Why Should You Be Freaked Out About Greece? Remember, The Great Depression Had Two Parts
Why Should You Be Freaked Out About Greece? Remember, The Great Depression Had Two Parts
Megan McArdle
Apr. 28, 2010, 4:37 PM
The most terrifying words I’ve seen written so far about the growing crisis in Greece were penned by Yves Smith yesterday: “So the whole idea that the financial crisis was over is being called into doubt. Recall that the Great Depression nadir was the sovereign debt default phase. And the EU’s erratic responses (obvious hesitancy followed by finesses rather than decisive responses) is going to prove even more detrimental as the Club Med crisis grinds on.”
The Great Depression was composed of two separate panics. As you can see from contemporary accounts–and I highly recommend that anyone who is interested in the Great Depression read the archives of that blog along with Benjamin Roth’s diary of the Great Depression–in 1930 people thought they’d seen the worst of things.
Unfortunately, the economic conditions created by the first panic were now eating away at the foundations of financial institutions and governments, notably the failure of Creditanstalt in Austria. The Austrian government, mired in its own problems, couldn’t forestall bankruptcy; though the bank was ultimately bought by a Norwegian bank, the contagion had already spread. To Germany. Which was one of the reasons that the Nazis came to power. It’s also, ultimately, one of the reasons that we had our second banking crisis, which pushed America to the bottom of the Great Depression, and brought FDR to power here.
Not that I think we’re going to get another Third Reich out of this, or even another Great Depression. But it means we should be wary of the infamous “double dip” that a lot of economists have been expecting.
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(Excerpt) Read more at businessinsider.com
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