WHAT A STUDY OF 1937-1938 WOULD TEACH OBAMA                                    

    In early 1937, FDR wanted to gain back Congressional support from Southern
    Democrats who demanded a balanced budget,  So, instead of listening to the
    economist Keynes who advocated deliberate deficit government spending to
    create jobs while the private sector was hoarding money (like banks do now),
    he listened to his Treasury Secretary (Morgenthau) and again publicly declared for
    a balanced budget, just as he had in his 1932 Presidential Campaign.  

    Treasury Secretary Morgenthau convinced FDR that private investors considered
    federal deficits dangerously inflationary (remembering Weimar Germany) and the
    eventual taxation they would require would be too unsettling for private investors
    to have sufficient confidence to put their money at risk. 

    Inflation was only 3.6% in 1937.  Despite this, FDR fully accepted the premise
    that private capital was the primary source of jobs in the US, despite its utter failure
    in the 1930s.  He acquiesced in Morgenthau's notion that the stock market
    had dangerously begun to bubble because it had almost quadrupled between
    FDR's Innaugration and March 1937.  He warned that another 1929 Collapse
    might happen unless fiscal austerity was shown by the Government and the
    "speculative bubble" of 1933-1937 was pierced.  As it turned our, this was terrible advise.

                  WPA Murals in Cincinnati and Cleveland.   Were They A BoonDoggle? 
                  Hardly.   For 73 Years, travellers have stopped and looked and admired them.

   

    FDR's 1937 Budget did sharply cut back spending programs. WPA artists no longer
    created beautiful murals and photographers no longer recorded the lives of
    Southern working men.  Wilderness camps for young men to shape new public parks
    and fight forest fires were all cut back.  Soon, there was another sharp jump in
    unemployment, a drop in business confidence and a disastrous market decline.  
    The economy disastrously fell over a new cliff.   Unemployment jumped from 14.3%
    to 19.0% in 1938. Manufacturing lost 3 years of gains and sropped back to 1934 levels.

    But FDR was was not an ideologue.  In 1938, FDR saw his mistake and began spending
    programs again without heeding short-term budget constraints.    He listenened to Keynes
    not his Treasury Secretary or conservative Democrats.   The market roared back
    despite bleak international news.   In February 1938, Congress passed a new AAA bill
    which authorized crop loans, crop insurance against natural disasters, and gave large
    subsidies to farmers who cut back production. On April 2, 1938, Roosevelt sent a massive
    new spending program to Congress.  $3.75 billion was then split between PWA, WPA,
    and various relief agencies. Other appropriations raised the total to $5 billion of new
    government spending early in 1938. The economy then turned around and recovered.
        ( Source: http://en.wikipedia.org/wiki/Recession_of_1937%E2%80%931938 )

            "In the fall of 1937, an economic recession struck the American economy.   Although not as severe as a depression, the recession was worsened by Roosevelt’s unwillingness to spend money, as the government at
that time was already millions of dollars in debt.  The economic downturn caused a rift within the Roosevelt Administration; some of FDR’s advisors, like his Secretary of the Treasury, Henry Morgenthau, Jr., urged
him to balance the budget and abandon the course of great government expenditure as had been taken earlier,
while another group, headed by Harry Hopkins of the WPA, urged Roosevelt to unbalance the budget by
running a deficit and increasing government spending.  Although the former group believed that balancing
the budget would increase spending in the private sector, the latter faction was backed up by the already- -proven-successful policies of John Maynard Keynes.  Keynes, who attributed the 1937 recession to
the American economy’s lack of preparation for an increase in investment (as public relief programs helped
more Americans get on their feet again, investment and spending altogether increased), had, up to that point,
theorized on the effictiveness of government spending in reversing a depression and making up for the lack of
investment in the private sector of business ....  Keynes, who also believed that copious government expenditure would cause a re-stimulation of the economy, had a large impact on both Roosevelt and the
advisors who helped coach him out of the recession of 1937, and although FDR was at first reluctant to spend
more money in order to rebound from the events of 1937, he eventually recognized the need for more
government expenditure, as called for by Keynes.  Thus, in March 1938, Roosevelt announced a plan for a
new federal outlay agenda, which, within the course of just months, would help to significantly improve
America’s economic situation..."     ( Source: http://harwich.edu/depts/history/HHJ/Clark.html )

      The stock market felll 40% in the Fall of 1937.  This was the second biggest six-month
     decline in stock market history.  The decline took place in only 14 weeks.  Keynesians
     say FDR's policy choices caused this second Depression and stalled the 1930s' recovery.  

     Of course,  gathering war clouds in Europe and Asia also worked to unsettle the stock
     market.  Asian markets for American goods were badly disrupted when China was
     brutally attacked by Japan on July 10, 1937.  This quickly led to Japan's attack on
     Shanghai in August 1937and continual warfare until l945.  In Europe, Hitler was
     militarily preparing for the Anschluss Österreichs (the German annexation of Austria)
     and then the German take-over of Czechoslovakia in March 1938 and October 1938, respectively.

                                              Peerless Sell S9s Mark Tops in 1937

         
              While a world war is not on the horizon, the Obama Administration says the
              chances for an attack by Al Qieda in the US are high.  But this is not where the
              eerie parallels between now and 1937 are.

                        OBAMA IS MAKING THE SAME MISTAKES FDR DID IN 1937

              The danger centers on Obama's shifting away from a progressive jobs-creation
              agenda to placing higher priority in fighting wasteful spending and a "pay-as-you-go
              fiscal policy.  Obama seems to believe he must be still more conciliatory to
              his party's conservatives, especially the fiscal Conservatives in his party.  Liberals
              and Progressives he feels he can disregard.  So, despite criticisms from liberals like
              Nobel prize-winning Krugman, Obama is now talking about a spending freeze
              on non-military spending.  This is dangerous orthodox budget balancing in the middle
              of a near Depression.  He is again accepting Bankers' ideology as omniscient
              and not self-serving.  His Wall Street advisors still rule him.  He is too inexperienced
              to see how badly he is being served.  In college, he should have studied some
              American or European history somewhere along the line.  European governments
              everywhere, from 1929 t0 1932, made the Depression worse by following this approach.  
              Hoover was no better in the US. 

                                                  BANKERS' SELF-SERVING NONSENSE

              I wrote my dissertation at Columbia about the FINANCIAL ORTHODOXY approach's
              failure in England's  "locust years, 1919-1940.  The English economist. JM Keynes,
              had warned that this fiscal ideology, laudable as it sounds, was suitable only when
              private economies  were strong and jobs plentiful.  Balancing the budget, at all costs,
              and a "make- the-pips's squeak" cutting back of government expenditures was
              proven wholly inadeuate and dangerous in the 1930s, though is was the othodoxy
              and view put forth by bankers worldwide,  the Bank of England, Chancellors of the
              Exchequer.

              Chancellors, I showed in my dissertation, also wanted to limit  the chances of any
             spending minister becoming too popular and thereby challenging the Chancellor's
             normally pre-ordained rise to the Premiership.  It was this orthodox balance-the-budget,
             cut government spending and make the Dollar strong that was always, ALWAYS,
              the view set forth and advocated by US Treasury Secretaries to Presidents,
              Republicans or Democrats.    "Defend the pound."Or "Defend the Dollar" in the US. 
              Fear inflation.  Government is a barren whore.  Only private-for-profit jobs are real.
              Maintain the Pound (or Dollar) as the most important international currency.  Secure
              London or New York as then center of international finance.

              For big bankers in New York and London,  this orthodioxy was and is clearly
              a self-serving set of arguments.  It is propaganda  to defend the richest class
             and deny others a chance to rival them.  Among the hidden agendas, not the least
             imprtant, was that bankers wanted to make their debtors pay back their loans in
             deflated (worth more) dollars.  

             Considering how Obama has, despite his public rhetoric, given bankers hundreds
             of billions of   taxpayers' dollars in TARP, always allowed the outlandish bonuses
             to their executives and  then has [ermitted to stand the sixty-five billion more in AIG
             counter-party payments which Obama's Treasury Secretary-To-Be  tried  for months
             to conceal from the public, so noxious was the deal,   So, I am not surpised now,
             in the slightest that Obama is completely failing the American people again as he
             promotes and falsely legitimizes the bankers' self-serving, budget-balancing orthodoxy

              The obvious problem with this approach now and in the 1930s was that economic
              fear was too high.  Confidence in main steet was too low.  Private banks and investors
             hoarded or speculated their money and savings.  They did not put anywhere near
             adequate amounts money to work in businesses that would create jobs.   And so
             high umemployment persisted.  That bankers never questioned themselves and
             their smugly self-serving orthodoxy suggests they are not worthy of any government
            money.  A national. goverment-owned bank could not help but improve the economy
            at far less cost.   "Greedism" must be ended.

             That defending the Dollar as bankers want to an extreme is dangeorus for the
             economy AND the US Stock Market.   See the inverse relationship between the
             Dollar and the Stock Market in 2008 and 2009.  how the stock market has gone d 
             
----- DOLLAR'S 2008 RISE ACCOMPANIED BY US STOCK MARKET COLLAPSE-----
               
   ----- DOLLAR'S 2009 DECLINE ACCOMPANIED BY US STOCK MARKET RALLY-----