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With unemployment at 8.5 percent, former Labor Secretary Robert Reich finally called it:

This is still not the Great Depression of the 1930s, but it is a Depression.

Reich notes that if you count the underemployed (working less than the full-time hours they want), the rate rises to take in one of every six Americans. Put the economy on a war footing, he recommends, with government outlays for infrastructure and education. And hurry up with guaranteed health care for all.

Anyone disappointed that President Barack Obama didn’t make the pronouncement himself while on his European sojourn should consider that President Herbert Hoover wasn’t the one anoint his depression as “The Great,” either.

Hoover may have preferred the word “depression” to “panic” (or even to “recession,” I’ve heard), but he was far from the first president to use the D-word, according to the History News Network.

And it was likely Lionel Robbins — an economist and writer, like Reich — who first called it “The Great Depression” — in 1934.

By then Hoover was out of office, never having uttered the word “The” before the words “Great Depression” as president.

Related: When depressions were great

“I remember during the Depression — the Great Depression …”

Last fall in the run-up to the anniversary of Black Tuesday — and as our own clouds of economic doom seemed to be gathering — the Minnesota Independent carried a series of posts called “When Depressions Were Great” that took a look at what local newspapers were reporting before the crash of 1929. Iric Nathanson takes a similar but more detailed look back at a day during the depths of the Great Depression at MinnPost today — March 4, 1933, when banks in Minnesota took a state-ordered holiday to avert a run on their deposits.

One answer: Give us time. Riots weren’t making headlines right after the Great Depression started in 1929 either.

And locally, people have been picking up picket signs from time to time. Last September saw a demonstration against the federal bailout of the financial industry take place at the Minneapolis Federal Reserve Bank (Minnesota Independent video). Protesters gathered there again in November, this time with guest star Ron Paul, seeking to “End the Fed.”

The biggest local street protests on the economy (and many other issues) took place outside the Republican National Convention in St. Paul last September. (Studies asking the question, “Why were they not rioting during the RNC?” have tended to focus on the Twin Cities’ very effective police-state tactics.)

Prominent Minnesota economists gathered at the Humphrey Institute to grade the work of Henry Paulson and Ben Bernanke, and to look ahead.

This Tuesday, on a day when the federal government announced it will pump a quarter-trillion dollars into our nation’s banks, four of Minnesota’s most prominent economists were by turns caustic and cautionary in their criticism of the federal response to changing financial markets and to the economic crisis that has spread across the globe over the past few weeks. (The 90-minute program, sponsored by the Hubert H. Humphrey Institute of Public Affairs, can be seen in its entirety here, and there’s a live-blog account of the event too.)

After an interminably long-winded introduction by Humphrey Institute faculty member Robert Kudrle and a rather benign history of how and why the Federal Reserve Bank was created from Arthur Rolnick, the director of research for the Fed’s Minneapolis branch, the program sharpened considerably when U. of M. professor V.V. Chari spoke. Calling the bailout legislation passed by Congress and signed by President Bush a week ago “remarkable, and in my judgment remarkably unwise,” Chari, who is also a consultant to the Federal Reserve Bank of Minneapolis, sarcastically noted that the bill authorizes the Treasury Secretary Hank Paulson “to purchase essentially any kind of paper that the Treasury Secretary deems necessary to save the world. As far as the Fed is concerned,” Chari continued, “the Fed is now lending to anybody who meets one of two conditions: Either you are breathing and alive, or you are not breathing and dead.

“Are we doing the right thing?” Chari asked rhetorically. “That’s impossible to answer. We have done so many things over the course of the last month or so in particular, that I am convinced some of the things have got to be right—the law of large numbers dictates it. [But] the vast bulk of things we have done…will lead to either a substantial increase in the amount of risk that financial institutions will take in the future, or to extreme and punitive regulations that will prevent them from undertaking any reasonable commercial activities.”

Chari then acknowledged that he probably “would have done exactly the same things they have done” because the prevailing narrative is that the capitalist economy “rests on a thin skein of confidence, and if you break that confidence, everything comes crashingly to an end.” He said such a premise is “highly questionable” and leaves onlookers to assume that the Fed knows things it isn’t telling the general public. But that led to another biting commentary about the lack of transparency in the bailout process. “Our policymakers are treating us like children who can’t be told all the bad things that might happen. ‘Just do what we say and everything will be fine. If you don’t, then the end of Western Civilization is nigh,’” he said.

Chari pointed out that some of the Fed’s claims are demonstrably alarmist. For example, a central theme has been that credit is so tight that banks have stopped lending to viable commercial entities, or even to each other. But when he delved into the Fed’s own database, he said, he found that in the week ending October 1, “bank lending — for commercial-industrial loans, securities, mortgages — are all up. Most surprisingly, intrabank lending rose at its fastest rate in three or four years.” He concedes that the cost of such borrowing has skyrocketed and that “prices are an important indicator of where we are going. But quantity [of borrowing] is also important.

“It is entirely possible that policymakers are seeing things that the rest of us poor children are not seeing or don’t have access to,” Chari concluded. “My one plea is, tell us what you are seeing that worries you so much.” Otherwise, it may be that “policymakers are panicking for no good reason.” Either way, Chari says, “If I was in the market, I’d be panicking too.”

In an effort to mitigate Chari’s extraordinary statements, which seemed to debunk the magnitude of the crisis, program moderator Jay Kiedrowski (the former finance commissioner under Gov. Rudy Perpich) said his former colleagues at Wells Fargo told him the markets were so rattled that they weren’t receiving premiums on three-month Treasury notes — indeed, they had to pay more than the guaranteed return. And Minnesota state economist Tom Stinson noted that the market for municipal general obligation bonds has almost completely dried up, with the largest sales offerings being relatively puny issues of $40 million in North Carolina and $35 million in Kansas. The previous week, Stinson said, Kentucky had been forced to pay 6 percent interest on tax-exempt bonds. In other words, credit is indeed tight.

At this point, Kiedrowski turned to Tim Kehoe, who, like Chari, is a U. of M. professor and adviser to the Fed in Minneapolis, and asked him to explain the roots of the crisis. Kehoe cited a lack of adequate safeguards, saying that if various financial institutions were deemed “too big to fail,” then they should have better regulated. He also said that the bond rating agencies were conferring Triple-A ratings “on assets that were fundamentally bets that the housing market could do nothing but go up.” They were rated so highly, he continued, “because they had insurance against them from AIG. We didn’t understand that if something happened to the housing market, AIG would go down…that the bonds being rated Triple-A in effect were riskier than Argentinian government bonds in the 1990s.” This sucked cautious investors who backed only the highest-rated bonds into the crisis.

Kehoe then sought to put the crisis into perspective. He said that in October 1987, the stock market plunged 34 percent in two weeks, considerably more than the 24 percent the market had dropped in the past two weeks before Monday’s 900-point gain. “You all remember the Great Depression of 1987? No you don’t, because we didn’t have one. The stock market was back to where it was [before] in three years.” He said he wouldn’t be surprised if the present market rebounded in a period of three to five years. But he mentioned “one big caveat” that might prevent that from happening — “what the overreaction we are seeing in Washington [now] is going to do in the future.

“In a well-functioning financial system, we should get paid for taking risks” in bailing out these questionable mortgages and securities, Kehoe continued. “It is not clear to me that the people designing the bailout are making sure that the taxpayers are going to get paid for taking this risk.” Furthermore, bailing out these financial institutions creates a horrible precedent. “If somebody tells you to go down to the casino in Shakopee and bet, and if you win take the money home, and if you lose, don’t worry, I’ll cover it — well, then you’re going to do some pretty crazy betting,” he said. “That’s what the government is telling financial institutions in this country.”

To dramatize how much this way of thinking has already cost taxpayers, Kehoe ran through a financial calculation to determine the actual losses due to bad mortgages in the financial system. He arrived at a figure of $320 billion. “Why are we talking about these huge amounts then?” he asked, such as Rolnick’s earlier estimate that the government had poured close to $3 trillion into the system over the past six months. “We are going to not just bail out the bad mortgages. We are going to bail out lots of the bets on the bad mortgages, which are far bigger,” he emphasized. “The incentives that that gives the financial system to do things wrong in the future are overwhelming.”

Kehoe then held up a book, the result of a project he and a colleague had run for the Federal Reserve Bank of Minneapolis, joining with 24 other economists to take a look at all the economic depressions that had taken place around the world in the past century. “We find that the causes of these Great Depressions are not financial shocks. Instead they are [caused by] misguided overreactions on the part of government.” He compared the current crisis to what happened in Mexico in 1982 and Japan in 1991. He said that the government reactions guaranteed that Mexico’s finances would not grow over the next 13 years and that Japan would have no significant growth since 1991. “I don’t agree with Chari yet — I don’t think we’ve destroyed this economy to keep the sky from falling down. But the danger is that we might,” Kehoe concluded.

Kiedrowski turned the conversation to Stinson, asking Minnesota’s state economist what the implications of this federal crisis were for Minnesota. Stinson said the short answer is he doesn’t know — too much has happened in terms of the crisis and the federal response to permit reliable conclusions. But he did allow that they look at a number of different forecasting mechanisms, and “uncomfortably they are all very similar. The best guess we have is that the policy actions are unlikely to keep us from a recession.” This is hardly news, as — much to Governor Tim Pawlenty’s chagrin — Stinson claimed a statewide recession was underway months ago. He acknowledged this, held out hope that the bailout measures “may cause the recession to be less deep,” then delivered some very sobering news.

“The quarter we just finished was probably negative… In Minnesota, our sales tax receipts fell from a year ago. It is very likely we are going to have a negative outcome for the fourth quarter and it is also quite likely that we are going to have a negative quarter for the first quarter of 2009.”

However, Stinson added, “The recession is not expected to be particularly deep,” Stinson said. He added that high fuel prices had undercut the federal stimulus package this summer, but that falling fuel prices conversely should mitigate the recession over the next two quarters. Then, more bad news: “Housing is really a disaster. The construction industry is really a disaster. This year we will have had less housing starts than [any year] since World War II. And the forecasts now, looking on out, is that we will have even less housing starts in 2009 than in 2008.”

Finally, unemployment is a huge concern across the U.S.: “Private sector employment started declining last December, total employment started declining in January. It has gone down and down and has a long ways to go probably further. Everybody now is expecting to see unemployment rates in excess of 7 percent, which is a substantial jump from where they are right now.”

The final half hour was taken up with audience questions. This recap is long enough already, so I’ll bullet-point a few highlights and let you go to the videotape for more.

• Kehoe said he thinks Wells Fargo bought out Wachovia because he knew the federal government would bail out Wachovia. “I am going to interpret that what Wells Fargo did is just betting on a government bailout. They are betting that me as a taxpayer is going to pay.”
• Talking about how the political situation of an unpopular President and a looming election plays a role, Chari likened the Bush Administrations behavior on the bailout to what it did with the buildup to the Iraq war. “The consistent message is: ‘We are grownups, we understand the real problems, you don’t.’ What we found out about Iraq was, they did not have the information. In this particular instance, I hope they do have the information. All I am asking is that they disclose it. But there is this nagging feeling: Maybe they are overreacting to weird feelings in their own heads.” Stinson countered that the financial crisis is more tangible and credible than the supposed threat in Iraq. “This isn’t Mr. Chalabi reporting visions of mobile bio-weapons labs running around the streets in Baghdad…We are in a difficult situation with the President and a lot of other political leaders who had never little credibility. But I do believe the threat was credible in this situation.
• There was a general consensus that developing nations are going to be penalized by this global crisis more than economically established countries. “The Mexican peso has depreciated 30 percent. The biggest movement it has had in the last 13 years happened in the last two weeks,” Kehoe said. “It is a phenomenon we call ‘flight to quality.’ The financial problem originated in the United States,” he continued, but when the crisis hit, “when it spread throughout the whole world and makes people nervous, what do they do? Invest in the United States.” Rolnick sees a longer term problem of countries who had pinned their hopes on globalization being cut out of the mix as countries become less confident in the stability of global markets.
• How will we know when the crisis is lessening? Rolnick said it will be when housing prices begin to stabilize. Kehoe fancifully replied that it will be when “Secretary Bernanke and Chairman Paulson stop running around like chickens with their heads cut off, pulling every lever they can get their hands on.”
• Which aspect of the financial system is most in need of re-regulation? Rolnick says all investors have to take a hit whenever a bailout is enacted. Kehoe says it should be Fannie Mae and Freddie Mac since they are the institutions most regarded as being safeguarded by government resources. Chari and Stinson agree that it should be the regulation of “credit default swaps,” markets that regulate against bond defaulting. Chari believes it is used by banks and others as a dodge against capital requirements.

From the Minneapolis Journal, Sept. 30, 1929:

Stock Market Views
Block Maloney & Co. to Charles E. Lewis & Co. — Last week’s heavy selling was generally ascribed to the Hatry debacle, the increased rate of the Bank of England and an outstanding increase in brokers’ laons [sic]. While these items no doubt played an important role in bringing about lower prices the fact cannot be overlooked that the real cause was probably the technical position of the market itself, which had been sustained for weeks past throught the manipulation of selected high-grad stocks. Therefore, of chief consideration at the present time is whether or not this weakened techincal position of the market has been correctd [sic] and its strutur [sic] ridden of rotten timber. We are rather inclined to the belief that it has been, but as a tribute to plain common sense would prefer to await definite signs that the market has struck bottom before assuming a constructive position in sound stocks.”

Business Men Study Art
Business men whose hobbyis sketching will discuss plans for the ninth season of the Business Men’s Art Class when they assemble at dinner Tuesday at 6:30 p.m. at the Institutte [sic] of Arts.

Branch Bank Chains, Banking Law Change Predicted by Firm
The next step in the development of the banking system of this country is the modification of the national banking laws to allow branch banking, predicts an analysis by Hornblower & Weeks, New York. “The first logical development to be expected will be a series of bank chains not unlike the public utility holding companies which sprang into investment prominence from 1922–24. We believe that subsequently the original banking units will merge their branch systems into larger and even more powerful groups, and that ultimately the appearance of such super-holding companies (comparable to the United Corporation and American Superpower in that field) will consolidate banking systems in a few national groups.”

Sermons in City Churches
Whether the world is getting better or worse is a question that does not lend itself to proof or disproof in the proper sense of the term, according to Rev. Howard A. Vernon, pastor of Judson Memorial church. “I have stood for many years with those who believe that the world is growing better,” Mr. Vernon said. … “When once you have swept the whole panorama of history you can discover an unmistakable trend toward better things.”

Federal Bank Earnings Set 5-Year Mark
Federal reserve member banks in the ninth district last year had the largest gross earnings since 1923, while the amount of earning assets held by the banks was the largest in the last 10-year period, the Federal Reserve Bank of Minneapolis announced today. … Profits of member banks in 1928 averaged 6.87 per cent of capital funds as compared with less than 2 per cent in 1923.

Day When Child Will Pick Its Diet Coming, Wilkes Says
The day is coming when children will select their own foods and if spinach is not among those selected it won’t greatly matter, in the opinion of Dr. Leroy A. Wildes, director of the medical service department of the American Child health Association. … “Left to his own resources under natural condidtions the child will select the foods his system needs, just as other animals do,” [Dr. Wilkes said.] “So much of the worry about a child being under or overweight is entirely wrong and unnecessary … “

Sept. 29, 1929, fell on a Sunday, meaning a fat edition of the Tribune that was chock full of cops and robbers: The Minneapolis purity squad rounds up gypsy fortune-tellers; San Francisco police round up Communists; Florida police nab the assassin of a man who formerly edited a newspaper called The Menace; St. Paul police hold a Harry Houdini-wannabe in Ramsey County jail; none of the four convicted in the bombing of the Boulevards de Paris Cafe in St. Paul goes to jail; and a small boy alerts police to a brick-throwing Kodak burglar in downtown Minneapolis.

And there was this item of financial news: First National Bank will double the size of its main lobby in Minneapolis — already one of the largest banking rooms in the West — and also double its vault capacity as part of a major remodeling just announced.

From the Minneapolis Sunday Tribune, Sept. 29, 1929:

Gypsy Seers Arrested Purity Squad

The purity squad of the Minneapolis police turned their attention to gypsy fortune tellers Saturday and arrested six self-styled experts in palm reading and phrenology in raids on five establishments.

25 Communists Held for Gastonia Protest

San Francisco, Sept. 28 – (By Associated Press) – Twenty-five members of the Young Communist League of America, including three women, were arrested by police tonight when they staged a demonstration on a downtown street corner protesting against the trial of the Gastonia textile strikers in North Carolina, who are accused of the murder of a police official.

Thief Hurls Brick, Steals Two Cameras

A burglar hurled a brick through a display window of the Eastman Kodak Co. at 116 Fifth Street South early Saturday evening, snatched two valuable cameras and escaped. A small boy who was passing at the time reported the theft to police, and a crowd attracted from Marquette Avenue by the sound of breaking glass had gathered when police arrived to investigate. The stolen cameras were valued at about $150.

Former ‘Menace’ Editor Shot Down

Jacksonville, Fla., Sept. 28 – (by Associated Press) – Billy Parker, said to be a former editor of The Menace, an Aurora paper, was shot and killed late today at the headquarters of a local political organization. Police are holding Harvey Jackson for the killing.

Bars of Ramsey Jail Confine ‘Escape Artist’

H.M. Golden, escape artist, has often slipped off handcuffs and wriggled out of straitjackets for the edification of theater-goers. But he was up against a tougher proposition Saturday — the cold, hard bars of the Ramsey County Jail. Friday night while his troupe was preparing to entertain the soldiers at the Fort Snelling theater, E.C. Sinclair, deputy United States marshal, took Mr. Golden into custody on a warrant from Seattle, Wash., charging him with impersonation of a federal narcotic officer. [H]is bail was set at $5,000 which was not furnished.

Four plead guilty in Café’s Bombing:
Three Fined, One Given Suspended Sentence at St. Paul.

Four men held in connection with the fight and bombing at the Boulevards of Paris café, Lexington and University avenues, St. Paul, September 18, Saturday pleaded guilty to assault and battery charges proferred against them by Motorcycle Officer Herman Schlichting.

First National Bank Expands Building Space

The quarters of the First National Bank in Minneapolis … at Marquette Avenue and Fifth Street are to be enlarged and extensively remodeled at a total cost of $400,000 … As a result of the alterations, the main lobby on the second floor will be doubled in sized … [as well as] the doubling of the basement vault space, and installation of a new ventilation system. The remodeling is expected to require about six months and will be done with minimum of interference with the bank operations. The present lobby was one of the largest banking rooms in the West when the building was occupied in 1915 by the First National Bank …. Fourteen years ago the merged banks had a staff of 340 persons and held 28,647 accounts. Those figures have increased to 524 officers and employes [sic] who handle over 78,000 accounts.

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Laborer Plunges to Death Here

Arvid Halstron, 28-year-old laborer, 801 Third avenue S., was fatally injured early today when he fell 40 feet to an eighth floor landing, then dropped two more stories. He was working on a hoist tower at the new Northwestern National Bank building, now under construction.

British Airships Called Failures

“In my opinion they will not be launched long before they either crack up in the air or at the mooring matsts,” said [Edward F.] Spanner ["a widely know naval architect"].

Race Balloon Grounds Bloodstained, Empty

Paris, Sept. 26 – The Aero Club de France believes the mysterious balloon which grounded with an empty, blood stained basket at Kamenice, Jugoslavia, last night was the Golden Button, piloted by the French aeronaut, M. Norguer, who started here Saturday in a long distance race for the Aumont-Thieville trophy.

Another Federal Tax Reduction

The prospect that Congress, on the advice of the Treasury Department, may soon order the fourth reduction in Federal taxes since the War, is all to the good. It is a bright corollary of advancing and continuous prosperity.

60 Negroes Jailed After Gun Battle

Chicago, Sept. 26 – (AP) – Fear of trouble in the densely populated negro quarter of the South Side was quieted today by the presence of several hundred policemen and national Guardsmen, stationed there following the slaying of Policeman William Gallagher and John Septhenson, a Negro, yesterday. … Sixty Negoes, men and women, were arrested as police swarmed into the Negro area. The entire section, however, was unusually quiet, not one call being made to police stations where squads waited in readiness to answer riot alarms.

Business at 1928 Level, Bank Says

[T]he volume of business and aggregate income of the northwest the latter half of 1929 is likely to be at least equal to that of the corresponding months of last year, according to the monthly business review of the Northwest Bancorporation of Minneapolis. Interest rates are holding steady at high levels … and the demand for funds is strong throughout the northwest.

Stock Market Views

Vague and whispered rumors disseminated in the financial district, none of which came out into the open, contributed to yesteday morning’s selling.

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From the Minneapolis Morning Tribune, Sept. 25, 1929:

Hoover Asks Flexible Tariff

President Hoover today threw himself squarely in to the senate dispute over the retention of the flexible principle in the Hawley-Smoot tariff bill, which Democratic leaders hope to eliminate by the aid of votes of some of the Republican independents.

Speaker Says Tariff Bill Is Monstrosity

Northfield, Minn., Sept. 24 — The tariff bill, as it stands today in the senate, is a monstrosity for which the Republican party cannot afford to take responsibility, Governor Clyde M. Reed of Kansas asserted here tonight …

Free Trade Not Issue in Tariff, Simmons Says

… A reasonable tariff, based upon scientific rules, yes; but — “Tariffs are not levied for the purpose of creating billionaires or millionaires. No man or corporation has a right to ask the government to guarantee or safeguard through the tariff an unreasonable profit. Neither are excessive and unreasonable profits conducive to the public welfare … ” [comment by Sen. Furnifold M. Simmons of North Carolina]

Everybody’s Business

[N]early $5,000,000,000 of market value are represented in stock securities now. Fifteen years ago it could scarcely have been thought of. No industry is important or big enough to stand still and let the procession pass.

Terms St. Paul Postal Station Near Collapse

Testimony by the city building inspector that the St. Paul commercial post office building, for which the government is paying $10,000 a month rent under a non-cancellable lease, “may collapse in 30 days,” and by a private engineer that it is “worthless and dangerous to the employes [sic],” enlivened a hearing Tuesday before the federal appraisal commission …

Senators Pile Criticisms on Farm Board

… “In the meantime,” said Senator Wheeler, “wheat farmers of the northwest are suffering the loss of thousands of dollars and nothing is being done about it.” Senator Frazier of North Dakota added: “You say you have done everything you can, yet the hard spring wheat farmer is being fleeced worse than he has been in the past 35 years …”

International Bank Is Seen as Stabilizer

[T]he founding of the international bank simply creates another piece of banking machinery with worldwide scope, but its sphere of influence is limited … Instead of being a superbank as its critics object, it will be a servant bank. Controlled entirely by the world’s central bankers, it will conform necessarily to the wishes of the central banks …

Sending a Boy to Mill

In the wise lore of downeast Yankeedom there is a saying: “Don’t send a boy to mill.” New York financial brokers, it appears, have been doing just this for some time, when they employed a messenger 18 years of age to transport heavy sums in money and securities. One result was the theft of $512,000. The boy is the goat for a neatly arranged theft audaciously executed. … It is unfair to any boy to make him responsible for more than a half million dollars in money on a city street. …

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From The Minneapolis Journal, Sept. 24, 1929:

U.S. Piling Up Big Surplus, Plans 1930 Tax Reduction; Total May Be $300,000,000

A substantial reduction in taxes, favored by President Herbert Hoover, will be recommended to the regular sessions of congress next December by the treasury … [E]xperts will start work within a week to determine how much of a cut can be made and how it will be distributed. The financial officials … pointed to continued prosperity and large income tax collections as the base upon which the tax reduction would be made.

Coolidge Gift 4-Digit Check

Calvin Coolidge’s wedding present to John [Coolidge] and Florence [Trumbull] was a check, Mrs. John H. Trumbull, mother of the bride, revealed today. “It was a check — a substantial amount — but I cannot say how much,” the governor’s wife said. She denied reports the former president had presented the newlyweds with a $50,000 trust fund. She indicated the check was for an amount in four figures.

From the Minneapolis Morning Tribune, Sept. 24, 1929

Everybody’s Business

George W. Edwards, economist of Stone Webster & Blodgett, Inc., in his admirable publication, The Money Market Survey, which he publishes each month, says that during the past 12 months, non-bank-lenders have supplied $1,600,000,000 of the increase in brokers’ loans, while the banks have contributed but $460,000,000.

“Since the beginning of this year, the financing of investment trusts has amounted to about $1,110,000,000,” says Edwards. “Due to seasonal conditions, the volume of bond issues has been small. Foreign bond offers were few, and the volume of municipal bonds was the lowest for any August since 1923.”

Senate Pushes Drive for New Income Facts

One of the outstanding features of the debate over the tariff bill in the senate has been an insistent demand, reluctantly yielded to, for information concerning industrial concerns, hitherto regarded as secret. … [T]he debate closed on the subject with this sarcastic utterance from Senator McMaster:

“I realize that we ought to give full consideration to the side of industry, that the tax payers of the country should not be given any consideration; that the great mass of the people who pay the bills, when they are being taxed further by law, should not know the full reasons why they are being taxed.”

Economic Interdependence of U.S., Europe Heightens Concern Over World Bank

The interests of the united States and the interests of Europe are so bound together economically, despite the seeming isolation and financial security of this country, that the setting up of a bank such as the proposed Bank of International Settlements becomes a matter of grave concern to American business …

“Suppose, for instance,” said one business man interested in farming, “that England wanted wheat from the United States. Suppose at the same time that England’s sterling exchange was weak, as at present. politicians in any other country might see in this an opportunity to force down sterling exchange still further, and thus aid their own debt payments by the purchase of cheap sterling exchange.

“If this were done — if England’s exchange were pounded down to a still lower level — it would have an immediate unfavorable effect upon the agricultural situation in this country … it would cost England more to buy American dollars, and hence the English could not afford to buy so much wheat … and the American farmer would suffer accordingly. … The same condition applied to other American industries, would give the same result.”

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The problem with the current financial crisis is that no one knows what’s going to happen. By contrast, it’s almost comforting to read the news from 79 years ago today. Markets are “reactionary,” trading is “largely professional in character,” and the United States is owed (rather than owes) unfathomable sums of money. It’s ominous, to be sure, but at least you know how it ends up:

THE MINNEAPOLIS JOURNAL, Sept. 23, 1929

Market Turns Reactionary When Heavy Selling Hits Utilities; Steels Lead Turn

New York, Sept. 23 — (AP) — Nervous trading again characterized today’s stock market, which bounded upward at the opening, turned reactionary before midday when heavy selling developed in some of the public utilities and then headed upward again in the early afternoon under the leadership of the steel shares. Trading was largely professional in character, due largely to commission house advices suggesting that small investors and trader [sic] restrict their commitments until a more definite trend was established.

THE MINNEAPOLIS MORNING TRIBUNE, Sept. 23, 1929

Everybody’s Business: Debts Settled?

From the North American Newspaper Alliance — All national debts, including that of the United States, will grow lighter as the years roll by, because a certain amount of principal is paid annually with the interest.

Every nation in Europe has settled her war debt with the United States with the exception of Russia. That nation, not yet recognized by the United States, is not able to effect a settlement of her debt of $187,729,750.

In the recent debt settlements, the United States has waived all claims against Germany and has left it to the allies to collect from Germany, so they can pay this country. The United States spent $25,000,000,000 in the war. The allied debt to the United States originally was about $10,500,000,000. With interest added, the 14 nations which have settled have agreed to pay the United States $11,542,684,000.

For instance, total interest payments over this long preiod will amount to $10,621,185,993. Now put this amount on top of the original debt — the principal involved — and the European countries, to square the debt, will have to pay more than $22,000,000,000.

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