Monday, October 19, 2009

WSJ: The View From Inside a Depression

Thanks to Will for passing this along.

In January 1931, a lawyer named Benjamin Roth, 38 years old, solidly Republican, a solo practitioner in Youngstown, Ohio, decided to start a diary. Realizing that he was “living through an historic thing that will long be remembered” — as he put it in one early entry — he wanted to keep a record for posterity.

Mr. Roth’s diaries have just been published in book form — “The Great Depression: A Diary” — edited by his son Daniel, who worked in his father’s law practice for many years, and James Ledbetter, the editor of The Big Money, a financial site run by Slate. It is an eye-opening read, though not necessarily in the ways you might think.


A few months later, he wrote: “As I re-read some of the predictions made by outstanding economists in past few years, I must laugh. They were all wrong. None of them foresaw the 1937-1939 collapse and many predicted inflation before this.” Mr. Roth comes to the conclusion that relying on experts is a waste of time.

Today, we’re all a little like Benjamin Roth, asking questions we don’t know the answer to, and wondering, as he did 70 years ago, whether the crisis is, indeed, over.

Maybe the fact that the Dow crossed the 10,000 mark this week really does signal that the crisis has ebbed, as The Journal put it on Thursday. Or maybe the poor earnings by Bank of America and Citigroup this week suggest we’re merely in the eye of the hurricane, as 1935 and 1936 turned out to be.

There are plenty of experts who will tell you the worst is over, and I hope they’re right. But as Mr. Roth discovered in the 1930s, the experts can’t predict the future any better than the rest of us. When you are living through a financial crisis, all you can do is wait and see. Governments take action they hope will have the desired effect — but who knows if they really will? It only becomes clear much later, and far too late for those of us living through it.

On that same day in early 1937 that Mr. Roth mistakenly wrote that the Depression had ended, he concluded that instead of relying on experts, the only proper course was to “use your own judgment and do your own thinking.”

In the fall of 2009, those remain words to live by.


Book: The Great Depression: A Diary