Why I like Coolidge and why we are not recovering

June 8, 2011 04:22

Does anyone still wonder why the economy under a president who seems hostile to business is failing while the economy under a president who supported it and wasn’t ashamed to say so, boomed?

by Michael Kennedy at Chicago Boyz


The Harding-Coolidge administration took office in March 1921 and the recession was over in months. Why ? Governments were smaller then and had less influence on the economy. The Wilson Administration has been widely described as the equivalent of a fascist regime with its war time controls and economic meddling.

The National Recovery Administration was probably the most openly fascist bureaucratic organization that the US government ever instituted. It was eventually overturned by the Supreme Court, prompting Roosevelt’s “court packing” scheme. (A very sympathetic version by PBS).

What then, led to the Depression and what is leading to the present frightening echo of 1933? Here is a very worrisome chart.

Here is a chart showing the price/earnings ratios of cyclical stocks vs “defensive stocks.” What it shows is that cyclical stocks, that can be expected to respond to economic conditions, are very, very cheap. That looks like most people do not expect recovery any time soon. Why ?

Calvin Coolidge has been criticized in history for his pro-business sentiments expressed in words. He is alleged to have said, “The business of America is business.” In fact, that is not an accurate quote but the sentiment he expressed was similar.

What we have now is a president who makes statements like, “So if somebody wants to build a coal-powered plant, they can; it’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted.”

We have a president who tells would-be entrepreneurs that “I do think at a certain point you’ve made enough money.”


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