities of the future, and a productive agricultural landscape that will be inhabited differently (probably more densely because farming will require more human attention). ”
-James Howard Kunstler
Here’s a Shooter who seems to have the right idea…
“I read Linda Traynham’s article and agree with much of what she says. Most small towns however, don’t have a Dell problem, they have as Kunstler says a Walmart problem or an illegal immigrant problem. It is no doubt too late for suburbanites to relocate en mass to small town America. It takes a long time to be accepted into a small community. They will find themselves culturally lost and unable to support themselves. In my opinion unless you have a great deal of money where you are right now is where you will endure “the long emergency”. People would do well to prepare to supply the basics for themselves. Most will not. If Kunstler is right, and I expect the future to be closer to his model than to the “charge it” manner of the recent past, many will not survive. Mankind can rationalize anything when he is hungry. Perhaps if we are really lucky we can make America what it was. I wouldn’t bet the farm on that if I were you.”
And here’s an email that made me chuckle…
“Hi Gary,
“You have so much common sense, much of the time, but there seems to be so much that you just don’t understand.
“Instead of endless criticism, tell us how you would fix the economy…now.”
I wonder if you haven’t been paying attention. I don’t believe in fixes and I’ve said so repeatedly. Sometimes the piper has to be paid. Whiskey credo number three: Sometimes there is no forgiveness, only punishment.
The megalopolis and its populations are going to melt back into town and country. The ravages of private and public debt won’t be avoided…especially not by more private and public debt.
I wouldn’t do a damned thing to “fix” this. I’d let it play out because tampering would only make the outcome worse in the end. Alas, most of the world and all those in power believe that there is a way to wiggle out of this mess…so tamper they will.
Prepare yourselves as best you can, Shooters. It’s going to get more and more interesting…
Regards,
Gary Gibson
Managing Editor, Whiskey & Gunpowder