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madness is still a fixation of a significant
sector, especially of the U. S. public.
Which Experts to Believe?
lf
you ask top economists about the
1970 situation, you will get every spec–
trum of opinion from "worst financia!
situation since 1931" to "What reces–
sion? This is just an 'adjustment
period.'"
Harvard's John Kenneth
has frequently warned of
another economic collapse of
the magnitude of the 1929
crash.
Former Federal Reserve
Board Chairman William
McChesney Martín said in
1968 that the U. S. was "in
the midst of the worst finan–
cia! crisis we've had since
1931." He said unless we
reverse the deficits in our
budget and balance of pay–
ments, we shall face "the
greatest setback this country
has faced in my lifetime. It
would take us a long time
to recover from it."
Galbraith
The
PLAIN TRUTH
most are not considering the basic
causes of economic woes any more than
they did in 1929.
"Ürcbestrated Optimism"
A prevailing idea exists that if the
authorities express optimism in the
economic situation, this will ensure sta–
bility. Their rosy pronouncements are
usually no more than what the
W alt
Stt·eet Jotlfnal
recently called "Orches–
trated Optimism." Such rosy statements
December 1970
eventually lost
nine tenths
of their
paper value.
Almost all the great economists of
the era predícted a rosy economic future
in the 1920's. "In 1929 the leading
economists of Harvard, Yale, Princeton,
Ohio State, Michigan - one can hardly
think of a major institution missing
from the list - were enrolled believers
in the bull market" (Sobe!,
The Great
Bttlt Market,
p. 127).
The highly respected
Harvard Eco–
nomic Society,
for example,
published a widely circu–
lated weekly economics let–
ter. Almost every week
during 1930 (
after
the
crash), they issued state–
ments such as " the outlook
continues favorable," "the
coming Spring recovery,"
"no depression in sight.''
Holding out for recovery
being "just around the
corner" has
AL
w
AYS
been
the voice of the economists
in trouble. After all, who
wants to say, "recovery is
ttvelve years away"?
Wide World Pholo
Today, such verbal carrots
are still held befare the
people. Each week an eco–
nomic forecast predicts a
"bottoming out" or recovery
"next quarter." Sometimes
they are right - sometimes
they are wrong. But the
point is
ECONOM!STS OFTEN
U.
S.
Secretary of Com–
merce Maurice Stans has
called the "New Economics"
( which is the name adopted
for the
U.
S. Government's
system of overspending used
throughout the Sixties) "the
biggest economic experiment
the world has ever seen."
He warned that "if it fails,
it ... may forever shatter the
strength of our free demo–
cratic system."
One-time millionaire "Champagne Fred" Bell is re–
duced to selling apples on the streets of San Francisco.
About one million investors were wiped out in the 1929
crash.
DO NOT KNOW.
Why Experts
Are
Divided
Jacques Rueff, De Gaulle's
leading economist, said, "The situation
today is extremely disturbing because it
resembles so closely the situation of the
late 20's.''
Those are four of the world's top
economists. Four egually well-educated
and famous economists would label
these views as "extremist." Other more
conservative government officials and
leading European central bankers would
be somewhere in the middle.
How can so many experts - having
access to the same facts - come to such
varying condusions? The answer is,
were even more common •n late 1929
and early 1930.
"Then as oow," Galbraith writes,
"no one supposed such spokesmen
knew whether business was sound or
unsound"
(The Gl'eat Ct-ash,
page
149).
In
perspective of hindsight, these
rosy predictions are often ludicrous. For
instance, one of the leading economists
of the day said - nine days before the
crash of Black Thursday, 1929 -
"Stock prices have reached what looks
like a permanently high plateau."
Despite such rosy predictions, stocks
Like generals who study
to win the
previotts
war, not
the
coming
war - economists have
studied diligently to prevent "1929."
But the future financia! crisis might
not be stock-market oriented, but
infla–
tion
oriented (like the German inflation
of 1923, when baok accounts and
peosions were wiped out by
inflation,
and
bilüons
of marks couldn't buy
"two cents' worth" of goods). Or -
the future crisis could be caused by
a poor
crop year
(no one has taken care
to prevent this type of catastrophe) .
Oc
the next crisis might result from
(Continued
011
page 42)