1946: The Greatest Depression in US History (prior to 2020)

In 1945, as the Second World War ended, the
economy of the United States entered the worst economic depression in its history (although
2020 may surpass it). In the first year of this depression, real Gross Domestic Product
shrank by 4 percent, and in 1946 real GDP dropped by 20.6 percent. Not only was this
way-worse than the year 1932 – the peak of the ‘Great Depression’ that started with
the Wall Street Crash – but per capita output did not regain its 1944 level until 1964. You can see this on charts – like this one
from “THE INSTITUTE FOR ECONOMICS & PEACE”. The blue line shows that there was a major
reduction in real GDP at the end of the Second World War, and confirms that it didn’t really
surpass this until the 1960s. You can find similar looking charts all over
the internet or in the books. Here’s another from Wikipedia, this time showing that the
real GDP numbers recovered by about 1950. No matter where you pull the numbers from,
they show a huge decrease in real GDP in this period – anywhere from 11.6 percent to 20.6
percent, and loads in between. Again, Wikipedia lists a 12.7 percent decrease on it’s “List
of recessions in the United States” page, stating – “The decline in government spending at the
end of World War II led to an enormous drop in gross domestic product, making this technically
a recession.” Technically a recession!? Technically!? This
was the worst recession in US history! (At least prior to 2020.) So of course it’s
a recession! And according to the real per capita Gross
National Product data, it only took 12 years to recover from the 1929 crash, whereas it
took 20 years to recover from the 1946 depression. And this was exactly what mainstream economists
had predicted at the time. They claimed, during the war, that there would be a massive recession
at the end of the war. Their predictions showed that unemployment would be massive because
of the huge number of military men coming back from the war, and the closure of munitions
factories. All these men would just be dumped into the civilian economy, which wouldn’t
be able to cope. Millions would be lying in the gutters, and everything would be bad.
And indeed, the official unemployment rate during the Greatest Recession in US History
(1946) was somewhere around the massive 2.6 percent, although Wikipedia puts it as high
as 5.2 percent – which is still the lowest unemployment rate in any recession in the
20th Century by its own estimations. “From all of this the student [of economic
history] will no doubt conclude that the heretofore neglected Great Depression of 1946 was the
worst cyclical downturn in modern American economic history, and that by some measures
it had a greater disruptive impact on the American economy than the earlier, more celebrated
Great Depression of 1929-41.” And yet, historians have completely ignored
this recession. You won’t find a single history book which talks about the millions
of unemployed – the massive 2, 3 to 5 percent unemployment rate – or the contraction of
the economy. In fact, you’ll hear quite a bit about a supposed “post-war Boom”
in the United States economy. “The decade following World War II is fondly
remembered as a period of economic growth and cultural stability. America had won the
war and defeated the forces of evil in the world. The hardships of the previous fifteen
years of war and depression were replaced by rising living standards, increased opportunities,
and a newly emerging American culture confident of its future and place in the world.” Obviously, human memory must be wrong because
the statistics clearly show that there was an economic downturn of truly epic proportions
in 1946. “…the economy seemingly did plunge into
depression in 1946 – at least, that is the conclusion one must reach if one takes seriously
the official gross domestic product (GDP) data on which economists and historians normally
base their accounts of macroeconomic fluctuations.” And – “…the Great Depression of 1946 has been
worsening every decade. In 1960, when Historical Statistics of the United States, Colonial
Times to 1957 was published, the reported decline in real GNP in 1946 was but 7.8 percent,
and for the three years 1944-47 just 9.8 percent, hardly a great depression. When the next edition
of Historical Statistics was published in 1975, however, the 1946 decline was a more
robust 12 percent, and the total business cycle downturn (1944-47) saw a drop in real
output of 14.2 percent. “By 1981, when the Department of Commerce
reported revised national income data, the 1946 drop had reached a truly “depressing”
14.7 percent, with the episodic decline reaching 17.4 percent. Five years later, in 1986, the
1946 depression truly earned the label of “great” when the latest revisions in statistics
revealed the 19 percent drop discussed above. The Great Depression of 1946 seems to be getting
constantly worse, and if current trends continue should soon pass the 1929 depression in magnitude
by any criteria.” And, indeed, it has passed it. We’re at
a 20.6 percent drop at the moment, although it looks like it’ll soon be worse than that. So… what’s going on here? No one remembers
or writes about the Great Depression of 1946. In fact, median family income at the time
grew slightly, from $2,410 in 1944, to $2,595 in 1945. And then went up to $2,659 in 1946.
And it was during this period that you have the “Baby-Boom” generation – referring
to the people born between 1946 and 1964 (the exact years it took to get out of the supposed
Great Depression of 1946). People thought: ‘we’re in a miserable recession, so better
have lots of kids’ because, when I’m suffering from severe economic hardship, the only thing
I think of is making poverty-babies. “…contemporary Americans experienced 1946
as a gloriously prosperous year that had nothing in common with 1932.” So yes, the statistics show a Great Depression
in 1946, even though this was a period in US history of unparalleled economic growth
– sometimes referred to as an ‘economic miracle’. So clearly, these statistics are
flawed. But here’s the problem. See, the mainstream
traditional narrative states that the Wall Street Crash of 1929 led to the Great Depression,
and, despite policies like the New Deal, it was only World War Two which got America out
of the Depression. The narrative is that: government spending on tanks and bullets during
the war led to a “production miracle” and a “Great Wartime Boom”, thus proving
that the government should spend its way out of recessions. The economic statistics used
to show that this is the case, are the ones we’ve just seen – the GDP and GNP numbers,
as well as unemployment numbers, and so on. If you look at the GDP numbers, it clearly
shows an economic boom during World War Two, as well as during Roosevelt’s New Deal era.
Again, proof that World War Two got America out of the Depression. But this is where the traditional narrative
stops. Their conclusion: War is good. The End. Except, no it isn’t. If you use the very
same statistics which ‘prove’ that World War Two got America out of the Depression
and continue them into the post-war period, you then get the Greatest Depression in US
history – the 1946 slump. But we know that this slump is fiction – it simply didn’t
happen. So these statistics are clearly fiction too, which is perhaps why the predictions
of the mainstream economists of the time – that there would be high unemployment and so on
– were ever-so slightly completely-incorrect. And the same fictional statistics that ‘prove’
that the 1946 collapse happened, are the exact same fictional statistics that are also used
to ‘prove’ that the war-time boom happened as well. So what does this mean? Well – “If we dismiss as spurious the GDP data
that indicate a postwar depression, are we warranted in dismissing the GDP data that
indicate a wartime boom?” Turns out, yes. Yes we are. These statistics
are pretty much the only evidence we have for a war-time boom. In fact, we have a LOT
of evidence which goes against the idea of a war-time boom. This is why historians have
dismissed or ignored the statistics when talking about the immediate post-war period, because
the statistics go against the contemporary reports of a booming post-war economy. Official unemployment figures do show a decrease
in unemployment during the war years by 7.45 or 4.62 million people (depending on the figures
used). Unemployment went from 15.7 percent in 1940 to 1.3 percent by 1944. Then went
up slightly to 2.6 percent in 1946, and 3.8 percent in 1947. However, there’s a problem. If say, there
were millions of lazy unemployed in Britain right now, and I gave them all unemployment
benefits. So, I paid them money even though they’re not working or contributing to society.
And then I said – “See! I’ve reduced unemployment because now they’re getting paid!” – you’d
say, no, that’s not solved the unemployment crisis, you’re just paying them for doing
nothing. They’re not economically productive, so they’re still unemployed. Okay, well
similarly, if I paid the unemployed people as before, BUT I also gave them a rifle and
shipped them to France… Does that mean they’re not unemployed anymore? Well, no, because
they’re still not economically productive. They’re still technically unemployed. They’re
not contributing to the domestic economy at all. In fact, they’re actually a drain on
the domestic economy, since the people who are actually working are having to produce
goods and services for themselves AND the people you’ve shipped off abroad to die
in a foreign country. So, while they do have jobs, they’d technically be classed as unemployed
from an economic and logical standpoint. Now I’m not saying that military people
aren’t doing something useful. Arguably they are keeping the country safe. Great.
However, you can’t turn around and say that they’re economically contributing to society,
because they’re not. They’re draining the resources of society, as if they were
unemployed. If 20 people made 20 loaves of bread for themselves
– so they consumed 1 loaf of bread each per day. And then we shipped 10 of them abroad,
then everyone gets half a loaf of bread each. Living standards would actually go down for
the workers who are working. This is what happens when you have unemployed people in
the economy, or government employees – because either way, these people take from the people
who do work and then don’t produce anything of economic value in return. If they did produce
something of economic value, then they wouldn’t have to take from the workers in the first
place. Tax would be voluntary. The fact that it isn’t, is proof that they’re not producing
anything of economic value to the rest of society. As Rothbard states – “…any increase of taxes and government
spending will discourage saving and investment and stimulate consumption, since government
spending is all consumption.” Now, when looking at the US economy in WW2,
not only have you taken a bunch of unemployed men, handed them a rifle, shipped them to
France or Iwo Jima, and then claimed that this has solved the unemployment crisis, but
you’ve also taken some of the employed men from the economy too. 16 million men worked
in the armed forces of the United States in World War Two. Well, even taking the highest
figure, unemployment fell by 7.45 million men. So, you’ve drafted more people during
the war than were unemployed before the war. Meaning, you’ve taken some of the experienced
workers out of the economy, and you now have a labour shortage. Thus, you saw women, old
men, teenagers – basically, less skilled or inexperienced workers – being employed in
the factories in the United States. And the mainstream economists and historians will
tell you – it was this: the sending away of some of the most experienced workers (to die
on the shores of foreign lands) and the drafting of less skilled or inexperienced workers,
which led to the greatest economic boom the economy of the United States ever had. Really? Does this make any logical sense to
anyone? Similarly, producing tanks, bullets, ships
and planes does not equal economic growth. If it did, building a fleet of ships, sending
them out to the middle of the Atlantic, and then sinking them, would produce an economic
boom. Clearly that’s stupid. Well, so is military production in general. What matters
when it comes to economics is that living standards increase as a result of economic
activity. We all want to be better off than we were yesterday. Producing war planes doesn’t
equal higher living standards. Building Sherman tanks might win the war, but won’t put food
on your plate, nor a car in your driveway. As Left-Wing economist Seymour Melman pointed
out – “…whatever else you can do with a nuclear-powered
submarine that is almost as long as two football fields, and capable of cruising underwater
for weeks and at high speeds—you can’t wear it, you can’t live in it, you can’t
travel in it, and there’s nothing you can produce with it…” So clearly there’s a problem with the official,
traditional mainstream narrative, and their statistics. But what is the problem? Well,
when the US Commerce Department in 1975 and then 1990 produced real Gross National Product
trend lines, they looked like this – John Whitefield Kendrick – working for the
Office of Business Economics in the US government – produced a line looking somewhat similar. Now, Gross National Product is basically an
estimate of the total market value of all the goods and services produced by the means
of production which are owned by a country’s residents. However, the numbers given by the
US Commerce Department and by Kendrick also include some of the military spending and
production too, since, after all, tank factories built during the war, will easily convert
into car factories after the war, right? So they put those numbers in as well, and thus,
here’s what they came out with. But even at the time, some people realized
that there was a difference between domestic production and military production, and that
military production may not be easily converted into domestic production after the war. Economist
Simon Kuznets made his own estimates during the war and then revised them after the war.
In 1952, he corrected the government statistics for inflation, determined a more accurate
assessment for the price of military goods, as well as other things, and came out with
his own line. Yep – that’s a bit different isn’t it.
Kutznet’s revised estimate shows modest GNP growth during the war, and a definite
increase in real GNP between 1945 and 1946. But, as Robert Higgs points out, Kutznets
actually didn’t go far enough. Normally Kutznets would argue that you would have to
use what he called a “peacetime” GNP concept. Meaning, he thought government spending could
only be counted if it pays for consumer goods or capital formation. In other words, if production
contributed to living standards or if it boosted production of machines to produce goods which
would later contribute to living standards, then that could be counted. What he discovered
when he factored this concept into his calculations in 1961, was this – Yes, a decrease in Gross National Product.
The economy of the United States actually shrank during the war. Worse, his calculations
show that, not only was the war-time economic boom a fiction, but so was the great depression
in 1946. In fact, by his estimates, we see a growth in the economy in 1945 to 1946. This
makes more sense historically, since we know that there was a post-war boom. And that boom
is now reflected in these statistics. But, even though Kutznets applied this principle
to his long-term studies, he ended up rejecting it for the Second World War years. The excuse
he gave at the time was that this time was different because this time was a life and
death struggle. So, when there’s a big war, you can throw out all your principles and
just make stuff up. ‘Life-and-death struggle time, therefore two plus two equals five.’
Basically, he could not bring himself to admit that, not only was there not a wartime boom,
and that World War Two didn’t get America out of the Great Depression, but that World
War Two actually put the US economy further into the recession. He couldn’t admit that.
So he came up with some excuse not to admit it. Thankfully though, there are economists who
are willing to actually make logical sense and stand by their own principles. One such
economist (though not the only one) is Robert Higgs. (His book, “Depression, War and Cold
War” is the one you should read if you want to dive deeper into this topic.) Robert Higgs
has successfully argued that military production doesn’t contribute at all to capital formation,
which it doesn’t. A machine in a factory which produces grenades, can’t suddenly
switch its production to producing something that civilians want. And, indeed, most of
the war factories didn’t do this. So the real Gross National Product numbers used by
mainstream economists as provided by the US government include the means of production
that was in military use – which they’re not meant to have. Real Gross National Product
is meant to be an estimate of the total market value of all the goods and services produced
by the means of production which are owned by a country’s residents. If you include the
means of production that are owned by the state military, then that’s not GNP. “When one adopts this position on the treatment
of military overlays, that is, when one deducts all of them from GNP on the grounds that they
purchase (at best) intermediate, rather than final, goods, one arrives at a starkly different
understanding of economic performance in the 1940s.” And here is Higg’s own real GNP number,
with the non-civilian military production taken out. This is a better reflection of
how the economy of the United States performed in World War Two. It shrank. Living standards
decreased. And this makes sense logically too. Producing warplanes does not increase
your living standards. Let me show Higg’s line on it’s own. Yes, with the corrected GNP numbers, you can
see that, shifting the means of production from the civilian economy to the war economy,
led to a decrease in consumer goods. Does that sound logical? Yes it does. It also shows
that, when millions of men came back from the war, determined not to be unemployed,
and ready to work and make something of themselves, they boomed the economy in 1946. This fits
what we hear at the time – that there was a post-war boom. Living standards rose again.
And Higg’s statistics actually show this. So, not only was there not a ‘wartime boom’
during World War Two, but World War Two didn’t get America out of the Great Depression. It
turns out that it was the end of World War Two which got America out of the Great Depression. But there’s more to this. Let me quickly
explain. If you crash land on a desert island, how much is a coconut worth in dollars or
pounds? It’s not. It has no real value in dollars
or pounds because you do not have anyone to trade it with. The way we generate prices
is by trading with other people. Lots of people buying and selling goods is what generates
prices. We all agree, okay on average a coconut is worth so-many dollars, therefore that’s
it’s price. So, without the buying and selling of millions of goods by millions of people
in a market, you cannot generate prices. Well, what was the US economy like during
this period? Starting in the 1930s, but really taking hold
during the War, you had wage controls, price controls, rent controls, regulations, inflation,
heavy taxation, deficit spending, rationing, military conscription, an artificial shifting
of the means of production from consumer goods to to military machines… So basically, lots
and lots of manipulations in the economy. A significant portion of the economy was no
longer buying or selling goods. The US soldiers in Europe weren’t buying their rations on
the open market, they were getting them handed to them by the State. Nobody was negotiating
the price of a Sherman tank, meaning it was impossible to calculate the actual price of
a Sherman tank. Goods were not being bought and sold, and those that were had heavy government
intervention. So, the result of all this manipulation was that prices did not reflect the true value
of the goods produced in the economy. The prices they did have were fiction. And when
you then gather together a bunch of fictional numbers and then compile those worthless numbers
into things like Gross Domestic Product, you get another fictional number. A number you
cannot use to measure how well an economy is doing. “Where there is no market there is no price
system, and where there is no price system there can be no economic calculation.” “…the fundamental problem is that meaningful
national product accounting requires market prices, and the command economy of the war
years rendered all prices suspect and many of them, especially the prices paid by the
government for goods and services, manifestly arbitrary.” This is why some economists and historians
have argued that large fictional numbers like GDP and GNP are basically worthless, unless
you have a totally free market – which we’ve never had anywhere. This explains why the
US government – and all governments – are having a hard time with their economic numbers
and are basically making stuff up. Because without a truly free economy, you cannot have
true market prices. Without true market prices, you cannot create accurate statistics. Thus,
the US government is constantly revising the numbers for the Great Depression of 1946,
making the depression deeper with each revision. And all their statistics that they produced
today are the same – made up. The entire foundation of their analysis is the price value of the
goods, and they can’t calculate that because the economy has been manipulated – by them! Well, the lesson here is pretty straight-forward:
when Roosevelt died and all the governmental restrictions started coming off the economy
– freeing the economy up – prices returned to normal, which is why you see a dip in the
official GDP and GNP figures. At the same time, you had an influx of men returning from
abroad, who decided to work rather than not work. Because the economy was freed up, they
were actually able to work. This boosted productivity, which in turn, boosted living standards – hence,
the baby boom. The lesson isn’t that spending money and
building tanks booms the economy. The lesson is that: a free economy works. And from 1929
to 1945, America did not have a free economy. That’s why the Depression lasted as long
as it did. And the Depression was caused by the government’s credit expansion of the
1920s. You may have heard of the “roaring 20’s”. Well, it was called that because
the US government bank – the Federal Reserve – was printing currency left right and centre.
This caused malinvestments, which then created bubbles in the economy, which then popped
in 1929. The government then tried to spend its way out of the Depression, first under
Hoover, then under Roosevelt. “…we might have done nothing. That would
have been utter ruin. Instead we met the situation with proposals to private business and to
Congress of the most gigantic program of economic defense and counterattack ever evolved in
the history of the Republic. We put it into action…. For the first time in the history
of depression, dividends, profits, and the cost of living, have been reduced before wages
have suffered… They were maintained until the cost of living had decreased and profits
had practically vanished. They are now the highest real wages in the world.
“Creating new jobs and giving to the whole system a new breath of life; nothing has ever
been devised in our history which has done more for… “the common run of men and women”.
Some of the reactionary economists urged that we should allow the liquidation to take its
course until we had found bottom… We determined that we would not follow the advice of the
bitter-end liquidationists and see the whole body of debtors of the United States brought
to bankruptcy and the savings of our people brought to destruction.” Rothbard’s book: “America’s Great Depression”
is an amazing read. You can get it online for free. And I now know why all the socialists
criticise people for reading Rothbard – because they have nothing that can compete with him.
And he’s not the only one that they cannot compete with – “Credit expansion cannot increase the supply
of real goods. It merely brings about a rearrangement. It diverts capital investment away from the
course prescribed by the state of economic wealth and market conditions. It causes production
to pursue paths which it would not follow unless the economy were to acquire an increase
in material goods. As a result, the upswing lacks a solid base. It is not real prosperity.
It is illusory prosperity. It did not develop from an increase in economic wealth. Rather,
it arose because the credit expansion created the illusion of such an increase. Sooner or
later it must become apparent that this economic situation is built on sand.” Our economy, in 2020, is built on sand. This
is why the stock market is currently imploding. Yes, the Communist Cough made things worse.
But Austrian School Economists have been saying that this crash was coming, and one of them
even predicted that it would happen about 6 months or so after the yield curve inversion
– and he was right. Rather than just let the air come out of the
bubble and let things return to normal, governments around the world are taking control of their
economies, and bailing out the corporations with trillions and trillions of newly printed
currency and adding digits to a screen, at the cost of the working people, just like
they did in 2008, 1929, and other recessions too. They’ll tell you that spending newly
printed currency (that robs all of you of your purchasing power) will get us out of
the depression we’re now in. They’re lying. All this will do is rob you of your purchasing
power, and deepen the recession. It will empower the corporate state, and the central banks.
And it will lead to economic ruin. Will the 2020 Great Depression be worse than the 1946
Greatest Depression? My prediction is: yes, yes it will. Thanks for watching, bye for

Comments 100

  • Yes, WW2 didn't get America out of the Depression

  • btw we are about to have another global great depression.
    expect wars.

  • Lets hope we are not enterting another recession after the current situation eases and just on the back of recovery from the 2010 downturn. America's great depression, retold could be the World's great recession. Interesting video thanks.

  • As much as I admire Hoover and FDR trying to help, they just skewed everything up, and made the Great Depression last longer than it should have.

  • I like your excursions into "not directly war" stuff. F the haters and "tanks only" crowd. Peace!

  • That moment when you stick your economy onto your economy to fix your economy

  • I honestly had no idea about this

  • God TIK, stick to economics.

  • so we are in the depression already? 😀 Shit, I should've been a "preper", now Sainsbury's empty as hell.

  • The US Government never stopped FDRs depression era New Deal, infact it has expanded crazily for over 80 years with or without a downturn in the economy.

  • “Poverty babies” is the best term I’ve all day

  • Prior to 2020 ? whe are still in the recesion whe don't know where it going to end.

  • Just got done watching a few of your videos on Hitler's rise to power, namely "The REAL reason why Hitler had to start WW2" and when I finished and checked your page here is this video. Perfect timing!

  • Was '08 worse or was that what the modern media said?

  • Will you add subtitles to this video? As a side note, this question too:
    I know this question is unrelated to this topic, but how are armchair historians different from historians who are academic historians? Say, I read about Stalingrad, all the books that you have read, after hearing about them from one source or another. How am I, someone who does not have a degree, still differ from someone who has a degree? Is there no difference, or is there still a difference, and without a degree, I have no authority?
    Would be very obliged to have an answer.

  • Why can't most people realize that even experts can be wrong? People have been wrong since the dawn of time.

  • Seems the WWII Propaganda Machine continued long after WWII in the USA?

  • My friend can you make also a video about the madness we experience today

  • TIK – the US spending on military after WW2 did have one economic benefit – ensured that we kept oil prices down.. ?

  • In the far past, military men would invade nations, sack cities, and plunder. Would you consider those same men as societally draining resources? I seem to remember Alexander the Great sacking one Greek city (Thebes maybe?) And the resulting plunder being able to outright maintain the military through a large part of the Anatolian campaign.

    Whats your opinion there Tik? Great video by the way. Hope ur safe over there with Boris sick.

  • 19:37 You and higgs are a bit wrong here. There are a lot of civilians that TOTALLY want grenades. just a few laws in the way, that's all.

  • The notion that government contributes no economic value is nonsense. People would not form governments if their existence was always a net loss. The organizing capability of government is or can be economically valuable, depending on the its relative size and application.

    Also, there is no such thing as persistent free market/economy. Free market/economy is a BS concept. A better word would be open market/economy.

  • The FDA just approved COVID19 treatment drugs today so no depression.. Sorry

  • Talk abou the 1920 depression

  • @TIK just wanted you to know that your economic and wartime logistic/production videos and are very interesting, do not stick to only talk about Mansteins fairytales 🙂

  • 11:56
    yes , as is police , courts , all the gov clearks , teachers , etc etc . To be fair – anyone who does not work in the private sector is a drain to society.
    But especially gov institutions .

  • Good video. BTW you did not mention agriculture, oil/fossil fuels, and arms sales/lend lease. But I agree the depression was a result of fiat currency. ?

  • Thank you for this video. I was looking forward to this. I guess we'll see what happens now with the biggest economic bail outs in history and almost all countries increasing their hold on the economy.

  • if the 1950's where so prosperous why did elvis live in a chicken shack…

  • Great work, I'm out of a job at the moment but will continue to support the channel as long as I can.
    Still interested to know your thoughts on the petrol vs diesel engine d tanks effect on Germany during the invasion of Russia.

  • MaYBe iF We aLl woUld sTiCk to tanK oUr PeRsonAl valuE WouLd inCreAse.
    T: Some dumb marxist/nazi

  • StICk tO TaNKs

  • … Is this why (i think) there's a reason why massive war in current era would be economically unproductive?

  • Brilliant analysis. Thank you.

  • The only thing Truman ever did right was ending the war production boards in 1948

  • The thing is this won't just be a US depression. It will be a global depression. Millions of people around the world are not working. In all industries. Panic buying will drop off massively in the next few months as people will run out of money. Then government support will drop off.

  • Next: Why europe did not recover from the black death until 2008

  • the great depression wasn't caused by printing money: back then the USA was on the gold standard. all dollar transactions could be cleared in gold, that was in fact the only way to do international business.
    the great depression was however caused by a credit bubble. Germany owed reparations to France and a lot of other countries. France owed money to Britain and the USA. Britain also owed $ to the USA. So long as product could be extracted from Germany that human centipede of deadly credit can keep going: Germany pays France, France pays USA and UK. UK pays USA.
    Once Germany defaulted and refused to repay any furthe reparations the only option was for the USA to extend credit — which it did. But eventually the creditors want repayment. When the credited can't pay then the bank collapses, and since the bank has no money to lend businesses relying on credit to fund current operations go belly up.
    It was a crisis of paper money: but the paper money was bonds, not dollars.

  • This is very good. War does not help the economy, war is always a catastrophe however we turn it. Still, it was necessary to kill fascism, nazism, and later communism because they don't care about the costs. This video also show how rearmament did not help Nazi Germany out of depression in the 1930s.

  • How is any of this surprising? We built +27,000 liberty ships, +640,000 jeeps, +295,000 aircraft between 1941-45. Then the war ended, and we just stopped doing that (at least on this scale).

  • I very much like the context around the war you deliver. Weiter so!

  • What about the industrial complex, if you build war equipment and export it. Will that add to the economy? I guess so?

  • "It is in war that the State really comes into its own: swelling in power, in number, in pride, in absolute dominion over the economy and the society." 
    -Murray Rothbard
    (Now Trump has declared "war" against C-19)

  • P R I O R T O 2 0 2 0

    that is a confident prediction that i cant say i disagree with

  • Why the hell don't you just come out and say we are all doomed TIK. God damnit. That a way to be another harbinger of doom you god damn bugger. You'll be doomed like all of us.

  • A German comedian, Loriot, did a film about a tank factory which had converted to making marzipan potatoes…that showed the absurdity of trying to factor military production into economic calculations.

  • 30:20 damn… such a black pill there Tik 🙁 way to brighten my day

  • Any idea if you will look on other country economics during the and after the war?

    Awesome video :3

  • Stick to banks, TIK.

  • Austrian economists are not impressed with macroeconomics equations that list government spending as 'adding' to gross domestic product. lol

  • Can this be used to actually explain why Soviet Union collapsed at end of day? Strong military industry and extreme military spending did not helped Soviet Union rebuild after WW2 and possible prolonged it?

  • Real Keynesianism has never been tried, TIK. The current situation can be easily solved with negative interest rates and more quantitative easing.

  • This always annoyed me. Yes if you draft everyone unemployment goes down. Yes if you endlessly produce "goods" that will be sent to the other side of the planet and explode GDP goes up.

    Willfully ignoring that these numbers represent real things happening in the real world is basically malpractice.

  • It's almost as if a wartime command economy works a little bit differently from a peacetime free-market economy, and the statistical measures for one can't be meaningfully compared with the statistical measures for the other.

  • The banks have to bailed out because if they collapse we are all screwed. Without banks there are no business-loans and no economic growth. A bankrupt country is not a pretty thing.

  • Great video, the subject is very interesting and quite confusing.

  • Cancel all debt and start again…who is the money owed to? Banks..who create debt from thin air because of its legislation and ignorance from the masses.

  • Very interesting. An other myth busted: America got out of the great depression thanks to the war.

    You also explained well how GDP is not an accurate mesure to explain the success or the wealth of a country and where the myth comes from. But I don't understand why you say it is because there is a state. If it was private companies buying military equipment and sending emplyees to war, it would be the same: no contribution to consumer good and living standards, no? Because it seems to me the driver of this war recession was not the US state, but the Japanese and the Nazis.

    Thank you.

  • I think you don't understand how things work. You say that without economics you cannot speak about war. True. But you can speak about military operations without speaking about logistics? Intelligence? Doctrine?Instructors?… It isn't a dark conspiracy it is demand and offer. I am not a drain on the economy because there is a demand for firefighters. Deal with it.

  • I don't know whether TIK actually believes what he puts out. It feels like he forgets that economists always factor in "guns vs butter" when talking about statistics. The issue is that GNP/GDP figures are indiscriminate and don't always reflect real living standards and terminology like "recession and depression" doesn't actually mean anything for people. When there is a war on though, the government actively intervenes in the market place to produce weapons of war so yes, the historian is "right" to toss out the years of WW2 when discussing real growth.

    The truth is that WW2 did immediately consume the excess unemployed and put them to work. It is undeniable. Whether the work they did was profitable for the civilian economy or not is irrelevant to the core concept of the "Wartime Boom". The "Wartime Boom" refers to shaking off the decade long malaise which saw a significant portion of the populace in their prime production years spent in economic inactivity – regardless of whether the inactivity was for the civilian market or not.

    The work programs of the FDR's "New Deal" and the "Wartime Boom" were not economically beneficial, it's true. But it started to get people out of the mindset that it is "ok" to sit at home and do nothing or that long term high unemployment rates were "normal" and to be tolerated. The simple act of giving people money to dig a ditch that is economically useless or to build a tank that has value beyond the 0 dollars of useful economic output produced.

    It was designed to instill a psychological sense of self-worth and a habit of waking up every day to a job in order to earn money to sustain yourself. Economics is as much about human behavior as it is about how much money is being spent. It is the heart of Keynesian economics that you constantly ridicule that created this effect. The only problem with Keynesian economics is that it advocates for SHORT TERM injections in the economy but the measures put in ALWAYS end up being long term or PERMANENT distortions of the marketplace by the government because of the lack of political will to withdraw subsidies or handouts.

    Transitioning out of the wartime economy into a large rise in the civilian economy is PROOF that Keynesian economics works when you are willing to withdraw the stimulus after the crisis is over and done with. Of course, it was easy back in 1945-46. It is easy to close down factories making tanks, planes, and bullets and telling workers that they must now find jobs in the civilian economy on their own when there is no war to fight. It is MUCH HARDER to wean people off of cheap credit, welfare handouts, and other "free" subsidies in peacetime once they have gotten used to receiving such benefits. It is the same old "ratcheting effect" we see in all types of economic behavior. That lack of political will, however is not indicative of whether government intervention in the market place is or is not folly.

  • Well technically soldiers are doing something productive contrary to what you stated. The whole point of war (and possibly winning them) is to gain economic and political influence on foreign countries. If we strip down all the rethoric surrounding WW2 all the countries that went to war did it so for economic reasons. Italy in Africa, Japan in the fare East, Germany in Eastern Europe to give a few examples. We can also be cynical down to the bone and say that sending soldiers to die is also a way to reduce unemployment (I do not support that). Also let's not forget that France and UK and US had their own colonial holdings scattered around the world.

  • why is Keynesian economics so prominent among economists? if your job is economics, how can't you understand the essence of it?

  • Stick to PanzerBeobachtungsWagens ?

  • I like to make a lot of snarky quips. Seriously: CEOs and all working members of a corporation are contributing to the economy.
    What about shareholders who do not work for a living and have others manage their money?
    I know that this sounds exactly like Karl Marx, but it is a good question?
    What are the idle rich?
    So Higgs is "saying" that building pyramids or war chariots does not contribute to the national economy.
    One must literally turn their swords into something useful, like plowshares to gain benefit.
    During WWII we might as well have been building a pyramid to reach the moon, as the economy transitioned to consumable goods or products that would produce consumable goods (plowshares) the economy recovered.
    The discrincapy between the Higgs line and the 1990 estimate of commerce is the total war time production to defeat the Axis – a modern economic miracle that kept the Soviet Union in the war(?)
    I can remember hearing about rationing during the war… What were people really buying, when they bought war bonds?

  • Could some of the theory of the post war boom in America be seen as comparison economics?
    A man with two coconuts, sitting under a tree might consider himself poor.
    But when he looks around, he sees man with one coconut under another tree. Then sees another with two coconuts, but no tree.
    Now he considers himself wealthy.

    The US had factories whose production was cut at the end of the war. But at least it had factories. Most industrial nations had piles of smoldering bricks.

  • The Great Depression was caused by bank runs. I still cannot believe that myths are spread otherwise. The Gold standard, and the failure of the Federal Reserve, along with lack of protection of deposits caused the economy to go belly up. In addition I recall being taught in my history classes in US highschools that they were afraid of the Depression returning after the war was over.

  • The government is causing both depressions

  • 20:00 If who produces the thing is to determine whether or not the thing is counted as being part of GNP, does that mean that privately-produced health care services should count towards GNP, but government-produced (such as what the UK has) should not? Because it seems like this understanding would make an unnecessarily expensive privately-owned healthcare system look deceptively good on paper from a GNP perspective. How would a non-socialized single-payer system (Canada) look on paper?

    Let's talk about unemployment payments for a second. Putting aside for the moment the public good of paying people to stay home during an uncontrolled viral outbreak, let's focus on disincentives to work. I'm currently employed part-time as a delivery driver, but I lost my other job because of Corona, so I'm eligible for unemployment benefits (far more than I would be normally, as of two days ago). Here's the problem: my benefits are reduced dollar-for-dollar with what I earn at work, which means that I'm essentially working for free. In fact, I'm losing money because I still have to come out of pocket for gas and mileage. Wouldn't it make more sense to reduce benefits by seventy-five or fifty cents per dollar earned, so as to encourage people to take part-time work to supplement their income during a job search?

    25:46 I think you're downplaying (completely ignoring, really) the effect that GIs with pockets full of cash had on the postwar economy. War bonds were maturing, and people hadn't bought a new car since before the Depression. It wasn't just that production was able to shift back to consumer goods, it was that there was wherewithal to go with the willingness, which meant demand. Have you ever read any Keynes at all? He answers a lot of questions you don't seem to be asking.

    28:05 I'm going to need you define the word "socialist," as you're using it. Credit expansion, or theft by printing press, is done in practice to benefit the capital sector at the expense of the consumer. That doesn't sound socialist in any way at all, and the politicians doing it are usually centrists. If everyone to the left of Rothbard is a socialist, then I'm going to have to ask you to use a different term, because that understanding of socialism is so broad as to be meaningless. Is taxing the capital sector to recover for the consumer what was stolen by the printing press "socialist?"

    I mean, I'm listening to the Mises part and he's not saying anything that a socialist would disagree with. The only disagreement here seems to be who is responsible for the credit expansion: socialists, or capitalists and their lobbyists. Considering who most directly benefits from capital expansion, I'd say the answer is obvious.

  • I'm sure lots of foreign nations paying you for your assistance in war also helps the economy. Well actually it depends where that money is spent by the government.

  • You've made me, a soldier, feel useless now.
    Was it really that necessary TIK? 🙁

  • Why is there a discrepancy in the statistics? Because there is a fault in the metrics.

  • Great video TIK! Underrated topic. I have a question for you, was Abadaan refinery really Britain's achilles heel? Which one is the more influential reason for allied aggression on Iran/Iraq? Resources or corridor to the USSR?

  • And those figures are with women leaving their wartime jobs to make room for men coming home. And a Private only made $50 a month back then, and women earned less than their male counterparts on the Homefront. And women didn't start to make strides towards equality until (you guessed it) the mid-60s.

  • I couldn't help but think this mainly only matters from an economical point of view. If you're like me and think the economy isn't everything. Everything has a value and sometimes that which is uneconomical from the surface but has significant value to the nation is an economical value of it's own.
    I'm not an economist, I think if the economy shrinks but not a level lower than what it was not too long ago and then seems to recover as a 'depression', a recession sure.

    Also 'depression' especially in a free market is subject to confidence above all. Since at the end of the day economics is subjective.

  • Stick to your home!

  • Good video as always. Couldn't you of drawn this out to an hour and a half though? Lol

  • i'd like to argue politicians are also, in fact, unemployed. they contribute nothing to society.

  • Hey TIK can you do a video on the recent economic crisis and the effects of it? May be a bit outside of your usual stuff (just a bit) but it would be interesting to see what you think of it and what people should do in response (since I don't trust the government to provide proper help).

  • you early by a few hours TIK you almost had me

  • HA HA HA…….What a fricking minefield!…..Numbers lie…..numbers tell the truth…..economist got it right…….economist got it wrong……..artificial government adjustment of economic conditions is bad…….artificial government adjustment of economic conditions is good……and the whole system is built on sand to start with……aaaaahhhhhhh!!!!!Two things I know from personal experience…..during the 70's (Cold War era) I lived in California at the time …..which had many Aerospace/Aircraft and other defense related industries in state…… jobs were often scarce……but whenever a new defense contract was awarded to whoever….wherever…..the job listings would boom significantly…..and not just in those job related fields…..I got a job…….I could feed and clothe myself…..while I'm sure at some point….to some degree…. there was a economic slump…..I could live and not on the streets.Again in 2008……I lost my job……government intervention again……I was able to eat ….pay my bills…buy necessity's and other stuff too etc…….I guess my point is…….I'd much rather have a loaf of bread to eat that was produced by some theoretical imaginary process that's built on sand….than starve.I'm not saying it's economically/morally right or sound…..just saying.At that point….politics….religion……human made up concepts of morality…..economic theories…..can quickly become irrelevant.If faced with starvation/death….one might decide to blow your head off to eat your arm.I think this is what governments fear…..and why such actions…..economically sound or not……are taken……..By the way…..not to worry……I'm not coming for your arm…..for one …..I like/respect you….two……I'm not that hungry……three…..I'd have to chance running into too many infected Corona zombies along the way…….but then again……..if you were a delicious looking female……..I might not think twice?????????

  • U keep giving me great shit to unwind. As a nurse who has to deal with the current health issue, i thank you.

  • I love that you prove your maths. there would be some idiot that would disagree.

  • Soviets saved the days. Without Soviet advertisement of new technologies, America would have had no jobs at all. No jet planes, no transport aviation, no space program, no this no that.

  • WW2 had the US partnering with the Soviets. So I don't see how anyone can argue that WW2 was a fight for some "good" or "just" cause. We sided with the devil to fight another devil. What a waste. We should have just let the devils fight each other.

  • I disagree military men fighting in a war is a job there job is to secure freedom for their country to continue to have a free economy so the economic numbers may drop after the fighting but because of the job they did allowed the economy to readjust itself of course not overnight but because it’s not controlled by another nation it fixes itself …..thanks soldiers for a great JOB…Well done!!!

  • Controversial as usual. But god damn do you do solid work tik. love it!

  • Excellent. This is really interesting. I had always assumed that the traditional take that the war ended the depression. However, thw way that you have explained this actually makes a lot more sense to me. I would genuinely be interested in more videos on this subject.

  • best comment I've seen on this, it was a public sector recession in 1946, not a private sector one, as you point out, the private sector was stuck from the start of the war producing public goods (weapons). this makes it unqiue in the 20th century.

  • So wars aren't a bankers best friend? The wehraboos will be disappointed again.
    I think ONE of the reasons why the '46 Depression is not mentioned is because of the relative advancement of tech as compared to the post-'29 Depression. Automobiles became more powerful, had sleeker designs, and there were more of them. The availability of said automobiles gave rise to the Suburbs and the marketing campaign that made people believe that owning a house was part of the American Dream, although that campaign started pre-WW2 it really took off with the Suburbs. Scientists at Bell Labs invented the transistor and WW2 radar tech gave us microwave ovens. The US started building the Interstate Highway system and military service members were entitled to the GI Bill. Now the bad stuff. That GI Bill was in response to the unemployed masses of soldiers getting restless and the government was trying to avoid the same problem that it had post-WW1 (check out Gen. Smedley Butler.) No one mentions all the service members who came back suffering from severe PTSD. In the '40s and "50 African-American migrants from the South and Puerto Rican immigrants moved en masse to the Industrial centers of the North only to find that work had disappeared and majority of the factories were shutting down and not coming back.

  • Www

  • Well thanks TIK I'm even more depressed now! ?

  • TIK, your trying to make the point that consumer is better than military hard wear. I think you missed at least two areas 1) food production as in during the war farmer could get loads for land seed and tractor/equipment. food production went up this was consider war production. Also after war the groverment get this going to produce food for the countries hurt by the war. 2) Money, the wages payed to war time production works and yes even saving bonds were used for thing like home loans after the war. This money powered the USA during the transition (to switch over the factors 3) Yes, the national and personal debt well hit and having everyone on lock down does not help. I am lucky I can work from home, and yes my pay was cut by 20% for the lockdown time period.

  • Armament industry worthless industry which drains all living standards and makes dogs life in modern army, I am kidding some domestic dogs living standards is better, than soldiers. That is big problem of 1946 generation to today, elevators automation in 40s killed 10 thousand jobs around the world, robotics kills 4 million jobs in USA, even China wants bigger work force efficiency with robotics (and of course products quality and products sophistication Foxxcon builds suicide traps for kids in factories and yes smart phones gives bigger GDP than cheap plastic).
    Not everyone can be artist, singer, scientist, economist, philosopher movie director and so on, plus that is low demand and high standards jobs. Professional sport is better that army training, plus pro-sport gives a lot of money fame and free hot chicks 🙂
    Plus according economist Diana Coyle military scientific inventions 10% are adapted to civil life, and 90% research money goes,nobody knows :/ ,maybe put man on the moon 🙂 To keep men busy and happy with high testosterone instead creating violent crime gangs by men, government try puts them into army or police squadrons or militia, worst reason of industrial complex is that it is most corrupt industry sector on behalf of TOP SECRET cover, it is reason why local governors like spend taxpayers money on armament industry, where car manufacturer is in free market competition and consumer always has chance to choose from various local and imported manufacturers, you can not put price on soldier price, yes patriotism is the last refuge of the scoundrel. You can save life by not starting war.
    And third argument if some steel and chemical magnates thinks that if they rebuild steel industry by producing 16 inch naval barrels or explosion chemicals for war needs and people will have millions jobs, this jobs not just burden on consumers living standards, but also burden on environment and health. And shows that they have small pp and wants overcompensate 🙂

  • Depression is OK as long as there are TANKS.

  • And again the comments sections is full of long winded comments saying "Nuh UH!" Without really backing anything up. This is solid, bulletproof research that called out casual history on it's bullshit.

  • i sense a strong libertarian wind in the air…..just saying^^

  • Thank You TIK (Lewis) for once again another very informative video.
    Here in the United kingdom of Great Britain & Northern Ireland there is this group which George Orwell warned everyone about called the Fabian Society. The Fabian were and still are fierce socialists who admired and praised large Socialist Nationalist Fascist dictatorships such as Mussolini's Fascist Italy & Adolf Hitler's Nazi Germany. They founded the Labour Party as well as the London School of Economics and Publications such as the New Statesman.
    With whats happening now in Lock-down Britain I suspect them to be in overdrive pushing for a universal income for the unemployed masses on the condition that people take their mandatory vaccines.
    The UK and the world needs to be more libertarian and return back to a true market based economy.

  • What I take from this and the last video on depressions is that if we re-open everything now and pretend it's "business as usual" like many politicians want we'll be just sacrificing lives for nothing, the depression is already here, it's inevitable and it will be worsen by things that are out of our control like bailouts and money printing. Am I correct in my assumption our should I stick to tanks?

  • Dude you just repeat the same shit for the 10 minutes, holy fuck I barely watch this channel because i knew it was boring but God damn.

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