Business Booms and Depressions Since 1775 (1943)
A 1943 Federal Reserve chart of U.S. booms and busts since 1775 prompts debate over what really drives economic cycles and whether modern policy has made them less severe. Commenters argue over the dangers of deflation versus mild inflation, the legacy of the gold standard and the Great Depression, and the role of central banks and Keynesian stimulus in smoothing downturns. The conversation also touches on who gains and loses from inflation, asset bubbles, and long periods of low growth, with Japan, 2008, and housing costs used as contemporary reference points.
Deflation: harms, benefits, and mechanisms
- Long debate on whether deflation is “mostly good” or “very bad.”
- Critics emphasize debt dynamics: when prices and wages fall but nominal debts don’t, burdens rise, hitting poor and indebted households and farmers hardest.
- Others argue modest price declines from productivity/technology are beneficial (greater purchasing power), and that deflation is often a symptom of crisis, not the root cause.
- Deflationary spirals are described as rare and avoidable if authorities expand money/credit instead of doing austerity.
- Distinction is drawn between “good deflation” (tech-driven efficiency, e.g., electronics) and “bad deflation” (collapse in demand, mass unemployment).
1920s, Great Depression, and historical cycles
- Question: how could the 1920s have both deflation and prosperity?
- Some argue they didn’t really coexist; the chart lumps together the 1920–21 depression, the mid‑20s boom, and the 1929 crash.
- Multiple earlier panics (1873, 1893, 1901, etc.) are cited to show frequent pre‑WW2 crises.
Policy, central banking, and post‑WW2 changes
- Several comments credit post‑WW2 monetary flexibility (no gold standard) and Keynesian fiscal tools for avoiding deflationary busts on the earlier scale.
- Others blame central banking and low rates for larger modern bubbles and debt overhangs.
- 2% inflation target is defended as a practical buffer against deflation; others call it arbitrary and a stealth tax on savers.
- 2008 is discussed as tracking the Great Depression until aggressive monetary/fiscal intervention; some see that as necessary stabilization, others as creating a larger, deferred bubble.
Inequality, debt, and distributional effects
- Repeated focus on who wins/loses:
- Inflation tends to help debtors and hurt creditors/savers.
- Deflation does the opposite and can entrench rentier classes.
- Debate over whether “monetary expansion gone amok” and shareholder primacy are squeezing ordinary workers, forcing them into risk assets just to preserve wealth.
Business cycles and (in)stability
- Many see booms and busts as inherent to human behavior (over‑exuberance, FOMO) and complex systems; others stress that policy can shorten or deepen downturns.
- Taleb’s “antifragility” is invoked: cycles may be a feature, cleansing bad investments and funding risky innovation, though synchronized crashes are still highly damaging.
Central planning vs markets
- Brief side debate: Soviet‑style planning claimed to smooth cycles but is judged to have produced chronic shortages and misallocation.
- Some suggest planning was undermined by bad data, politics, and limited computing power; others see the failures as fundamental information/coordination problems.
War, reparations, and modern parallels
- The chart’s depiction of the 1930s leads to discussion of WWI reparations, Weimar hyperinflation, and how punitive settlements contributed to later conflict.
- Thread digresses into whether current sanctions and isolation of Russia risk repeating Versailles‑style mistakes; participants strongly disagree on the validity of this analogy and on responsibility for the Ukraine war.