I should have been more clear—my point isn’t its severity, but rather what was seen as the greatest danger to be avoided at all costs. That greatest danger was the domino collapse of the entire global financial system and it is precisely that which led the US Fed to adopt rather unconventional methods in the aftermath of the Lehman Brothers bankruptcy.
What was widely seen (correctly or not is a different and complicated issue) as the major issue was the possibility of all the big world’s banks freezing up in a chain of defaults or maybe-defaults as all of them are interlinked and hold each other’s debt. That didn’t exist as a problem in the XIX century.
Domino effects of banks was definitely a thing in the 19th and even 18th century. Moreover, even if it did happen to the extent that the worst case situations envisioned, it isn’t clear it would have been worse than 1819. And even if total unemployment did get worse, it is likely that the overall standard of living would still remain far better than any time in the 19th century. Larger events can occur but the ratchet is still slowly moving in the same direction.
Well, I never saw an estimate for a worst case scenario with an unemployment rate as high that in 1819, but now that I state my reasoning explicitly, that sounds pretty weak.
There have been a bunch of papers on this, I’ll have to track them down, but if memory serves me the low estimate is around 15% and the high is around 22 or 23%. Unfortunately, precise economic pre-1920s is generally hard to come by.
That’s a good point. I suppose one could argue that Spain is a relatively small part of Europe as a whole, but that seems like a pretty weak argument. I think I’m going to have to update on this general position to substantially reduce my confidence that the economic situation has been becoming more stable. Thanks.
I should have been more clear—my point isn’t its severity, but rather what was seen as the greatest danger to be avoided at all costs. That greatest danger was the domino collapse of the entire global financial system and it is precisely that which led the US Fed to adopt rather unconventional methods in the aftermath of the Lehman Brothers bankruptcy.
What was widely seen (correctly or not is a different and complicated issue) as the major issue was the possibility of all the big world’s banks freezing up in a chain of defaults or maybe-defaults as all of them are interlinked and hold each other’s debt. That didn’t exist as a problem in the XIX century.
Domino effects of banks was definitely a thing in the 19th and even 18th century. Moreover, even if it did happen to the extent that the worst case situations envisioned, it isn’t clear it would have been worse than 1819. And even if total unemployment did get worse, it is likely that the overall standard of living would still remain far better than any time in the 19th century. Larger events can occur but the ratchet is still slowly moving in the same direction.
Nationally. But not globally.
Nothing is clear since we’re dealing with counterfactuals, but why do you believe so?
Well, I never saw an estimate for a worst case scenario with an unemployment rate as high that in 1819, but now that I state my reasoning explicitly, that sounds pretty weak.
What was the unemployment rate in 1819? A brief look at the web gave me nothing.
There have been a bunch of papers on this, I’ll have to track them down, but if memory serves me the low estimate is around 15% and the high is around 22 or 23%. Unfortunately, precise economic pre-1920s is generally hard to come by.
Given that right now the unemployment in Spain is about 25%, that doesn’t sound too horrible.
That’s a good point. I suppose one could argue that Spain is a relatively small part of Europe as a whole, but that seems like a pretty weak argument. I think I’m going to have to update on this general position to substantially reduce my confidence that the economic situation has been becoming more stable. Thanks.