great depression

from bernanke (1983), nonmonetary effects of the financial crisis in the propagation of the great depression

incidence of financial distress was very uneven.
aggregate corporate profits before tax was negative in 1931 and 1932
post-tax retained earnings were negative in 1930-1933

corporations with >%50million in assets maintained positive profits through the period, leaving the brunt to be dealt with by smaller corporations. so the easy liquidity found its way to larger blue chip corporations

many phrases if taken out of this paper sound exactly like the current situation. you can take out the Baa spread with treasuries and it looks the same in certain time periods.

HOWEVER, it differs in one crucial respect. there wasn't a sustained spike in spread in 2008, and the government in this case did not wait until 1933 to intervene in the financial system. no bank runs, no massive unemployment.

in other words, the mechanism of failure sounds pretty similar broadly, which is the failure of credit intermediation. however, the consequences seem different because so far bernanke has prepared a doctrine and it seems to be propping things up.

this, bernanke identifies as the key: he identifies the greatest single (perhaps only) contributing of the New Deal to amelioration of the crisis the restoration of the financial system of intermediation, because due to informational and enforcement problems, no one else proved up to the task of stepping into that role.

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