Scott Sumner on Past Mistakes
I wish more people in government would read Scott Sumner’s blog:
I once read all the New York Times from the 1930s (on microfilm.) You can’t even imagine how frustrating it was. They knew they had a big problem. Then knew that deflation had badly hurt the economy (including the capitalists.) They new that monetary policy could reflate. And yet . . .
Weeks went by, then months, then years. Somehow they never connected the dots.
“Monetary policy is already highly stimulative.”
“There’s a danger we’d overshoot toward too much inflation.”
“Maybe the problems are structural.”
“There are green shoots, things are getting worse at a slower pace. The economy needs to heal itself.”
“Consumer demand is saturated. Even workingmen can now afford iceboxes and automobiles. We produced too much stuff in the 1920s.”
And the worst part was the way political news kept slipping into the financial section. Nazis make ominous gains in the 1932 German elections, Spanish Civil War, etc, etc. In the 1930s the readers didn’t know what came next—but I did.
Thankfully we can learn from their mistakes.
Yes, but can we act on the lessons we draw from them?