the great slump of 1930

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The Great Slump of 1930

What would the great economist of the last century, who had lived through two world wars and a great depression say to us today in the 21st century about our current economic situation? One will never know, but we do have the thoughts and writings of John Maynard Keynes. In "The Great Slump of 1930" he wrote about the period of deflation which was the great depression at a time when it had really just started and there were more questions than answers about what was happening.

At the time of his writing, Keynes could not have known how events would have turned out and finally overcome. However, he very accurately made an assessment on the seriousness and length of the economic and political problems, being very prescient, even in 1930. He understood that "the fundamental cause of the trouble is the lack of new enterprise due to an unsatisfactory market for capital investment." Keynes goes further and makes an astute observation which could just as easily apply to today's situation as it did in 1930: "Meanwhile, the reluctant attitude of lenders has become matched by a hardly less reluctant attitude on the part of borrowers. For the fall of prices has been disastrous to those who have borrowed, and anyone who has postponed new enterprise has gained by his delay. Moreover, the risks that frighten lenders frighten borrowers too." Much attention in today's situation has been given to the lending side of the equation, but not so much to the borrowing side and the willingness on the part of the borrower to assume risk in today's environment. Keynes rightly brings insight to the situation of his day. His work could bring insight to the policy makers of today as well.


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