It had been a long haul.  Unemployment rates were finally at the lowest levels of the current President’s term.   Manufacturing, after being down for years, had finally surged past it zenith prior to the collapse.  The Stock Market was again, after 5 years, finally back in record territory.

The economic downslide appeared to be over.  Consumer confidence was high. The bad economic times were behind us.

It was time to cut the deficit that had swollen during the bad years. The nation could not keep pace with the growth of interest.  Now with good times finally approaching, it was time to whittle that problem away….

Big cuts were made across the board to  cut back government spending…..

But wait.  We are discussing 1937!

1937?  But I thought the Great Depression started in 1930 and lasted up until the war, 1941,  That’s what we were always taught in school….

Ah.  You didn’t let me finish…

One year later, the stock market would be at 50% of it’s value.  Unemployment shot up from 14% back to 19%.  Manufacturing slipped 37% down from the previous year.  We were once again, indeed in the middle of  the Great Depression.

It came because we tried to force austerity way too soon.  The economy was only just rebounding,  We were imposing the economic equivalent for a quadruple bypass surgery patient,  a week after the operation, to be running in a marathon….

Exactly. Look what happened.  As the government contracted suddenly, the shock wave rippled through every person who had gone through it at least once before.  This time, they knew what to do.  Get out of the market immediately. Stop spending immediately. Cut to depression staff levels immediately.  They weren’t getting burned like the last time…..

Although it is impossible to say today is the exact parallel to the man-made continuation of the Great Depression, there are startling similarities.

What is most striking, is that we never heard about this bubble of good economic data in our history books.  The result of  misapplied austerity simply continued the Great Depression, so that those  few good months just like we experienced, became quickly forgotten and swallowed up in the new upcoming crises.

Todays sequester and major cuts to spending, are our version of the austerity imposed upon the economy back in 1937…..

Stock Market 1937
Chart Courtesy of Minyanville

Courtesy of Wikipedia

Manufacturing 1937
Courtesy of Wikipedia

Money Supply 1937

Courtesy of Wall St. Pit