What should FDR have done during the interregnum?

Paul Krugman made the following comment about a recent statement by Obama:

And here’s this, from Thomas Ferguson: Obama saying

“We didn’t actually, I think, do what Franklin Delano Roosevelt did, which was basically wait for six months until the thing had gotten so bad that it became an easier sell politically because we thought that was irresponsible. We had to act quickly.”

As Ferguson explains, this is a right-wing smear. What actually happened was that during the interregnum between the 1932 election and the1933 inauguration — which was much longer then, because the inauguration didn’t take place until March — Herbert Hoover tried to rope FDR into maintaining his policies, including rigid adherence to the gold standard and fiscal austerity. FDR declined to be part of this.

But Obama buys the right-wing smear.

I’m not a FDR hater; I think he was “magnificently right” to devalue the dollar (to quote Keynes.)  But FDR probably should have cooperated with Hoover–even if it meant (falsely) promising not to devalue the dollar.

And please don’t say “but that would have been lying.”   Here’s the Democratic Party platform that FDR campaigned on: 

The Democratic Party solemnly promises by appropriate action to put into effect the principles, policies, and reforms herein advocated, and to eradicate the policies, methods, and practices herein condemned. We advocate an immediate and drastic reduction of governmental expenditures by abolishing useless commissions and offices, consolidating departments and bureaus, and eliminating extravagance to accomplish a saving of not less than twenty-five per cent in the cost of the Federal Government. And we call upon the Democratic Party in the states to make a zealous effort to achieve a proportionate result.

We favor maintenance of the national credit by a federal budget annually balanced on the basis of accurate executive estimates within revenues, raised by a system of taxation levied on the principle of ability to pay.

We advocate a sound currency to be preserved at all hazards and an international monetary conference called on the invitation of our government to consider the rehabilitation of silver and related questions.

Politicians lie all the time.  They are expected to lie.  The British government lied in 1931, 1967, and 1992, when it said it wasn’t going to devalue, before it did devalue.  That’s expected.  Everyone knows that if you say you will devalue in the future, it forces an immediate devaluation.  And under a gold standard if there is uncertainty about whether a devaluation will occur then gold hoarding increases, which is deflationary.  This happened on four occasions during the Great Depression, and on each occasion asset prices and industrial production declined sharply. 

FDR basically had three choices.  The traditional route would have been to lie and say that he would adhere to the platform, maintaining the gold standard while working toward an international agreement to give silver a monetary role.  The markets knew that other countries weren’t going to adopt silver.   Then when he took office he could have said; “Because I wasn’t able to get agreement, we have to go it alone with a currency devaluation.” 

Or he could have told the truth and said he was going to devalue the dollar.  That would have forced Hoover’s hand, and a devaluation would have occurred almost immediately.  The promising upswing of July to October 1932 would have turned into an explosive boom.  The 57% increase in industrial production that occurred during the first four months of FDR’s term would have instead occurred in the last 4 months of the Hoover administration.  If FDR had gone ahead with the NIRA’s high wage policy then he would have been blamed for aborting the Hoover recovery.

Instead he was continually evasive.  Even in Hoover’s last days in office he refused to support any of Hoover’s actions to address the banking crisis.

The interregnum was a horrible period, with an enormous amount of suffering during the winter of 1932-33.  It was the low point of the Great Depression.   And although the Depression itself was Hoover’s fault, this especially bleak period was partly FDR’s fault.  I’m not one of those conspiracy buffs who thinks FDR intentionally allowed Pearl Harbor to happen.  And I doubt he fully understood the effect of his evasive answers.  But most educated observers back then knew what was going on.  They knew that uncertainty about the dollar was depressing the economy.  The press pointed to similar events during the late 1800s, when fears about the soundness of the dollar had also had a deflationary impact.  FDR had three options, and he picked the one that imposed maximum harm on the economy.  That’s no right wing smear, it’s the truth.

Update:  Commenter Russ Anderson pointed out that this post was confusing.  I should have been clearer that while the best option for the country was for FDR to state he would devalue, and force Hoover’s hand, that option was a complete non-starter, politically unacceptable.  Those things just are done.  Given that the best option wasn’t really on the table, he should have said he’d maintain the gold standard.  Nothing I said should be seen as implying that the Great Contraction was caused by anyone other than Hoover.


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36 Responses to “What should FDR have done during the interregnum?”

  1. Gravatar of Russ Anderson Russ Anderson
    24. November 2010 at 06:23

    Perhaps I’m missing something. You say FDR was right to devalue the dollar and you say FDR should have cooperated with Hoover, even though Hoover opposed devaluing the dollar. Why should have FDR cooperated in doing the wrong thing? More importantly, how would FDR signing on to Hoover’s opposition to devaluing have helped the economy? (Phrased another way, how would choice #1 have a different economic result than choice #3?)

    You seem to be saying choice #2 would have had the best economic effect, but that choice is the complete opposite of cooperating with Hoover. Instead it is undermining Hoover for the good of the economy.

    Hoover was still the president during the interregnum and still had final responsibility for the policies of his administration. Hoover did not need FDR to sign off on his policies. If Hoover did not make economic moves that would help the economy because FDR would not sign off, that was Hoover’s fault. Hoover’s real problem was that the policies he wanted in the interregnum were the same policies that had not worked for the previous 3.5 years. He just wanted FDR to sign off on those failed policies. It may have made good political sense for Hoover to try to tie FDR to his failed policies, but that hardly makes FDR a bad guy for failing to play along.

  2. Gravatar of scott sumner scott sumner
    24. November 2010 at 07:26

    Russ, Number 2 was the best from an economic perspective, and you’re right that it would have represented a lack of cooperation. I’m saying it would have been best, but politically was likely a non-starter. Those things just aren’t done.

    I agree that Hoover should have devalued, and I said he was responsible for the Great Depression. But given Hoover was not going to, FDR should have said he wouldn’t either. Creating uncertainty has a devastating impact on AD, and results in lots of unemployment. The irony is that while a hard gold standard is far far worse than fiat money. A gold standard where there is uncertainty about the future dollar peg is much worse than even a hard gold standard. It leads to gold hoarding and banking panics. FDR’s hints that he might devalue hurt Hoover’s policy. I agree that Hoover should have responded to FDR’s hints by devaluing immediately, and he didn’t. Please don’t read my post as a defense of Hoover—one of the worst presidents ever (along with Wilson.)

  3. Gravatar of scott sumner scott sumner
    24. November 2010 at 07:32

    Russ, I added an update to reflect your criticism.

  4. Gravatar of Contemplationist Contemplationist
    24. November 2010 at 08:35

    Okay now I’m totally confused. How can Hoover have caused the Depression when we here are focussed on monetary policy? If Governor Strong had not died, would you be crediting Hoover?

  5. Gravatar of Mark A. Sadowski Mark A. Sadowski
    24. November 2010 at 09:05

    Scott,
    Pinning the blame for the dreadful winter of 1933 on uncertainty over FDR’s future actions strikes me as a little incredible. If everyone was so uncertain as to what FDR was really going to do why did Hoover expend so much effort trying to get him to commit to staying on the gold standard and to US participation in the London Economic Conference?

  6. Gravatar of Jim Glass Jim Glass
    24. November 2010 at 10:28

    “Nothing I said should be seen as implying that the Great Contraction was caused by anyone other than Hoover.”

    The Great Contraction phase of the Depression certainly wasn’t caused by FDR, but I don’t think Herbert would appreciate you saying it was caused by nobody but him.

  7. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    24. November 2010 at 10:31

    ‘I’m not one of those conspiracy buffs who thinks FDR intentionally allowed Pearl Harbor to happen….’

    Actually, the evidence strongly suggests that Harry Dexter White deliberately provoked Japan into attacking us on orders from his KGB handler, post Hitler’s attack on Russian in June 1941.

    Eric Breindel and Herbert Rommerstein quote the ostensible KGB agent to that effect in their book on Venona.

  8. Gravatar of cassander cassander
    24. November 2010 at 11:13

    Never forget this gem:

    “The removal of government from all fields of private enterprise except where necessary to develop public works and natural resources in the common interest.”

    If only it were so…

  9. Gravatar of cassander cassander
    24. November 2010 at 11:37

    Patrick> American policy for years had been directed toward containing Japan in the Pacific, implicitly since the Russo-Japanese war, explicitly since the Washington Treaty, and especially after their invasion of China. That said, the sneak attack on the american fleet at pearl harbor was Yamamoto’s baby, vigorously opposed by the navy high command and carried out only because Yamamoto threatened to resign if the operation was not carried out. FDR was especially fond of the navy and would never have moved the Pacific fleet to Hawaii if he had thought there was a chance of it being attacked at anchor.

  10. Gravatar of caveat bettor caveat bettor
    24. November 2010 at 12:58

    FDR may not have allowed Pearl Harbor to happen, but I know that allied intelligence agents did send the OSS (CIA predecessor) the Japanese fleet’s intercepted and decrypted transmissions indicating attack on US forces and sovereignty around the end of November, 1941.

    I know this because my grandfather was one of those agents.

    I doubt more and more that the fact our carriers were away on exercises to be mere coincidence.

  11. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    24. November 2010 at 15:18

    Cassander, nothing you said has any bearing on what I wrote. It is simple fact that in the late summer and fall of 1941 our policy toward Japan became much more aggressive. We demanded that they pull out of China, or suffer a boycott, of, among other things, oil. Japan had occupied parts of China since 1937, why did it suddenly become important to us in late 1941?

    Also, there is no evidence FDR himself had a clue what his employees were really up to, i.e. taking their orders from Moscow rather than him.

  12. Gravatar of scott sumner scott sumner
    24. November 2010 at 18:14

    Contemplationist, I meant Hooverite policies:

    1. He supported the Fed’s tight money policy. Don’t think that doesn’t matter.

    2. He supported and signed Smoot-Hawley.

    3. He sharply raised taxes in 1932

    4. He strongly pressured big business to maintain wages despite deflation. And indeed wages fell much less rapidly than in 1921.

    Mark, You said;

    “Scott,
    Pinning the blame for the dreadful winter of 1933 on uncertainty over FDR’s future actions strikes me as a little incredible. If everyone was so uncertain as to what FDR was really going to do why did Hoover expend so much effort trying to get him to commit to staying on the gold standard and to US participation in the London Economic Conference?”

    First of all let’s set aside FDR. I am quite certain that uncertainty over the dollar led to gold hoarding in late 1931, in the spring of 1932, in early 1933, and in late 1937. On each occasion the asset markets and the economy did very poorly. There’s a reason. Fears about the dollar led to a sharp increase in gold hoarding, which is deflationary when the nominal price of gold is fixed.

    Whether FDR should be blamed for early 1933 is a tougher question. But I can see why Hoover would have been desperate to get FDR’s support. Hoover was trying to strike international agreements over gold, war debts, ect. But he had no leverage w/o FDR’s support on the war debts. And Hoover couldn’t stop gold hoarding without either devaluing immediately or getting FDR to promise not to devalue. Hoover wasn’t going to devalue, indeed the actual devaluation was so controversial that many of FDR’s top economic advisers resigned in protest. Think about what that means. It would be like expecting George Bush to do a health care bill that was so controversial that Obama’s top people would later resign in protest over the radical nature of the bill. People forget just how controversial the FDR move was. Unlike Britain, the dollar was no under pressure when FDR devalued.

    Jim Glass, I didn’t phrase that properly. I meant Hooverite policies. See my answer above.

    Patrick, I had a hunch someone would mention that. I’m no expert, but my hunch is that FDR heard rumors of an attack, but thought it would be smaller and further east. If he really knew what was coming he could have gotten just as much political mileage out of the attack if he had warned Pearl Harbor 2 hours earlier, so they could have better defended themselves. That’s why I think the extreme conspiracy theories are implausible–there is no motive.

    cassander, Yes, I had to chuckle reading the platform. If you are going to lie that much, does it really hurt to wait a couple more months before announcing that you were considering devaluation?

    And I agree about FDR and the navy.

    Caveat bettor and Patrick, I agree that FDR probably heard rumors about a possible attack. I also agree that FDR wanted to enter the war. Perhaps he did provoke Japan on purpose. I am not knowledgeable enough to respond to those arguments. All I meant is that I didn’t believe the sort of theories floating around with 9/11–that the President knew precisely what was going to happen, and the tragedy could have been avoided. Milder conspiracy charges might well be true–I can’t say.

  13. Gravatar of Russ Anderson Russ Anderson
    24. November 2010 at 19:52

    Scott, thanks for the reply and update. In general I agree with most of your points. Keep that in mind as I pick on some specifics.

    I agree #2 was best from an economic perspective and maybe politically a non-starter (not that 1930′s politics is my strong suit). But what if FDR had tried? Would it have “forced Hoover’s hand”? Keep in mind, as you point out, the three previous gold hoardings (especially the one in late 1931 after Great Britain left the gold standard). Those did not force Hoover’s hand even as industrial production declined sharply. The fourth gold hoarding, in the interregnum, with its sharp decline in industrial production likewise did not force Hoover’s hand. My point is there was no way to force Hoover’s hand (not even as bad as the economy sunk in the spring of 1933). There was no choice #2.

    As for “uncertainty”, I have a hard time understanding how having FDR lie about being committed to Hoover’s gold standard policies and pushing a silver standard that the markets knew other countries would not adopt only to do a 180 degree turn and devalue would reduce “uncertainty”. How much “certainty” could the markets have with FDR after a move like that?

    It’s like saying we can reduce uncertainty if we all play pretend. FDR refused to pretend that the gold standard was working so it’s part his fault. The gold standard was failing, the markets increasingly recognized that reality (especially after late 1931) and Hoover refused to recognize it regardless of how low the economy sunk. FDR playing pretend wasn’t going to change the underlying fundamentals. There was no choice #1.

    Given all that, I have a hard time blaming FDR refusing to sign on to Hoover’s policies or blaming FDR for Hoover’s actions (or inactions) during the interregnum.

  14. Gravatar of cassander cassander
    24. November 2010 at 23:57

    Caveat> The OSS wasn’t formed until 1942 and Donovan was just a WWI vet and political lawyer. Perhaps your grandfather was with Army or Navy Intelligence?

    Patrick> I see a pretty steady ramping up of pressure on both sides of the Pacific. There was the invasion of China, the refusal of Japan to settle for anything less than the complete conquest of china. So the US cancels it’s commercial treaty with Japan, so they sign up with the axis powers, so we pass the 2 ocean navy bill. Then Japan invades north Vietnam. Then we embargo their scrap metal. Then they invade south Vietnam and we embargo their oil. Most accounts of the war seem to say that FDR had pretty much settled on fighting by the late 30s. Remember, he signed the Atlantic charter in August of 41 (before the US was at war) point six of which started “After the final destruction of Nazi tyranny”

    Now, you could argue that FDR was pushed towards these decisions by men like Hiss and White, I wouldn’t deny it, but it’s hard to see FDR bumbling toward a war he didn’t want or expect. There is plenty of evidence of soviet influence on american decision making during and after the war, why grasp at straws concerning the war’s beginning?

  15. Gravatar of Mark A. Sadowski Mark A. Sadowski
    25. November 2010 at 00:31

    Scott wrote:
    “Whether FDR should be blamed for early 1933 is a tougher question. But I can see why Hoover would have been desperate to get FDR’s support. Hoover was trying to strike international agreements over gold, war debts, ect. But he had no leverage w/o FDR’s support on the war debts. And Hoover couldn’t stop gold hoarding without either devaluing immediately or getting FDR to promise not to devalue. Hoover wasn’t going to devalue, indeed the actual devaluation was so controversial that many of FDR’s top economic advisers resigned in protest. Think about what that means. It would be like expecting George Bush to do a health care bill that was so controversial that Obama’s top people would later resign in protest over the radical nature of the bill. People forget just how controversial the FDR move was. Unlike Britain, the dollar was no under pressure when FDR devalued.”

    Smaller quote:
    “Hoover wasn’t going to devalue, indeed the actual devaluation was so controversial that many of FDR’s top economic advisers resigned in protest. Think about what that means.”

    So you’re essentially saying that FDR should have had his gonads cut off because Hoover didn’t have the guts to do the same.

  16. Gravatar of Mark A. Sadowski Mark A. Sadowski
    25. November 2010 at 00:41

    Cassander wrote:
    “Caveat> The OSS wasn’t formed until 1942 and Donovan was just a WWI vet and political lawyer. Perhaps your grandfather was with Army or Navy Intelligence?”

    Perhaps most of us will never know the true story. (And some of us already know it all too well.) Oh well. Get used to it.

  17. Gravatar of ssumner ssumner
    25. November 2010 at 08:39

    Russ, Those previous episodes were very different, as the fear of devaluation was rather low. People correctly saw that Hoover was unlikely to devalue. The forward markets showed the dollar falling only a point or two. But when rates are near zero, that’s enough to trigger some gold hoarding. And remember that actual devaluations tend to be large. If FDR said he’d devalue in March, the 6 month forward dollar would have plunged 20% or 30%. When rates are near zero that forces either super high interest rates or devaluation. There is no way Hoover could have fought the markets at that point. Everyone would see an easy way to become as rich as George Soros–the gold standard would have collapsed almost immediately.

    Your second point is stronger–FDR might not have been believed. But I think he should have tried. Even with his evasions the risk of devaluation wasn’t that high–we weren’t in desperate financial shape like Britain in 1931. By publicly supporting a strong dollar he could have further reduced uncertainty.

    The interregnum is an awkward period. There are some types of policy that require long term credibility. When there is a long interregnum it makes economic policy less effective. The previous time parties changed, November 1920 to March 1921, was also a complete economic disaster, with plunging output–although the political connection is less clear. There were also troubles in the late 1800s. I recall reading when Cleveland was elected the economy was very unstable until he made a strong defense of the gold standard. Fear of dollar devaluation also contributed the the 1893 depression. It was a chronic problem in our system. The best answer is make the interregnum shorter, which we did after 1933. But it’s still too long, and once again policy drifted between November 2008 and January 2009. (Although Obama did endorse TARP.) That was the period of maximum collapse in the economy. Someone should do an economic study of interregnums. And they should be shorter still. I think in Britain they are less than one day.

    Cassander, Thanks for that info.

    Mark, You said;

    “So you’re essentially saying that FDR should have had his gonads cut off because Hoover didn’t have the guts to do the same.”

    Don’t think about FDR’s pride, think about the extra few thousand unemployed men huddled around bonfires during the winter of 1932-33 because of the gold/banking crisis.

    Life’s not fair, but that was the right thing to do.

    If McGovern had been elected in 1972 he should have publically announced that the North wouldn’t get a better deal from him than they’d get in ongoing negotiations with Kissinger–regardless of what he’d actually do.

  18. Gravatar of Mark A. Sadowski Mark A. Sadowski
    25. November 2010 at 20:44

    Scott,
    You wrote
    “Don’t think about FDR’s pride, think about the extra few thousand unemployed men huddled around bonfires during the winter of 1932-33 because of the gold/banking crisis.”

    Well put and well said. I’m with you as always.

  19. Gravatar of Russ Anderson Russ Anderson
    26. November 2010 at 14:37

    “Don’t think about FDR’s pride, think about the extra few thousand unemployed men huddled around bonfires during the winter of 1932-33 because of the gold/banking crisis.”

    Shouldn’t that be: Don’t think about Hoover’s pride, think about the extra few thousand unemployed men huddled around bonfires during the winter of 1932-33 because of the gold/banking crisis. After all Hoover was the president at that time.

    As Scott correctly points out, “Hoover wasn’t going to devalue” and the opposition to devaluation was more than just Hoover, it was also Hoover’s political base and many in FDR’s base. Scott’s description of how controversial devaluation was is, if anything, understated. Devaluation was really, really controversial.

    Scott is probably correct that had FDR said that he would devalue the forward dollar would have plunged (etc). Scott concludes “There is no way Hoover could have fought the markets at that point.” Are you sure?

    We know that 20% unemployment was not enough to get Hoover to devalue, We know that the collapse of much of the banking system was not enough to get Hoover to devalue. We know the gold hoarding and thousands huddled around bonfires during the winter of 1932-33 wasn’t enough. None of the pain caused by the Great Depression was enough to get Hoover to devalue. That is the actual history,

    I don’t see any way that Hoover ever devalues the dollar. A quick look at Hoover’s memoirs confirms that view. Maybe I’m missing some later history where Hoover admits that he should have devalued or conditions that would have led him to devalue.

    Here’s an alternative scenario: Hoover refuses to have his hand forced (to devalue) and blames FDR for the plunging forward dollar and the resulting economic damage. Hoover and the gold supporters then blame FDR for the Great Depression. That, of course, is pretty much what Hoover and the gold supporters really did do anyway even without FDR trying to force his hand.

    To a lesser degree, since FDR did not sign off on Hoover’s refusal to devalue, we are supposed to believe that FDR signed up for some of the blame for effect of Hoover refusing to devalue. I don’t find that convincing.

    FWIW, from The Memoirs of Herbert Hoover, Vol 3, p 195: “Despite the greatly increased load during the winter of 1932-1933, a survey of the work of the various relief agencies showed that except for persons occasionally overlooked, there was neither hunger nor cold among the unemployed.”

  20. Gravatar of Russ Anderson Russ Anderson
    26. November 2010 at 16:11

    This seems relevant to the discussion. From The Memoirs of Herbert Hoover, Vol 3, Chapter 18, page 197:

    “Another disturbing factor was the fear of currency manipulation. There had long been a large element for “soft money,” “fiat money” and “managed currency” in the Democratic party. Many such money bills had been fathered by important Democratic members of the previous Congress. The Democratic platform had straddled the issue of the gold standard by calling for “sound” money.

    From this background and information in our hands, we had repeatedly charged during the campaign that if Roosevelt were elected there would be tampering with the gold standard or managed currency or fiat money issues. At Roosevelt’s request, Senator Glass furiously denied it, and Roosevelt, himself, flatly denied it in a speech on November 4, 1932, citing the “covenant” on all issues, which stated that they were payable in gold of present weight and fineness. Nevertheless, tinkering with the currency was quickly to emerge.

    The sum of all these matters was to turn the clock of recovery abruptly backward with the election. And failure to cooperate was to push it still further back.”

    According to Herbert Hoover, 1) it was the Hoover campaign that repeatedly raised uncertainty over FDR’s commitment to the dollar. 2) Roosevelt flatly denied those assertions, expression support for the gold standard. 3) Hoover blames FDR for the economic downturn.

    At least according to Hoover, FDR chose Scott’s option #1 (as Scott suggested) and it was the Hoover campaign that raised uncertainty. To the degree that the uncertainty hurt the economy, Hoover was the one actively doing it.

  21. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    26. November 2010 at 16:26

    I’m grasping at archived documents, cassander. On June 21, 1941–the day before Hitler stunned everyone by invading Russia (and, before the KGB contacted Harry White)–Cordell Hull handed the Japanese Ambassador in Washington this proposed draft of an agreement:

    http://www.ibiblio.org/pha/paw/213.html

    It’s couched in the normal diplomatic niceties, such as:

    ‘The Japanese Government having communicated to the Government of the United States the general terms within the framework of which the Japanese Government will propose the negotiation of a peaceful, settlement with the Chinese Government., which terms are declared by the Japanese Government to be in harmony with the Konoe principles regarding neighborly friendship and mutual respect of sovereignty and territories and with the practical application of those principles, the President of the United States will suggest to the Government of China that the Government of China and the Government of Japan enter into a negotiation on a basis mutually advantageous and acceptable for a termination of hostilities and resumption of peaceful relations.’

    After Operation Barbarossa that tone disappears in the formal exchanges, and is replaced by what one could call insults. Insults we were avoiding even in light of the Japanese transgressions you listed above. It’s very clear that things changed once Stalin was at war with Japan’s ally Germany.

    Btw, Hill wasn’t in a policy making position, but White was essentially running Treasury.

  22. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    26. November 2010 at 16:29

    Oops, that should be ‘Hiss’ not ‘Hill’ above.

  23. Gravatar of Mark A. Sadowski Mark A. Sadowski
    26. November 2010 at 16:53

    But the point is that the although the OSS may have known the truth before it occurred they should still have not cared. The OSS’s job was to deliver information. That is all.

  24. Gravatar of Mark A. Sadowski Mark A. Sadowski
    26. November 2010 at 17:12

    Why should I care? My father was in the OSS. What does it matter now?

  25. Gravatar of Mark A. Sadowski Mark A. Sadowski
    26. November 2010 at 17:45

    Again,
    Arnhem,

    http://video.search.yahoo.com/video/play?ei=UTF-8&fr=yfp-t-948&fr2=tab-web&p=a+bridge+too+far&vid=261652414494&dt=1247641200&l=192&turl=http%3A%2F%2Fts3.mm.bing.net%2Fvideos%2Fthumbnail.aspx%3Fq%3D261652414494%26id%3Dfdcfef9fc12f5362b11d31e94a442149%26bid%3Dq3mOHconn5tAWA%26bn%3DThumb%26index%3Dch1%26url%3Dhttp%253a%252f%252fwww.dailymotion.com%252fvideo%252fx9vcbi_a-bridge-too-far-trailer-1977_shortfilms&rurl=http%3A%2F%2Fwww.dailymotion.com%2Fswf%2Fx9vcbi%26v3%3D1%26autoPlay%3D1%26related%3D1%26autoStart%3Dtrue&tit=a+bridge+too+far+trailer+1977&sigr=12e0af99k&newfp=1

    We had the huns by the nose and we kept kicking them in the !@# until we won.

  26. Gravatar of cassander cassander
    26. November 2010 at 18:32

    Patrick> But the Japanese decided to attack America BEFORE June ’41. Japanese foreign policy for years had been fought between the navy party, which wanted to advance in the south pacific and the army party which wanted to advance in china, Siberia and Manchuria, but by 1940 the Navy was ascendant. The war with china dragged on interminably, Hitler’s pact with Stalin made it seem unlikely that he would ally against the USSR, and in border skirmishes the best of the Japanese army was humiliated by second string soviet divisions. Yamamoto delivered the first draft of the pearl harbor plan in january of 41, and it was officially named Operation Z in April.

    Now, I have no doubt that once Hitler turned on Stalin, men like white tried to hurry things along. But by that point, the die had already been cast. I just don’t see them having that much of an effect on outcomes.

  27. Gravatar of Mark A. Sadowski Mark A. Sadowski
    26. November 2010 at 19:28

    There are three points of view on this:

    http://www.youtube.com/watch?v=sXldafIl5DQ&feature=player_embedded

  28. Gravatar of Mark A. Sadowski Mark A. Sadowski
    26. November 2010 at 19:36

    Or as the man with no name once said: “There are two kinds of people in the world, those with loaded guns, and those who dig.”

  29. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    26. November 2010 at 22:18

    cassander, they had plans to invade Russia at the same time they were planning the Pearl Harbor attack. This was the intense focus of Richard Sorge’s spy ring in Tokyo; to find out which it would be. Sorge was even monitoring Japanese military uniform factories to see if they were producing cold weather, rather than tropical, clothing.

    Japan and the U.S. were negotiating into November, it wasn’t until then that Pearl Harbor was finally approved.

  30. Gravatar of scott sumner scott sumner
    27. November 2010 at 08:45

    Russ, You don’t provide any alternative as to what Hoover would have done. He certainly couldn’t have done nothing or all of the gold would have drained out of the US. Hoover himself indicated that they were almost forced to leave the gold standard in early 1932.

    If he didn’t devalue he would have done what the Germans did and adopted exchange controls. Even that would have been far better than the status quo.

    Technically you might be right–I should have said been forced to leave the gold standard, not devalue.

    I agree that Hoover was not aware of people suffering in the winter of 1932-33.

  31. Gravatar of Mark A. Sadowski Mark A. Sadowski
    27. November 2010 at 20:28

    Russ wrote:
    “According to Herbert Hoover, 1) it was the Hoover campaign that repeatedly raised uncertainty over FDR’s commitment to the dollar. 2) Roosevelt flatly denied those assertions, expression support for the gold standard. 3) Hoover blames FDR for the economic downturn.

    At least according to Hoover, FDR chose Scott’s option #1 (as Scott suggested) and it was the Hoover campaign that raised uncertainty. To the degree that the uncertainty hurt the economy, Hoover was the one actively doing it.”

    Rings true.

  32. Gravatar of ssumner ssumner
    28. November 2010 at 06:51

    Mark, That point actually supports my argument, not Russ’s. The problem occurred after the election. If FDR “flatly denied” an intention to devalue before the election, he had a moral responsibility to “flatly deny” an intention to devalue after the election.

  33. Gravatar of Russ Anderson Russ Anderson
    29. November 2010 at 22:17

    Scott, really? FDR does what you suggest, stating support for the gold standard 3 days before the election, in response to Hoover raising uncertainty, and that doesn’t count?

    The alternative was that Hoover refuses leave the gold standard (or devalue) and blames FDR for the plunging forward dollar and the resulting economic damage. That is what he actually did.

    Scott is correct that Hoover said they were almost forced to leave the gold standard in early 1932 (explained in detail in Volume 3 of his Memoirs http://www.ecommcode.com/hoover/ebooks/browse.cfm). In Feb 1932 gold was flowing out at a rate of $100M a week while “free” gold reserves were down to $350M. As part of dealing with this, the percentage of gold held in reserve for each paper dollar was reduced from 70% to 40% (in the Glass-Steagall Act) the effect being an increase in “free” gold. This meant the next gold run (spring 1933) would need a significantly larger outflow of “free” gold before the Federal Reserve would run out. According to Hoover, the outflows of gold were $160M in Feb 1933 and $122M in the first 4 days of March 1933, which was smaller than the total outflow in early 1932. I don’t have the exact total of “free” gold in early 1933, but presumably it was significantly higher (due to change in the reserve rate) than in early 1932. Hoover makes no indication that it was getting close to running out in early 1933. The amount of “free” gold is how much of a gold run it would have taken to force the US off the gold standard.

    Hoover does talk about possibly using a WWI war powers law which Congress had never repealed to limit withdrawals and gold flows, but said his legal advisors questioned it’s legality. Hoover then writes: “I then developed the idea of my issuing an executive order under this power, provided Roosevelt would approve. My legal advisors agreed that, if he approved, it could be done because he could secure ratification in a few days from his overwhelming majority in the incoming Congress.” Think about that. Hoover claims he, as the sitting president, was not authorized by the WWI law, but if the president elect (with no legal authority) signs off it would be legal because a _future_ congress could ratify it.

    Hoover later complains when Roosevelt says he plans to use the WWI law while also complaining that it’s Roosevelt fault that Hoover didn’t use that law because Roosevelt would not agree to Hoover using it. The point being Hoover could have used the WWI law to limit withdrawals and gold flows (and limit the economic damage) had he chose to do so, but he didn’t, while blaming FDR.

    Hoover makes clear in his Memoirs his desire to stay on the gold standard (Chapter 24: THE GOLD STANDARD AND MANAGED
    CURRENCY ISSUES).

    My guess, if “free” gold reserve got low enough, is that Hoover would have used the WWI law to limit gold flows as a way of slow the gold drain without going off the gold standard. But anything short of running out of “free” reserves would not get him to abandon the gold standard or devalue. Trying to “force Hoover’s hand” would only result in a smaller monetary base (due to gold flows) with the resulting contraction of the overall economy.

  34. Gravatar of ssumner ssumner
    30. November 2010 at 06:53

    Russ, You said;

    “Scott, really? FDR does what you suggest, stating support for the gold standard 3 days before the election, in response to Hoover raising uncertainty, and that doesn’t count?”

    That makes FDR’s action after the election far more indefensible than even I had recalled. If he did this before the election, he had a moral obligation to make even stronger statements in support after the election.

    I did not say Hoover came close to devaluing in 1933, I agree the outflows were not nearly large enough to force his hand. But the outflows would have been many orders of magnitude larger had FDR promised to devalue upon taking office. I agree with your argument about the incredible ineptitude of Hoover, and that he should have used the WWI law. And even an embargo (with no devaluation) would have been much better than actual policy. But I still don’t think FDR should have been so cagey about the gold standard after the election. He saw that Hoover was floundering, and while it might have been personally satisfying not to help Hoover out of his self-inflicted mess, it was not good for the country to have uncertainty about gold.

  35. Gravatar of Did the People Reject the Gold Standard? Did the People Reject the Gold Standard?
    1. June 2011 at 19:36

    [...] on ending the gold standard. Here was the Democratic platform for the 1932 election, as reported by Scott Sumner: The Democratic Party solemnly promises by appropriate action to put into effect the principles, [...]

  36. Gravatar of Did the People Reject the Gold Standard? | Did the People Reject the Gold Standard? |
    1. June 2011 at 20:49

    [...] on ending the gold standard. Here was the Democratic platform for the 1932 election, as reported by Scott Sumner: The Democratic Party solemnly promises by appropriate action to put into effect the principles, [...]

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