Albert Hart: Albert Hart's interview in this book opens with a description of his influence on the American economic machinery (72): his highly influential book, Debts and Recovery 1929 to 1937 " ... painstakingly documented and analyzed changes in the structure of the internal debts" of every detail of the U.S. economy, according to the book's author, Randall Parker. The interview also began with some humor. Hart, who died a month after the interview took place in 1997, related a story about his father, who was born in 1851, and thought he had earned a $400 fellowship from Dearborn Theological Seminary, which was supposedly going to pay all his school costs and living expenses. The catch to the money, Hart related, was that after his father was told he would get it, his father still had to "swear that he believed unbaptized infants were damned," Hart recalled, "and he was damned if he thought so (laughter). So he didn't get the fellowship."
Meanwhile, in the interview readers learn that the Great Depression was not necessarily a bad time for Hart, who graduated from Harvard University in 1930 and followed that up with a "traveling fellowship" from Harvard as well. That fellowship was a first hand lesson for him, as he received his money and just in the knick of time, had it converted into American Express checks, prior to the "great financial catastrophe of the Depression" (73).
And so what a reader learns from Hart's good fortunes was that not all Americans suffered the terrible fate of being out of work, out of money, standing in bread lines and warming their hands over fires lit on main street in 55-gallon drums. And in Hart's case, he had the opportunity to travel through Europe in 1931 prior to returning to the U.S. And pursuing his graduate studies at the University of Chicago, where he also found more good luck, receiving a teaching assistantship.
Hart graduated from the University of Chicago with his PhD in 1936, wrote a book called Debts and Recovery, and began working for the U.S. Treasury Department. But at this point of the biographical sketch of Hart's career, the interview (76-78) turned back to the in-between-wars period, and Hart was asked what gave him the idea that the U.S. economy was "in real trouble."
Hart remembered that he "was rescued" from the immediate banking crisis in 1931 because he had transferred his funds from a Kredit-anstalt account to express checks, but he was wary too that the dollar had appreciated against other currencies "quite a lot." What he also recalled was that President Herbert Hoover had surrounded himself with what experts believed to be "wonderful economists in those days," and that the operative thinking was that the way out of the Depression was " ... To balance the budget (laughter)."
When Hoover asked Congress for a 2% "transaction tax" he instead received legislation for "excise taxes and tariff duties," which "took us off course" Hart continued, and helped plunge the nation into a more serious depression. Hart says in the interview, without seeming to boast, the decisions made by Congress was a "perfect" example of what not to do, and he adds, "I'm pretty sure I realized it at the time."
The other key ingredient leading American into a deeper depression was when the British went off the gold standard, and the U.S. did not, which got America into a "hellish situation," he recalled. And when asked if the thinking at that time was, oh well, America bounced out of the recession of 1921, we'll do it again this time, he said that was indeed the feeling. And perhaps if the tax increase hadn't been enacted in 1931, in order to balance the budget, the country might have climbed out of the hole before digging it as deep as they wound up doing.
Hart states that the ability of the Federal Reserve Board to arbitrate security prices was overrated in the 1920s, and in fact it has "always overrated its capacity to manage things." No way, he emphasized, can the Fed "manage several things at once," and he was quoted seven years ago as saying that, so this wasn't a remark made only in hindsight.
What was the most compelling reason for the Great Depression, he was asked? Well, he stated, a "serious recession turned into a horror" when an economy with a potential of $100 billion per annum "was running at about 80% capacity" and along came a tax increase (mentioned earlier in this paper) which knocked $2 billion out of the mix. "Two billion out of 80 billion was by no means chicken feed," he said. And as a result of that poor judgment on the part of Washington, and the overall bad management of the economy, one-third of the nation was left "stranded" (80).
A lesson to be learned in hindsight, Hart stated, is that the world "is a lot bigger than the United States," and he doesn't regard "serious depressions" as "impossible" for the future.
Charles Kindleberger: In this noted economist's book, The World in Depression 1929-1939, he takes the position that the stock market crash of 1929 wasn't America's fault alone; in fact, he asserts (86), a lack of international leadership in terms of controlling debt deflation was a huge contributing factor.
In the interview, Kindleberger's account of his father's method of survival (88) during the depression is educational. His father's income fell to a quarter of what it had previously been, and so he would borrow from the bank using his stocks as collateral, until he finally was forced to sell his stocks completely to keep his family of five afloat.
His account of being in Europe at the time of the German take-over of France is very interesting and enlightening. Before going to Europe he worked in the Treasury Department (in 1936) and had his phone calls tapped by the FBI, and was humiliated when J. Edgar Hoover fed tapped conversations from Kindleberger's phone to newspaper columnists that favored FBI tactics. And while he was in Switzerland, the bank he worked for was shut down because of the war, and the only escape was a bus ride through unoccupied France, to Spain and then Portugal to a ship that took Americans back home. "We saw a lot of dispirited French soldiers," he remembered (90), and there were Jewish people on the bus who gave the driver a $100 tip; if any German soldiers were up ahead, he was to stop the bus and turn around.
Meanwhile, as to Kindleberger's view of the Depression, and why the stock market crashed, he said first, interest rates got tight because of brokers' loans; a good deal of foreign money was coming into brokers' loans, and when a big speculator in London, Clarence Hatry, went broke in September, and his companies collapsed, that sucked money out of New York brokers' funds. While the banks were trying to sort out the brokers' dilemma, commodity brokers were not making loans, so credit dried up and investment slowed down dramatically, he points out (93).
'International commodities were traded by shipping them on commission to New York and London," he continued. Buyers had to borrow if they wanted to buy, and if there was rationing of loans, they couldn't buy. If they could not buy, commodities prices would (and did) fall. Kindleberger said that "very few people" relate to the fall in price levels of internationally traded commodities between October and December of 1929 except me."
Kindleberger also said he disagrees with Milton Friedman, who said the stock market crash had little to do with the depression; "I can't believe that," he insisted. What would he have done, in hindsight, to…