September 27, 2011

Important post from Doug Henwood: how the right makes up stuff with numbers From: Left Business Observer Economists Harold Cole and Lee Ohanian have a piece in the Wall Street Journal that deserves a prize for the devious use of statistics. They want to argue that fiscal stimulus is bad, and the New Deal only made the Depression worse. This is a familiar argument on the right—and I even heard it once from a Marxist economist—but it’s just not true. Here’s the prize-eligible statement: But boosting aggregate demand did not end the Great Depression. After the initial stock market crash of 1929 and subsequent economic plunge, a recovery began in the summer of 1932, well before the New Deal. The Federal Reserve Board’s Index of Industrial production rose nearly 50% between the Depression’s trough of July 1932 and June 1933. This was a period of significant deflation. Inflation began after June 1933, following the demise of the gold standard. Despite higher aggregate demand, industrial production was roughly flat over the following year. Here’s a graph of the Fed’s industrial production index for the period: Crucial months are marked. July 1932 is the phantasmic trough of the recession named by Cole and Ohanian. Note that there was little recovery at all in industrial production between July and March 1933—the official Depression trough, so designated by the arbiter of these things, the National Bureau of Economic Research. March 1933 also the month that Roosevelt took office and declared a bank holiday, ending a four-year run on the banks. A month later, he severed the dollar’s...

Jodi Dean

Jodi Dean is a political theorist.

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