Hall of Mirrors
Book

Hall of Mirrors

The Great Depression, the Great Recession, and the Uses – and Misuses – of History

Barry Eichengreen
Oxford World’s Classics, 2015
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8

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Recommendation

Economist Barry Eichengreen presents an exhaustive study of the two great financial crises of the past century, the Great Depression and the Great Recession. From Federal Reserve rate cuts to housing bubbles to European currency crises, Eichengreen leads a comprehensive tour of two seminal periods. With the benefit of hindsight, he debunks a few popular myths. While plainly knowledgeable and a clear communicator, Eichengreen isn’t always the most helpful guide. Serious students of economics may already be familiar with much of the ground he covers, while lay readers could struggle to make sense of his sometimes-dense prose and jargony references to “macro-prudential policy” and “dissaving.” getAbstract recommends his substantive history to investors and policy makers who are conversant with these issues and who seek additional insight into markets, US history and economic policy.

Summary

Similar Crashes, Decades Apart

When global markets crashed in 2008, central bankers insisted they already had learned the lessons of the Great Depression. Where 1930s-vintage bankers were slow to act, modern economists slashed interest rates and pumped liquidity into the markets. The official response to the Great Recession seemed to thwart disaster. The US unemployment rate reached 25% in the 1930s. It peaked at only 10% after the Great Recession. Thousands of banks failed in the Depression. Hundreds crashed in the Recession. Policy makers contained the damage more effectively in 2008. But with the lessons of the Depression, they should have seen and acted on obvious signs of trouble.

Real estate bubbles in Florida and frothy commercial real estate values in the Northeast US preceded both the Great Depression and the Great Recession. Radio Company of America (RCA) was the hot tech stock of the 1920s, like Google and Apple in the early 2000s. In the run-up to both crashes, business leaders and economists gloated that they had figured out business cycles and that volatility was a relic of the past. A period of robust economic growth averaging 8% a year from 1933 through...

About the Author

Barry Eichengreen is a professor of economics and political science at the University of California, Berkeley. His previous books include Exorbitant Privilege and Golden Fetters.

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