European officials took the G20's commitment to cut deficits as a clear sign that the rest of the world had come around to Europe's point of view.
Santayana famously said "Those who cannot remember the past are condemned to repeat it."
By the spring of 1937, production, profits, and wages had regained their 1929 levels. Unemployment remained high, but it was considerably lower than the 25% rate seen in 1933. In June 1937, some of Roosevelt's advisors urged spending cuts to balance the budget. WPA rolls were drastically cut and PWA projects were slowed to a standstill.[3] The American economy took a sharp downturn in mid-1937, lasting for 13 months through most of 1938. Industrial production declined almost 30 per cent and production of durable goods fell even faster.Paul Krugman, back in 2008, posted some graphs which show what happened to GDP and to employment both before and after that misguided attempt to cut deficits before the economy had fully recovered.Unemployment jumped from 14.3% in 1937 to 19.0% in 1938, rising from 5 million to more than 12 million in early 1938.[4] Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels.[5]
And now, the Europeans and too many in the US Senate seem to think we should do the same thing all over again.
Santayana was right.
Posted by Linkmeister at June 27, 2010 12:47 PM | TrackBack