Are we going back to the past?

I was reading through some of the events that happened in the US during the period of great depression. Somehow given the apparent resemblance of what we are witnessing over the past year, the tendency to compare with the past is very compelling. As analysts, we like to look into the past as often as possible. We see a goldmine of information which we tend to under-utilize during the best and the worst of times. It is only during the phase of transition that this is used extensively as we are slowly but decisively testing our hypothesis on grounds that was otherwise never ever thought of.

There are two fold uses of looking into the past. 1) Are we heading for the same actions which probably will give the same set of results or different ones 2) Are we venturing into new areas and if yes, what does that mean.

I came across this interesting piece of what was happening in US during the period of great depression.

http://law.jrank.org/pages/13455/Home-Building-Loan-Association-v-Blaisdell.html

In 1933, in the midst of the Great Depression, Minnesota passed the Mortgage Moratorium Law. The law was modeled on President Franklin D. Roosevelt's NewDeal program for national economic relief and attempted to provide protectionto farmers and other property owners against mortgage foreclosure "during the continuance of the emergency and in no event beyond 1 May 1935." It authorized the Minnesota state courts to consider exempting troubled mortgagors fromforeclosure if the mortgagors requested such judicial consideration.

This law was passed till 1942...

Someone did an analysis stating that the debt to GDP in the US currently is over 3.5x times this time compared to over 2.5x times during the depression.

Are we going to see this happening again.

Interesting book - interesting macro themes

Three of the best books I have read in the past one year.

• Confessions of an Economic Hit Man by John Perkins
  
• Globalization and its discontents by Joseph Stiglitz
  
• Making Globalization Work by Joseph Stiglitz

Not that they are any kind of outright best sellers, but these are some books which caught my eye when I was browsing books at Landmark.



I think it is worth reading all these books continuously though the order is not going to make much of a difference. Confessions of an Economic Hit Man is more a James Bond kind of book, but most importantly the book reveals some interesting insights to the functioning of a few countries. This book specially corroborates the story of the brilliant movie, "Syriana".

After reading this book, one really wonders if our understanding of the world is actually in the right direction. We are all, atleast in class rooms, taught that Capitalism is far more efficient form than communism and that companies would eventually be ruling the world more than politics. The books written by Joseph Stiglitz gives an amazing insight, through his eyes, into the functioning of leading finance institutions like the World Bank and IMF. It gives the broad philosophies that these institutions have towards lending. A true eye opener.

I shall reserve my inferences to myself but would urge readers to look at these books quite seriously. I shall end this section of the blog by saying that the book is clearly one sided and hence suffers serious setbacks to create an unbiased opinion. From critics of these books, I see them lacking the same degree of conviction that I saw with what these authors have written. Anyways... there are a few more books available which could help create an opinion. Raghuram Rajan is one who follows the IMF doctrine. Hopefully his books should help create a better opinion.