David Stokes

The period between late 1929 and the beginning of the 1940s is, of course, known as the Great Depression.  But in a real sense, it could be called the Great Depressions.  There was more than one massive downturn in all things economic during those days of deprivation.

Five years after Franklin Delano Roosevelt spoke so eloquently about “fear itself” - and then began to fulfill his promise of  “experimentation” (as opposed to an actual plan), things were really no better than the day he took office.  His “hundred days” of frenetic legislation gave way to years of false starts and faded hopes. 

In early 1938, unemployment was at the 1931 level of 17.4 % and the Dow Industrial Average – at 121 - was still less than half of its 1929 high.  The Dow would not actually return to pre-crash levels until Dwight D. Eisenhower was well into his first presidential term. 

Amity Shlaes, in her fascinating book – a must read these days – The Forgotten Man: A New History of the Great Depression, gives us a snapshot of the situation half a decade into the politics, policies, and promises of the New Deal:

“The country was now at an odd moment.  There was a new sense of permanence about the Depression.  Being poor was no longer a passing event – it was beginning to seem like a way of life.”

What started as a panic in 1929 soon morphed into something more sinister, deadly, and often overlooked: deflation.  As money became scarcer, prices fell. Declining prices, if allowed to continue for long, tend to lead to a dangerous downward spiral of negatives – things like falling profits, closing businesses and factories, shrinking employment and incomes, and increasing defaults on loans by companies and individuals.

Deflation is the monster – the category 5 economic storm – to watch out for and guard against.

Early on during the Great Depression, housing values, though not starting the problem, became a leading indicator of the severity of the crisis.  As prices moved down, homeowners found themselves with homes worth less than the mortgage amount.  This led to a deflationary meltdown. 

Sound familiar?


David Stokes

David R. Stokes is a best-selling author, pastor, columnist, and broadcaster. His latest book is a novel: CAPITOL LIMITED: A Story about John Kennedy and Richard Nixon. Based on a true story, it's about a unique moment in 1947, when Kennedy and Nixon shared