What really could avoid the Great Depression?

[lounge60]

Is possible imagine (from,we said,1900) a plausible chain of events and alternate historicals facts that can avoid the crash of 1929 and the great depression or these were humanly inevitable?
In other words any attempt to create a timeline in which the great depression is avoid is pure ASB?

 

[LSCatilina]

Simple, you need a important economic crisis in 1900, or no WW1 (so, no economic bonus due to reconstruction/war etc).

Next, a real and well-listened economist (NO Keynes, please! I sware on God, DON'T) who convince all powerful nations that "playing alone when a international crisis come, it's dumb"

1929 : no, or quite no, protectionnism.

1/20 on my probability scale. Rather ASB.

In fact, crisis is inevitable, you can just retard it. Or advance. Not just avoid, with the magical hand of Mr.Smith

 

[lounge60]

Simple, you need a important economic crisis in 1900, or no WW1 (so, no economic bonus due to reconstruction/war etc).

Next, a real and well-listened economist (NO Keynes, please! I sware on God, DON'T) who convince all powerful nations that "playing alone when a international crisis come, it's dumb"

1929 : no, or quite no, protectionnism.

1/20 on my probability scale. Rather ASB.

In fact, crisis is inevitable, you can just retard it. Or advance. Not just avoid, with the magical hand of Mr.Smith

I know,is very difficult.
advance at 1900 can work?
And the FDR of 1900s can be..Teddy Roosevelt?

 

[Jaded_Railman]

The very first thing that could avoid it is avoiding WWI. The way governments financed WWI broke the gold standard, which made the global economy incredibly unstable.

If WWI is a necessity, there are certain things that 'can' be done to avoid the Great Depression, but you're going to have several decades of financial and economic instability regardless. While it's technical possible to avoid THAT outcome, it borders on ASB because the reforms necessary to achieve just couldn't be made to happen in a reasonable time period (10-20 years).

So, let's work backwards. Starting from 1930 (when the Great Depression went from a nasty deflationary recession like happened in '20-'21 to being the actual GREAT Depression), what could be changed?

1. Do anything to stop the Smoot-Hawley Tariff. Smoot-Hawley, and the retaliatory tariffs put on American goods by other countries, are what set off the bank failures that would cause wave after wave of runs over the next few years. Pretty much, once Smoot-Hawley passes nothing can stop the world from spiraling into something nasty. It doesn't have to be a ten year depression like happened in the US, but it's going to be something.

2. Make sure Hoover stops thinking so highly of himself. All his moralsuation and voluntary interventions in the early years of his administration made the economy weaker than it would otherwise have been. Most importantly, the 'high wage' policy he convinced several major corporations to follow kept the economy in disequilibrium throughout 1930, even if recovery started rather quickly.

3. Get the right people in charge in the world's central banks. Britain's abstinent insistence that she return to the gold standard at parity with its pre-war pound was stupid and contributed to that entire decade of economic weakness. France's gold hoarding was terrible, and more than anything but Smoot-Hawley and the Federal Reserve's own gold hoarding caused the 'Great Contraction' (the fall in the US money supply by 33% between 1929 and 1933). Things actually didn't work that badly in the 1920's when the central bankers of the world were working together.

4. To get a bit more specific, there are several policy changes that ultimately did more harm than good. Again, working backwards:

4a. The Federal Reserve blew and then popped a major asset bubble by alternately pursuing overly inflationary and then overly contractionary policies between 1927 and 1929.

4b. Both the Federal Reserve and the Bank of France were downright stupid when it came to their gold reserves. By 1931, I think, between the US and France you had 70% of the world's monetary gold reserves, but less than 40% of total output.

4c. The aforementioned thing with Britain insisting on returning the Pound to its pre-war gold peg. Basically, after inflating her money supply during WWI, Britain had two choices: 1. Set the peg at its new parity or 2. Let her economy deflate enough to repeg at the old value. But she wanted her cake and to eat it, so she wanted to repeg at the old value without deflating her economy. The Federal Reserve was very accommodating, but all this ultimately did was cause the entire international financial system to continuously de-stabilize.

5. Keep the immediate post-war system of floating exchange rates. The way the world works, you can really only ever have a central banking system or a gold standard. The metaphor works like, "Two men ride a horse. ONE of them has to be in front". Since you no longer had the US without a central bank, the gold standard wasn't going to work like it had prior to the Great War. The floating exchange rate system that ran from 1919 to 1922 allowed for more freedom for the world's central banks to pursue independent monetary policies without introducing macro-economic instability like happening later on in the 20's (where the gold peg transmits instability in one economy to all the others).

6. Dramatically lower Germany's reparation burden following Versailles. It won't get rid of all your problems, but it takes one factor of instability away.

OOOOR, my favorite, go all the way back to 1844 and prevent Parliament turning the Bank of England into a proper, modern central bank in the first place, retaining a system that more resembles free banking. Viola, economic instability problems solved

 

[RogueBeaver]

JR: wasn't the problem a structural one that dated to the Great Panic of 1904, which was only stopped by JP Morgan and friends? Besides, the UK's GDP was at 84% of the pre-Crash levels IIRC, at the bottom of the Depression, so it was more of a sharp recession than anything in Britain.

 

[lounge60]

The very first thing that could avoid it is avoiding WWI. The way governments financed WWI broke the gold standard, which made the global economy incredibly unstable.

Two question:

1-Is the same if the WW-I is very short and end in late 1914 or in 1915?

2-We said that WW-I is avoid (Franz Ferdinand is not shot,and in Europe a balance of the power is found ).
Without the war 1929 crash and depression is automatically avoid,or this is only one of others condition (for exemple,is need a some type of economic legislation)?

 

[Jaded_Railman]

JR: wasn't the problem a structural one that dated to the Great Panic of 1904, which was only stopped by JP Morgan and friends? Besides, the UK's GDP was at 84% of the pre-Crash levels IIRC, at the bottom of the Depression, so it was more of a sharp recession than anything in Britain.

Well, there's no precise definition of 'recession and 'depression', so telling the difference between the two is more of an art than a science. Calling it the 'Great Depression' is sort of an American centric view, because it was only here that unemployment stayed above 10% for a decade (everywhere else recovered by the late 30's...some places, mostly places with silver standards like China, barely even felt it at all), but it was pretty bad everywhere that got it. Britain suffered from unemployment in the teens for several years, the German economy slumped from about 1927 to the middle of the 1930's, etc.

The 'structural problem', if there was one to really talk about, dated from, alternatively, the end of WWI or 1913 when the Federal Reserve was established. As I said before, true, properly functioning metal standards are mutually exclusive with active, independent central banks. Once the US no longer had a non-central banking system, there was perpetual danger for the global economy and the international gold standard. One or the other had to give. IOTL, it was the gold standard. Considering the general financial ignorance amongst the American populace and their representatives, I don't think anything could be done about the Federal Reserve in the 1920's, so your 'structural problem' was the situation after WWI.

And the Panic you're thinking of was 1907. It wasn't stopped by Morgan's bailouts, but the depth of the following recession was mitigated.

Two question:

1-Is the same if the WW-I is very short and end in late 1914 or in 1915?

This would make the following recession somewhat less severe, and certainly heads off a 'Great Depression', but Europe was essentially bankrupt by the end of 1915/middle of 1916 (depending on which countries are being spoken of), when all the involved countries left the gold standard and started printing money. So, ending the war earlier does have a positive effect, but not quite as great as avoiding it entirely.

EDIT: Well, I guess the main thrust here is that, the moment European countries suspended convertibility, you're guaranteed some level of boom-bust. How big a boom and how harsh a bust depends on more specific problems, like how much money is printed. Every single player suspended convertibility in 1914, and some officially left the gold standard altogether by 1916.

If you have German warplans work out perfectly, and WWI ends by Winter 1914, then the boom-bust will probably be small. Have it last into the middle of 1916, and it'll be larger.

Of course, in a 'Central Powers Victory' TL, you'd expect an even larger boom-bust cycle simply because of how profligate German governments tend to be. The construction boom following the Unification War against France was the single main cause of the Panic of 1873 and the Long Depression.

2-We said that WW-I is avoid (Franz Ferdinand is not shot,and in Europe a balance of the power is found ).
Without the war 1929 crash and depression is automatically avoid,or this is only one of others condition (for exemple,is need a some type of economic legislation)?

Without WWI, there will still be periodic recessions and, occasionally, even nasty depressions, because a gold standard with an international system of central banks is unstable, but none will be as bad or as deep as the Great Depression. It all comes down to the skill and intelligence of the men at the helm, as it were, the world's central bankers. That's how it always works, really; the Federal Reserve ties for the gold with Smoot-Hawley as one of the immediate causes of the depth of the Great Contraction (During the depth of the Contraction, in in 1931, the Federal Reserve was selling securities, a contractionary policy).

 

[Dathi THorfinnsson]

In addition to everything suggested above, I'd suggest better stock market regulation.

If you had stronger limits on 'buying on margin', for instance, the stock market bubble wouldn't have been so big or so fast, and the resulting crash wouldn't have been so bad.

Some of the bad decisions (like Smoot-Hawley (sp?)) were in part due to the awful mess of the stock market crash, and the incredible severity of it.

Given the tenor of the times, you're not going to get modern regulation of the markets, and you aren't going to prevent the bubble and crash. However, there ARE somethings that could have been done - even within the mindsets of the time.

 

[lounge60]

So the "recipe" is:
1-Nothing World War -I
2-A better stock market regulation.
Now for the first ingredient we have many timelines and alternate stories.
But for the second?
How is plausible a better market regulation?
Maybe can be a initiative of Teddy Roosevelt?

 

[Expat]

Just to make sure: you're only talking about the stock market/financial side of the Great Depression and not the ecological disaster of the Dust Bowl side, right?

Because in order to avoid the collapse of Midwestern farming you need to either keep people off the land (or at least keep them from farming) or you need to alter farming practices drastically- maintain ground cover, plant crops that hold the soil better, avoid over-plowing, plant more wind breaks and if at all possible maintain more of the land as wild pasture.

 

[Dragozord]

What about not having Wilson in office during the 1910's? I think not having the Federal Reserve would help America out in curtailing a depression.

No Wilson means no World War 1 involvement for the US, No 16, 17th, and possibly 18th Amendments to the Constuition. It also means no Federal Reserve, which means Congress has to handle the issuance of currancy as demanded in Article 1 section 8 of the US Constuition.

Or for instance Hoover doesn't let the Coolidge tax cuts end? Im certain that would have helped the middle class and rich of the day.

So a combination of things would need to occur for the Depression to be avioded (or seriously lessoned)

No Wilson
No WW1
No Federal Reserve
Congress follows the Constuition regarding issuing currancy
Progressiveism seriously curtailed
12 years of Grover Cleveland would help

 

[RMcD94]

How does the US not joining WW1 suddenly stop it happening?

 

[lounge60]

Just to make sure: you're only talking about the stock market/financial side of the Great Depression and not the ecological disaster of the Dust Bowl side, right?

Ah Dust Bowl !
thanks for remember this; is a much important aspect.
Well,Dust Bowl problem fall in n-1 of the "recipe"

So the "recipe" is:
1-Nothing World War -I
2-A better stock market regulation.

I read on wilkipedia:

World War I increased agricultural prices, which also encouraged farmers to drastically increase cultivation. In the Llano Estacado, farmland area doubled between 1900 and 1920, and land under cultivation more than tripled between 1925 and 1930.
Finally, farmers used agricultural practices that encouraged erosion.
For example, cotton farmers left fields bare over winter months, when winds in the High Plains are highest, and burned the stubble (as a form of weeding prior to planting), which deprived the soil of organic nutrients and increased exposure to erosion.

So nothing WW-II much less risks of Dust Bowl.

 

[lounge60]

No Wilson means no World War 1 involvement for the US, No Wilson
No WW1
No Federal Reserve
Congress follows the Constuition regarding issuing currancy
Progressiveism seriously curtailed
12 years of Grover Cleveland would help

This is another important question:
For avoid Great depression we need nothing WW-I
or none US involvment in WW-I ?

 

[DaleCoz]

Great Depression

I agree that one of the big factors in the Great Depression was the British decision to go back on the gold standard at an inappropriate peg. That forced the US to loosen monetary policy too much, which helped put air in the stock market bubble. (Thank you Winston Churchill-in a key economic role at the time). So: Obvious point of divergence is that the British either don't go back to the gold standard or do it more intelligently.

I'm not sure if a purely monetary analysis captures all of what caused the Great Depression though--although it does explain a lot. The combination of a lot of unsophisticated investors entering the stock market and the activities of stock manipulators like William Durant (founder of General Motors) and his group of "Smart Guys" was going to cause problems eventually.

As an aside: Durant and his friends are an interesting cautionary tale. They rode the market to the top, cashed out not long before the crash and were in great shape until they decided that the stock market had bottomed out, jumped back in and ended up losing everything. Durant died a pauper. Churchill jumped into US stocks and lost most of his family's money too.

In any case, the stock market crash didn't immediately put us in the Great Depression. I believe that the unemployment rate in 1930 averaged a point or two below what it is now. It wasn't until the European banks started collapsing, and the runs started on US banks that things really got bad. Smoot-Hawley played a role in that.

Keeping the "Great" out of the Great Depression? Keeping Hoover out of the presidency would help. He was a bright, capable man, but not the right guy for the job of leading the US through the depression. He wasn't politically savvy enough to head off Smoot-Hawley or economically savvy enough to realize that jawboning companies to keep wages high in a deflationary environment was counterproductive. He was activist in the wrong ways and a horrible communicator.