Ian spoke with economics expert Amity Shlaes, New York Times bestselling author of The Forgotten Man: A New History of the Great Depression. Shlaes discussed some of the causes that led up to the Great Depression and how people were affected by the catastrophic economic conditions of the time.
Foreclosures were common during the Depression era, Shlaes explained, noting that many of the people who were foreclosed upon owned as much as 90% of their homes. In that period banks offered interest-only loans on the other 10%, which made it almost impossible to pay off a mortgage, she added. The stock market dropped a staggering 80% and did not come back to its 1929 level until 1954, Shlaes said. There were widespread bank failures. According to Shlaes, more banks failed in the Great Depression than even exist today. Shlaes also pointed out that there was not enough money during the Depression, so people bartered and made their own scrip (a substitute for currency which is not legal tender) to pay their bills.
Shlaes examined the role Herbert Hoover's administration played in the Depression. She said Hoover was a "control freak" who supported the Real Bills Doctrine and Smoot-Hawley Tariff, measures that worsened the underlying economics of the country. Things did not improve under the leadership of Franklin D. Roosevelt. She shared a story about how the 32nd president arbitrarily increased the price of gold by 21 cents because "three times seven is a lucky number." Roosevelt also allowed wage and price setting under the auspices of the National Recovery Administration which compounded the economic problems of the nation, Shlaes said. In the end, Shlaes believes the federal economic policies of the 1930s extended the Depression much longer than it should have been.