25 May Is it 1938 again?

“History Doesn’t Repeat Itself, but It Often Rhymes” – Mark Twain

Although Mark Twain was right that history seldom repeats itself, he was also correct in saying that history often rhymes. For example, it’s easy today to see the many parallels between recent events and those of the 1930s. History most certainly has been rhyming. However, might it also be presaging a repeat? Hmmmmm.

TLR has written often about the similarities between the 1930s and the last 15 year period, initially in March 2019 by noting the rhyming of the 2008 Global Financial Crisis (and subsequent government central planning intervention efforts) and the Crash of 1929 (and the government intervention that followed). With few tools and little experience, 1930s’ governments exacerbated the economically- and socially-disastrous impact of the Crash. Their efforts lengthened and deepened the Great Depression…, the opposite of the brilliantly-managed seemingly successful economic stimulus and money-printing by America’s government and the Federal Reserve during the 20-teens that alleviated the potential for immediate economic devastation caused by the Great Recession … and also, not surprisingly, jet-fueled the global economy. As TLR noted in March 2019, 1937 had marked a turning point in the global economy and in history…, one that 2019-20 was positioned to emulate. The possibility for further “rhyming,” however, was interrupted complicated by the outbreak of COVID-19. America’s government responded with ever greater spending and the Federal Reserve with even further Quantitative Easing, both of which powered the American and global economies to new heights, thereby departing from the rhythmic beat of the 1930s. While the unsuccessful government decisions of 1937 created a deeper Depression, the successful government decisions of 2020-22 had a variety of consequences that included transitory inflation, increased political division, rising international conflict, and unrepayable mounting deficits and debt. The apparent success of centralized economic management over the past 15 years in steering manipulating the U.S. economy around what would have been a depression serious economic downturn fueled the belief that the application of Modern Monetary Theory (which TLR has long derided) will continue to successfully avoid the consequences imbedded in the government policies of both the 1930s and the 20-teens. Time will tell.

The rhyming between the 2020s and 1930s resonates far beyond economics, however. Just as 21^st Century progress has been driven by technological innovation, the 1930s saw revolutionary technological change. The radio became ubiquitous, ushering in a new era of mass communication. Command of the airwaves became a necessity for political success and a bullhorn for the rise of nationalism … as both Adolf Hitler and FDR demonstrated. Similarly, the 20-teens saw the smartphone become the universal mode of communication, mass communication, and mass miscommunication, most powerfully when coupled with social media. Manipulation of the 21^st Century’s airwaves accordingly has become a necessity for political success, a bullhorn for the rise of nationalism, and a boon for those of today’s leaders who have mastered it … as well as a weapon for a new generation of cold warriors, influencers and propagandists.

Tariff barriers that choked off international trade exacerbated the Great Depression in many of the same ways that 21^st Century tariffs have been increasing prices, reversing globalization and clogging up re-ordering supply chains. The global economy in 1929 was fragmented with virtually no shared data, no international economic coordination, little historically-shared economic learning, fierce protectionist beliefs, and a free-wheeling market-based ethic. The global economy in the 20-teens had the benefits of massively-shared data, instantaneous communication, a treasure-trove of learning gleaned from the Great Depression, an activist global Central Banking system, and a shared belief in capitalism. That now is reversing as America has retreated and continues to retreat from capitalist leadership and the belief in the benefits of globalization. The economic hole created by this turnaround has been filled with Dollar bills, lots of Dollar bills, with nationalism and centralized government policy-making replacing internationalism. Historians have frequently pointed to the Smoot-Hawley tariffs of 1930 as a reason for the depth of the Great Depression. Although those tariffs differ in many ways from both the Trump and Biden tariffs/tariff proposals, the similarities are profound. The America First policies of candidate Trump and the Biden-enacted Inflation Reduction Act and invocation of the Defense Production Act echo the 1930s and have substantially similar effects. So do the central planning and Executive Power prerogatives of the two candidates – they eerily resonate with the words and deeds of 1930s’ fascists and socialists. History has proved that tariff barriers, centralized planning, fascism and socialism are disastrous for their followers … and for the world at large.

An even greater cautionary “rhyme” flows from the types of 1930s’ pre-war events that have been, and continue to be, repeated in the 2020s. As TLR highlighted earlier this month, America’s use of tariffs and sanctions created the same sort of axis of enemies as combined to pursue global domination prior to WWII. Then, as now, their power and aggressiveness grew. TLR has repeatedly warned that America, “plagued by partisanship and disorganized decision-making and wedded to a goal of ‘peace for our time’ (the goal expressed by Neville Chamberlain in his 1938 speech that handed Czechoslovakia to Nazi Germany), have led China, Iran, Russia and North Korea to take increasingly more brazen actions with the confidence that doing so will have little or no military consequences, but instead will incentivize America to further retreat from the international scene.” It is these “rhyming facts” that have led to burgeoning wars in Ukraine and the Middle East and threats of spreading aggressions from Taiwan to Africa to South America. In this regard as well, history most certainly has been rhyming and might, indeed, also be presaging a repeat.

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Finally (from a good friend)