TEXT OF COMMENTARY
Tess Vigeland: Been feeling the need to pop a dramamine every time you watch the stock market these days? Well, that’s how it’s supposed to be, right? I mean the market goes up, and then down and then back up. It’s got cycles and phases, and seems to right itself over time. Nothing we can do, so just live with it, right? Wrong, says commentator Amity Shlaes.
Amity Shlaes: We tend to think of market movements as weather. Something you enjoy or endure, but can’t do much about.
After all, people born in 1960 or later have seen mostly blue sky in their trading lives. To them, it has all felt like good weather. They know nothing of periods like the 1930s. Then, it seemed like Katrina all the time.
But crashes and recoveries aren’t inevitable like weather. Sure, there are business cycles. There are also consequences to actions by administrations, Congress, central bankers and foreign governments.
That was true in ’29. Then, bad policy, abroad and here, made a crash into something worse.
Herbert Hoover signed a protectionist tariff, even though he knew better. More than a thousand economists wrote a petition begging him not to, but he still did.
Hoover also raised taxes in a downturn. Bad. He and everyone else got the monetary policy wrong. They thought deflation was inflation, and acted accordingly. Ouch.
Roosevelt said his famous phrase: “The only thing we have to fear is fear itself.” But even FDR caused some fear — again, through bad policy. Several New Deal programs were based on crazy ideas — like that the time the shopper spent choosing his chicken at the market slowed recovery.
FDR spent year after year prosecuting business stars who were not criminals — Andrew Mellon and Samuel Insull. No one knew who would be next. The uncertainty kept the Dow low through the decade.
Bad policy can trigger a downturn now, too. Protectionism for China haters, really high taxes in the name of budget balancing — the kind Congress plans to talk about this September. Superfluous prosecution.
The recent crash at least reminds us that it matters what Washington does. On Wall Street, observers are updating Roosevelt’s rule. They have a new phrase: “The only thing we have to fear is the lack of fear itself.”
Vigeland: Amity Shlaes is the author of a new book on the Great Depression called “The Forgotten Man.”
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