Indicators, performance, and policy in the 1930s and today

Recent economic growth has been sluggish despite persistent attempts to stimulate the economy. The apparently unresponsive nature of the economy is quite unusual in recent history, leading observers to search back in history for similar periods that might help explain the anomaly of the present. This article compares monetary policy and economic performance in the current period with monetary policy and economic performance in the 1930s. The article argues that the current period is in a number of important respects qualitatively, if not quantitatively, similar to the early 1930s. In particular, the last three years are similar to the early 1930s in having the absence of strong economic growth, sharply lower short term interest rates, widening spreads between long term and short term interest rates, and stronger growth in the monetary base (a narrow monetary aggregate) than in the broader aggregates (M2 and M3).