44.1 Linking the Long and Great Depressions to Today
Social upheaval, mass unemployment and economic desperation – this isn’t the first time. We look at how the modern unemployment rate came about during the crises of The Long Depression. Also, real GDP-per-capita growth comparisons between The Long and Great Depressions to today.

[Emil’s Summary] Ad Astra is Latin for “to the stars”, which is where a consensus of economists believes the Chinese economy is heading.  After being the only large economy to record any growth in GDP for 2020, economists are forecasting 8% more for this year.  Indeed Beijing’s “skillful” management of the Covids has convinced two economic research centers – one in Japan, the other in Britain – to forecast that China’s economy will become the world’s largest by 2028.

There are three problems, including the surreal acceleration in debt and a shrinking working-age population, but fundamentally, that GDP in China is a political input not an economic output. The Party picks a growth rate in December and any shortfall between economic activity is filled in by uneconomic activity by year end.  With nothing written off, GDP is whatever Beijing wants it to be.

The Chinese growth miracle is neither Chinese, nor a miracle. Instead it is a growth model employed by dozens of countries throughout the past century.  The initial growth is so impressive that it’s seductive to extrapolate the model’s benefits and fail to account for the costs, which come at the end in the form of a rapid write-down, as was the case with the United States after the 1920s, or prolonged stagnation, as was the Brazilian experience after the 1970s.  The Soviet Union followed this policy and grew its economy to 20% of world GDP in 1966 prompting famed economist Paul Samuelson to predict that it would surpass the USA as early as 1984.  Noted academic Ezra Vogel’s best-selling 1978 book “Japan as Number One” similarly failed to anticipate the coming bill.

The Party may very well achieve its vainglorious goals.  But at what cost?  If past experience is any guide expect Ad Terra, not Ad Astra.  But that is for the second half of Episode 44, first we discuss the similarities between the 19th and 20th centuries’ Long and Great Depressions to present day.

———WHO———

Twitter: https://twitter.com/JeffSnider_AIP
Twitter: https://twitter.com/EmilKalinowski
Art: https://davidparkins.com/

Jeff Snider, Head of Global Investment Research for Alhambra Investments with Emil Kalinowski, smells like animal spirits. Ad Astra artwork by stoic Brad Pitt of the Pen, David Parkins. Podcast intro/outro is “Wondrous Things” by Mhern at Epidemic Sound.

———WHERE———

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———WHEN———

00:05 Where did the modern unemployment rate come from? From the 19th century’s Long Depression
01:42 Who was Samuel Gompers? Why was he a key figure in American labor history?
04:19 What does economic misery look like to the “tramps” and “bums” who could not find work?
04:57 Who was Carroll D. Wright? How did he bring an economic, measured eye to unemployment?
07:14 The National Bureau of Labor concluded that a depression robs economic upside
10:01 A depression is a prolonged period of stagnation, an economic doldrums
11:31 A Brief History of Doom by Richard Vague offers examples of the Long Depression (1873-96)
15:18 Emotional sentiment, the loss of “animal spirits”, is a real part of economic depression
17:20 How does present day growth in real GDP/capita compare to the Great and Long Depressions?

———WHAT———

They Can’t See the Dire Economic Situation For What It Really Is: https://bit.ly/3r2VAJz
Alhambra Investments Blog: https://bit.ly/2VIC2wW
RealClear Markets Essays: https://bit.ly/38tL5a7