…according to behavioral neurologists from the University of California, Berkeley and the Université de Saint-Etienne, France. They have developed a way to identify a hyena by picking out specific features of its giggle.
Identifying Hyenas By Their Giggle, Science Daily, April 26, 2009, http://www.sciencedaily.com/releases/2009/04/090426094329.htm.
When production fell more than in the first parts of the Great Depression, unemployment reached ~12%, the government did nearly nothing, and we were out in a few years, ushering in the Roaring Twenties…
In one crucial respect, the depression of 1920-21 was actually more severe than the Great Depression itself: there was a rapid decline in the price level of between forty and fifty percent within the course of a single year. As Friedman and Schwartz (1963) explain, “From their peak in May [1920], wholesale prices declined moderately for a couple of months, and then collapsed. By June 1921, they had fallen to 56 per cent of their level in May 1920. More than three-quarters of the decline took place in the six months from August 1920 to February 1921. This is, by all odds, the sharpest price decline covered by our money series, either before or since that date and perhaps also in the whole history of the United States.” (1963, pp.232-233.) The wholesale price index during the Great Depression took about three years to fall by the same amount.
Employment and output were however not as severely affected as in the Great Depression. Of course precise unemployment data are not available for this period, but one representative estimate (Lebergott, 1957) puts civilian unemployment at 2.3% in 1919, 11.9% in 1921, and back to 3.2% in 1923. Output figures tell a similar story: one aggregate index (Mills, 1932) indexes production at 125.3 in 1919, 99.7 in 1921, and rebounding to 145.3 in 1923. As these stylized facts indicate, the second unusual feature of the depression of 1920-21 was the rapid recovery in employment and output, in sync with a swift adjustment of the real wage to its new equilibrium position.
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Overall, the Bernanke-Carey framework seems to highlight some interesting contrasts between the Great Depression and the depression of 1920-21. Despite some extraordinary shocks, the American economy swiftly recovered from the depression of 1920-21. In contrast, the recovery of the American and the world economies from the Great Depression was extremely slow. This would lead us to strongly suspect that wage flexibility during the depression of 1920-21 was markedly greater than during the Great Depression, and this impression is strongly confirmed within the Bernanke-Carey framework of this paper.
Wage Adjustment and Aggregate Supply in the Depression of 1920-1921: Extending the Bernanke-Carey Model, Bryan Caplan, Professor of Economics, Princeton University, November 09, 1994, http://www.gmu.edu/departments/economics/bcaplan/year2.doc.
On March 2, 1932, the Senate Committe on Banking and Currency… was authorized… to make a thorough and complete investigation of the practices with respect to the buying and selling and the borrowing and lending of listed securities and the effect of such practices upon interstate and foreign commerce, upon the operation of the national banking system and the Federal Reserve System, and upon the market for securities of the United States Government, and the desirability of the exercise of the taxing power of the United States with respect to any such securities.
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In the course of the investigation thus far conducted by the subcommittee a record of more than 12,000 printed pages has been compiled and more than 1,000 exhibits received in evidence. The subcommittee has endeavored to investigate thoroughly and impartially some of the complex and manifold ramifications of the business of issuing, offering, and selling securities and the business of banking and extending credit. It has endeavored to expose banking operations and practices deemed detrimental to the public welfare; to reveal unsavory and unethical methods employed in the flotation and sale of securities; and to disclose devices whereby income-tax liability is avoided or evaded. Its purpose throughout has been to lay the foundation for remedial legislation in the fields explored and in some measure that purpose has already been achieved. During the progress of this investigation, Congress enacted the Banking Act of 1933, the Securities Act of 1933, the Securities Exchange Act of 1934, and several amendments to the revenue act calculated to eliminate methods of tax avoidance described before the subcommitte.
Stock Exchange Practices Report, June 6, 1934, United States Senate, 73rd Congress, 2nd Session, http://www.sechistorical.org/collection/papers/1930/1934_06_06_Intro_to_Pecora_C.pdf.
The Great Depression lasted another 12 years.
The SEC was created in 1934 to “add regulation” and combat fraud. The SEC missed Bernie Madoff’s ~$50 billion ponzi scheme (with ample evidence from Harry Markopolos, an independent investigator).
The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
Federal Reserve Act of 1913, US CODE: Title 12,225a. Maintenance of long run growth of monetary and credit aggregates, http://www.law.cornell.edu/uscode/12/usc_sec_12_00000225—a000-.html.
It has failed in nearly every capacity of its purpose and charter. We’ve never had such huge drops in employment. CPI has exploded. Increased production? Our manufacturing base has withered. What do we create? Word documents?
Before 1913, when the Federal Reserve System was created, there was never as bad of a depression as the Great Depression of the 1930s.
We keep creating institutions which keep failing us when the free market systems before, although imperfect, worked better (Industrial Revolution of the 1800s, never as catastrophic of an economic collapse, etc.). All the while, each government institution complicates and constricts our activities and freedoms.
United Nations Office on Drugs and Crime, World Drug Report 2008, Page 227, http://www.unodc.org/documents/wdr/WDR_2008/WDR_2008_eng_web.pdf.
For the more adverse scenario, house prices are assumed to be about 10 percent lower at the end of 2010 relative to their level in the baseline scenario.
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…the likelihood that the average unemployment rate in 2010 could be at least as high as in the alternative more adverse scenario is roughly 10 percent.
Federal Deposit Insurance Corporation, FAQs – Supervisory Capital Assessment Program, April 25, 2009, http://www.fdic.gov/news/news/press/2009/pr09025a.pdf.
Pretty rosy “worst case” predictions with housing prices falling 10% on average and a 90% chance that unemployment will peak below 11%.
UPDATE: As predicated, the stress tests were useless because the worst case was too optimistic:
The Congressionally-appointed panel overseeing the Troubled Asset Relief Program (TARP) recommends running again the stress tests on US banks, as economic conditions have worsened, its chair, Harvard University professor Elizabeth Warren, told CNBC Tuesday.
“We actually make recommendations to do it all over again right now,” Warren told “Squawk Box.”
“We’ve already blown past the worst-case scenario on unemployment,” she added.
CNBC, Repeat Bank Stress Tests ‘Right Now’: TARP Panel Chair, June 9, 2009, http://www.cnbc.com/id/31183773.
During Fiscal Year (FY) 2008, the IRS collected more than $2.3 trillion in tax, net of refunds, 45.8 percent of which was attributable to the individual income tax.
Internal Revenue Service Data Book 2008, Published March 2009, http://www.irs.gov/pub/irs-soi/08databk.pdf.
Recap of 2008:
Despite 3 years of overall tax rate increases, the average tax rate paid by the top 1 percent has decreased for the past 5 years, while the rates paid by the top 10 percent, 25 percent, and 50 percent all increased from 2005.
Internal Revenue Service, Statistics of Income (SOI) Bulletin, Winter 2009 Edition, http://www.irs.gov/pub/irs-soi/09winbul.pdf.
In 2006, the total income tax share, as a percentage, for the top X percent of taxpayers (Table 5):
United States Fast Facts: http://www.bts.gov/publications/state_transportation_statistics/state_transportation_statistics_2007/html/fast_facts.html.
See also historical tables: http://www.whitehouse.gov/omb/budget/Historicals/
If you spend more than $10,000, the person receiving it is required by law to file a report to the government:
(a) Coin and Currency Receipts of More Than $10,000.—Any person—
(1) who is engaged in a trade or business; and
(2) who, in the course of such trade or business, receives more than $10,000 in coins or currency in 1 transaction (or 2 or more related transactions),
shall file a report described in subsection (b) with respect to such transaction (or related transactions) with the Financial Crimes Enforcement Network at such time and in such manner as the Secretary may, by regulation, prescribe.
US CODE: Title 31,5331. Reports relating to coins and currency received in nonfinancial trade or business, http://www.law.cornell.edu/uscode/uscode31/usc_sec_31_00005331—-000-.html.
In this GFSR, estimates for writedowns have been extended to include other mature market-originated assets and, while the information underpinning these scenarios is more uncertain, such estimates suggest writedowns could reach a total of around $4 trillion, about twothirds of which would be incurred by banks.
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Despite unprecedented official initiatives to stop the downward spiral in advanced economies– including massive amounts of fiscal support and an array of liquidity facilities– further determined policy action will be required to help restore confidence and to relieve the financial markets of the uncertainties that are undermining the prospects for an economic recovery. However, the transfer of financial risks from the private to the public sector poses challenges. There are continuing concerns about unintended distortions and whether the short-term stimulus costs, including open-ended bank support packages, will combine with longer-term pressures from aging populations to put strong upward pressure on government debt burdens in some advanced economies. Home bias is also setting in as officials are encouraging banks to lend locally and consumers to keep their spending domestically oriented.
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Even if policy actions are taken expeditiously and implemented as intended, the deleveraging process will be slow and painful, with the economic recovery likely to be protracted.
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The inflation potential of a swelling of reserve money has led inflation expectations to tick up in response to some announcements of unconventional measures by central banks.
International Monetary Fund, Global Financial Stability Report, April 2009, http://www.imf.org/external/pubs/ft/gfsr/2009/01/pdf/text.pdf.
In 2001, Portugal began a remarkable policy experiment, decriminalizing all drugs, including cocaine and heroin. Some predicted disastrous results—that drug addiction rates would soar and the country would become a haven for “drug tourists.” Now that several years have passed, policy experts can study the results. In a new paper for the Cato Institute, attorney and author Glenn Greenwald closely examines the Portugal experiment and concludes that the doomsayers were wrong. There is now a widespread consensus in Portugal that decriminalization has been a success. The debate in Portugal has shifted rather dramatically to minor adjustments in the existing arrangement. There is no real debate about whether drugs should once again be criminalized.