The Stimulating Effect of the New Deal

[barking_iguana]

The y-axis represents the percent over the worst spot. In other words, where it says 40%, that's 140% of the GDP when the New Deal started.



It isn't quite as stark once you take inflation/deflation into account. There was substantial deflation from 1929-33, accounting for maybe 2/3 of the drop in nominal GDP. Still, even the drop in real GDP was huge. From 1933-41, there was very modest inflation (about 2% per year) which in comparison to the changes in the graph is immaterial.

Comments

[tayefeth.livejournal.com]

And yet, the wingnuts are still claiming the New Deal was a failure...

Speaking of wingnuts: are you familiar with Hal Turner? He just deleted a post claiming that he as ending blogging to deal with the "real work" of "violent revolution" and replaced it one complaining about the evil liberals who reported him for making threats. Ginmar has commentary.

[barking-iguana.livejournal.com]

Creepy. What ginmar quotes isn't quite explicit enough to convict him of anything, even if every wrod were true, but creepy nevertheless. The work he theoretically could be doing is to non-criminally bring about a change in the political environemnt that will convince others to make violent revolution. And more likely, he's not doing anything of the sort, except being a blowhard. But I hope he gets at least a quick check from those charged with protecting us from terrorism.

[tayefeth.livejournal.com]

Someone mentioned that he's located in North Jersey, which makes it even creepier...

[jpmassar.livejournal.com]

Inflation would seem to represent about 20% of the GDP growth.

The most informative presentation would be show inflation-adjusted GDP per capita.

[elgorade.livejournal.com]

Anytime I see graphs like this -- performance after a fall -- I end up wondering what the true line is. There was a lot of excess, froth, speculation, bubble, etc. in the late 1920s. So those parts of the line are overstated. There was an excessive drop in the crash. Expectations are part of the determination of prices and just like people get too hyped on the positive they get too caught up in the negative as well. So the bottom of the graph is too low, under the "real" line.

I don't know a meaningful way to measure that "real" line -- the line w/o the excess speculation and w/o the excess pessimism. I don't think anyone does.

The problem that bugs me is that w/o that line, we measure ourselves against the rate of growth in the speculative exuberance.