When FDR took office, he had to fix two parallel legacies of the booming speculative 20s, both of which caused busts in the 30s. There were cross-ties between the two legacies, so he couldn't fix either one by itself. He had to fix them in a cross-linked way.
One boom was initiated by huge government purchases of food in WW1. Bankers encouraged inexperienced farmers to buy useless land to take advantage of the demand. When the demand quickly disappeared, the farmers were left with a mortgage and no way to make enough money to pay it. They abandoned the farms after plowing off the (already poor) topsoil. When a fairly serious drought hit in 1930, the land took flight, covering up everything in its path.
Even competent farmers on good land had been using improper methods, allowing wind and water to carry off the soil. Millions of tons of topsoil were ending up in the Gulf of Mexico.
The other boom was the stock boom, which needs no introduction.
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FDR's administration used similar methods to solve both problems.
In the context of soil:
When the wind comes whistlin cross the plain,
a line of trees can redistribute its energy. The air has to twist and turn between small leaves and branches. Part of the force is thus turned aside and spent in mechanically thrashing the leaves and branches, and part is spent in the whistlin.
And when water comes rushing across a sloped field, a dense planting of grass can redistribute its energy. The water has to twist and turn between the stems and flat blades. Water that stops for a moment in front of a grass blade has a chance to penetrate the soil.
Without grass, the water moves freely and begins to pick up soil particles. As it gets more gritty, its scraping ability grows exponentially until it's a muddy flood.
But you can't leave everything planted to grass all the time if you're trying to grow profitable crops. So you have to use two other methods. Crop rotation allows part of the farm to be in grass in any one season; and contour plowing insures that the plowed rows serve as mini-dams to force the water down
instead of across.
What's the common factor here? Angular momentum. Stopping a flow by using reactance instead of resistance.
Breaking up massive linear motion into small circular and angular moves, so the air can feed the trees and the water can feed the plants.
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In the context of economics:
Speculators are like the linear force of wind and water. They advertise a seemingly unstoppable linear expansion. Buy now! Prices are going straight up, and prices have to keep going up up up UP UP UP UP UP UP!!!!
Join the flood while you still have a chance! Become part of a mudball that will help to gather other soil particles! Become a nail that can bounce against the side of a house and loosen up other nails to join the blast! Isn't that attractive? FUN FUN FUN!
FDR redistributed the linear momentum of money into more useful angular momentum.
Glass-Steagall and bank reform provided a windbreak and a contour. Speculators were halted, forcing money to pause and thrash around in the same place. When money had to stay in the same place, it had a better chance of penetrating local soil and feeding local business. Bank reform allowed money to stay securely
in the same place, decreasing the temptation to join big floods.
WPA was like a field of dense grass. Money stored in government clouds was rained onto real workers, who then produced real value and spent their money in local businesses. Real labor created real irrigation systems and real windbreaks and real dams, nicely closing the circle of my analogy.
Next, I'll try to extend this analogy to something else...... Well, I didn't. Jury duty broke up this line of thought. I've done reactance before, here
, but those items didn't hit the windbreak idea.
Labels: Experiential education, the broken circle