who paid for the Great Depression bailout?
February 4, 2009 12:56 PM Subscribe
Who paid for the bailout during the Great Depression?
USA is currently borrowing from China, but in Roosevelt's days, who was lending the USA cash?
Was the USA just printing more money and lowing interests?
USA is currently borrowing from China, but in Roosevelt's days, who was lending the USA cash?
Was the USA just printing more money and lowing interests?
We sold T-Bills and Treasuries and savings bonds, just like today, but it was only Americans buying them. Note that Americans still hold more than 50% of the debt today, despite all the talk about China.
Fed article: Why the U.S. Treasury Began Auctioning Treasury Bills in 1929
Note that World War I was very expensive, $21 billion in 1917 dollars, so huge debts was not some new concept.
posted by smackfu at 1:28 PM on February 4, 2009
Fed article: Why the U.S. Treasury Began Auctioning Treasury Bills in 1929
Note that World War I was very expensive, $21 billion in 1917 dollars, so huge debts was not some new concept.
posted by smackfu at 1:28 PM on February 4, 2009
At least some dispute your assumption. China is today's nation with production surplus, it was us then, with older industrialized nations drowning in debt. YMMV on the analysis, of course.
posted by el_lupino at 2:39 PM on February 4, 2009
posted by el_lupino at 2:39 PM on February 4, 2009
It isn't necessary to have foreigners buy U.S. debt. Americans can and will do that themselves. The main implication of having a high demand for U.S. treasuries by foreigners is that it makes running debt less expensive because the treasury doesn't need to pay as high an interest rate to attract lenders.
posted by JackFlash at 2:53 PM on February 4, 2009
posted by JackFlash at 2:53 PM on February 4, 2009
US institutions and individuals. How? Because there really wasn't much of a bailout. The New Deal, as far as I know, didn't involve direct payments to industry. Additionally, compared to the Obama boondoggle, the New Deal was not all that big. In 1920, the federal budget was about $10 billion. In 1940 it was about $20 billion. Yeah, that's a 100% increase, but 100% of a small number is still a small number, and government outlays as a percent of GDP hardly changed, hovering between 8-11%. Today we're closer to 20%.
Obama, on the other hand, is proposing deficit spending on a scale that hasn't been seen in 60 years. It's not entirely clear who is going to pay for it this time, and there are noises to the effect that the US is developing a sovereign debt problem.
Sovereign debt problems have been the cause of some unpleasant events in the past.
posted by valkyryn at 7:06 PM on February 4, 2009
Obama, on the other hand, is proposing deficit spending on a scale that hasn't been seen in 60 years. It's not entirely clear who is going to pay for it this time, and there are noises to the effect that the US is developing a sovereign debt problem.
Sovereign debt problems have been the cause of some unpleasant events in the past.
posted by valkyryn at 7:06 PM on February 4, 2009
Well, Reagan spent oodles of dollars in the 80s to get us out of the early 80s funk, and 10-15 years later, even after the S&L bailout, the US Gov't was running surpluses.
And Obama's "boondoggle" isn't exactly just a handout, for a number of reasons:
1) If we let the stupid banks and the stupid auto industries fail, as well they should, what does that do? Besides putting people out of work until a contemporary Tucker and Harley Buick buys the plants and starts up new companies, what happens when a corporation goes bankrupt? The shareholders lose their stake in the company. How many Americans' pensions and 401k plans and other accounts are chock full of GM? Tons and tons. The fallout from a GM bankruptcy would make $100billion look like chump change.
2) A lot of the stuff in the "bailout" is stuff that will have been funded some other way, relatively soon. All the infrastructure projects? They would have been funded by some Omnibus Spending Bill of '09 or another. Meaning, much of it isn't "new" money being spent.
3) It's a crisis of confidence as much as anything else. Not doing anything might be the least moral-hazardy way of dealing with it, but that's going to make things worse. Sometimes the illusion of a solution IS the solution.
4) As a percentage of GDP, the US debt is nowhere near the sovereign debt problem levels. Talk to me when we're borrowing 50% gdp and I'll start worrying.
(And don't forget that the top tax rates after the war were tre-fucking-mendous. And the economy grew in spite of that.)
What will be a problem is if we don't get a nice running start as the demographic age starts rising. Us echo-boomers just can't carry that burdon as it stands right now.
posted by gjc at 7:35 PM on February 4, 2009
And Obama's "boondoggle" isn't exactly just a handout, for a number of reasons:
1) If we let the stupid banks and the stupid auto industries fail, as well they should, what does that do? Besides putting people out of work until a contemporary Tucker and Harley Buick buys the plants and starts up new companies, what happens when a corporation goes bankrupt? The shareholders lose their stake in the company. How many Americans' pensions and 401k plans and other accounts are chock full of GM? Tons and tons. The fallout from a GM bankruptcy would make $100billion look like chump change.
2) A lot of the stuff in the "bailout" is stuff that will have been funded some other way, relatively soon. All the infrastructure projects? They would have been funded by some Omnibus Spending Bill of '09 or another. Meaning, much of it isn't "new" money being spent.
3) It's a crisis of confidence as much as anything else. Not doing anything might be the least moral-hazardy way of dealing with it, but that's going to make things worse. Sometimes the illusion of a solution IS the solution.
4) As a percentage of GDP, the US debt is nowhere near the sovereign debt problem levels. Talk to me when we're borrowing 50% gdp and I'll start worrying.
(And don't forget that the top tax rates after the war were tre-fucking-mendous. And the economy grew in spite of that.)
What will be a problem is if we don't get a nice running start as the demographic age starts rising. Us echo-boomers just can't carry that burdon as it stands right now.
posted by gjc at 7:35 PM on February 4, 2009
4) As a percentage of GDP, the US debt is nowhere near the sovereign debt problem levels. Talk to me when we're borrowing 50% gdp and I'll start worrying.
The US GDP is $14.3 trillion and the national debt is $10.6 trillion (before Obama's bailout).
posted by saeculorum at 9:06 PM on February 4, 2009
The US GDP is $14.3 trillion and the national debt is $10.6 trillion (before Obama's bailout).
posted by saeculorum at 9:06 PM on February 4, 2009
USA is currently borrowing from China, but in Roosevelt's days, who was lending the USA cash?
The U.S isn't borrowing "From" anyone. We sell treasury bonds which anyone can buy.
posted by delmoi at 11:17 PM on February 4, 2009
The U.S isn't borrowing "From" anyone. We sell treasury bonds which anyone can buy.
Obama, on the other hand, is proposing deficit spending on a scale that hasn't been seen in 60 yearsYeah, funny how that great depression ended about 60 years ago or so...
posted by delmoi at 11:17 PM on February 4, 2009
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So we just used our surplus to employ people in public works capacities.
posted by aleahey at 1:02 PM on February 4, 2009 [1 favorite]