In January, 1920, Roger Babson was a speaker at one of the Association of Commerce Lunches at the Morrison Hotel in Chicago. This was at a time of prosperity. However, Babson predicted a depression to occur within a year. Here is some of what he said.
“We are about to enter the worst business depression that our generation has ever experienced. I advise you to set your houses in order. I advise against any further plans of expansion until this depression has passed over.” After he said this, the rich bankers and business executives in attendance started laughing at him. Most of the people seated thought he was talking nonsense. However, future events would prove him right.
For a few months thereafter business continued its upward trend. But, just before the end of 1920, Roger Babson’s predicted depression occurred very quickly. By January, 1921, the economy was devastated and the depression was in full swing.
Once again, Roger Babson was invited to speak at the Morrison Hotel in Chicago at the Association of Commerce Lunch. Here is some of what he had to say. “You will remember that a year ago I warned you that within one year we would be in the throes of the worst depression our generation has ever seen. I noticed many of you smiling unbelievingly then. Well, that year has rolled around, and here I am again, and here is the depression with me.”
Chicago’s rich (and previously rich) bankers and business leaders were not laughing now. Babson explained to them how he knew and they didn’t. He drew an analogy between the economic forecast and the room temperature. “If I want to know what the temperature is, now, in this room, I go to the wall and look at the thermometer. If I want to know what it has been, up to now, and the existing trend as of the moment, I look at a recording thermometer. But, if I want to know what the temperature in this room is going to be, an hour from now, I go to the source, which determines future temperatures. I go down to the boiler-room and see what is happening down there. You, gentlemen, looked at bank clearings, indexes of business activity, stock car loadings, stock market quotations; you looked at the thermometers on the wall; I looked at the way people as a whole were dealing with one another. I looked to the source, which determines future conditions. I have found that that source may be defined in terms of righteousness.”
Here he explained his interesting formula for predicting economic downturns: “When 51% or more of the people are reasonably righteous in their dealings with one another, we are headed into increasing prosperity. When 51% of the people become unrighteous in their business dealings with their fellows, then we are headed for hard times economically!”
Are people in today’s world righteous or unrighteous in their conduct? In today’s world we have a Supreme Court that has put its stamp of approval on the killing of millions of unborn babies for the sake of convenience. The United States Congress has ripped trillions of dollars from the hard working tax-payers and funneled it to bankers, brokers, CEO’s, financiers, and underwriters who have contributed to the economic destruction of this country. The Treasury Department and the Federal Reserve officials lied to the American public, claiming they were going to use bailout money to buy bad paper (mortgages), toxic assets, from failing banks. They did a “bait and switch” routine, and ended up grabbing stock in the failing banks. The media portrayed this as no worse than spitting on the sidewalk. The IRS is taxing people into the dirt and charging penalties when they are not able to pay according to their deadlines. Hundreds of thousands of people crowd our prisons because they were in possession of a substance that the US Congress temporarily does not approve of. Honesty in matters of health and food is a rare component in our society, thanks to bribes that find their way to a large portion of our Senators and Congressmen. Honesty in matters of health and food is a rare component in our society, thanks to the mainstream media’s unwillingness to be critical of their drug sponsors. Millions of people are dying every year thanks to the AMA’s power in suppressing their competition and thereby increasing the incidents of heart attack, stroke, arthritis, and cancer. Certainly the majority of people in today’s world are dealing dishonestly with their fellow man.
The crash of 1929 is the fourth worst stock market crash, dropping 48 percent in October compared to August. It caused a rash of suicides. But, why is it thought of as the worst crash when it obviously isn’t? Two reasons: 1. It started the Great Depression. 2. Blame for it is laid at the feet of a Republican, generally viewed as the enemy by the press and the mainstream media. Hoover, a Republican, was indeed to blame for initiating the Great Depression following the crash of 1929. How did his policies initiate the Great Depression? Three ways: 1. He scared investors by opposing the stock market. 2. He initiated self-destructive tariffs that repelled international trade. 3. He interfered in business. To the people who are too young to remember the Great Depression, one might think, “It is a good thing FDR, a Democrat, was elected to bring the US economy back to life.” That’s not exactly what happened. Thanks to the policies of FDR, the depression lasted over a decade. Hoover initiated the Great Depression and FDR perpetuated it. And, guess what? The same mistakes they and their advisors made are being made in today’s economy. It is as if government never learns the lessons of history.
FDR created the NRA (National Recovery Administration), using the Depression as an excuse. The NRA poked its bureaucratic nose into many areas of the lives of American citizens, starting in 1933.
In 1934, the mid-term elections were rolling around. The Democrats were beginning to lose their popularity because of the tedious bureaucracy, particularly the NRA. So FDR and his cronies figured they could distract people away from the Depression by targeting various whipping boys, people they would prosecute for not going along with the program. The chicken industry was the vehicle through which the bureaucrats and predatory prosecutors hoped they might grandstand and successfully demonize and set legal precedence for future prosecutions.
By June 1934 over ten thousand pages of code (rules and regulations) had been produced by the NRA. So, finding someone who had violated one of their picky regulations was not a difficult task. The bureaucrats picked their first whipping boys, a Jewish family-run business, the Schechter brothers, who were running a chicken slaughter-house in New York. An army of inspectors descended on the chicken slaughter operation. Eventually, they discovered violations. After all, they had over 10,000 pages of regulations to use to throw their weight around. The chicken company had violated the 40 to 48 hour work week mandated by the NRA. The company had violated the minimum wage law of 24 cents per hour mandated by the NRA. The government did a setup. They arranged for the company to sell them a chicken that was not fit. This would provide the headlines they were looking for. The Schechter brothers who ran the chicken slaughter-house were indicted on 60 counts. Some of the charges were criminal so they could be both fined and jailed. This came to be known as the Sick Chicken Case. They were also charged with flaunting the code. What was the code? It was the 10,000 plus pages of rules and regulations being pushed upon the American citizens in the name of progress.
The regulations of the chicken industry included price and wage fixing, allowance for rights of unions, as well as requirements regarding an entire shipment of chickens, including unhealthy ones. Roosevelt’s cronies were intent on prosecuting the Schechter brothers in the Sick Chicken Case, making an example of them. There were originally sixty charges against Schechter Poultry, reduced eventually to eighteen charges plus charges of conspiracy by the time the case was heard by the Supreme Court. Upon appeal the lower court had sided with Roosevelt and against the chicken merchants.
The reason this case became important was because it showed in vivid detail how the NRA had evolved from being a helpful extended community project to being a mean-spirited heavy-handed bureaucratic hit squad, intent on pushing the small businessman into the dirt. Among the eighteen charges against the Schechter brothers were “the sale to a butcher of an unfit chicken” and the sale of two un-inspected chickens. The Sick Chicken Case was beginning to take center stage.
This case had been a setup from the beginning. The sick chicken had only been found after the prosecutor had performed autopsies on several chickens. Eventually one chicken was found that had impacted eggs inside her. The Schechter’s response was: “We don’t do autopsies on our chickens before we sell them.” Remember these were live chickens that were slaughtered after being bought.
The Supreme Court ruled in favor of the Schechter brothers, ruling that FDR had overstepped his authority as head of the executive branch of government. In essence, the executive branch was trying to legislate federal regulations to businesses that were to be regulated by the individual states. So, in this particular case, the bureaucrats were not able to whip their whipping boys, the Schechter brothers. As a result, for the first time in years, the government was prevented from sticking its nose into businesses, which, generally speaking, were regulated by the individual states. This marked the beginning of the unraveling of the NRA and other bureaucratic entities created, using the Depression as an excuse. This ruling was one of a series, which overturned components of President Franklin D Roosevelt’s New Deal imperatives between January 1935 and January 1936.
In the mid 1930’s, Roosevelt initiated tax hikes. There would be a death tax (estate tax) for people dying. After they’re dead there would be the double tax (inheritance tax) on people being willed money from dead people. There would be a graduated corporate income tax. The top individual tax rate was pushed up to 79 percent. The top corporate rate rose to 83 percent. Eventually, FDR established an undistributed profits tax in case any businessmen had the unusual idea of plowing profits back into their enterprises. Apparently no one in Roosevelt’s cabinet was pointing out how self-destructive these taxes would be. This is what caused family run newspapers to come to an end when the founder died. After all the taxes were paid, there wouldn’t be enough money left to perpetuate the existence of the newspaper. Once again, government was grinding the businessman into the dirt. Enterprising businessmen found themselves paying over three quarters of their yearly profits in taxes. Looking ahead, many simply gave up and stopped trying. After all, why put out effort on a country that is intent on forcing you toward poverty.
Thanks to the high taxes, businessmen could not hire people and, in most cases, laid people off, or closed their businesses entirely. The same is happening today. The government is raising taxes which most people, particularly small businessmen, are not able to pay without dropping into poverty. On the other hand, government is giving tax money to the rich bankers, supposedly for our own good. Now, just as in the 1930’s, it will take several years before the people demand a halt to this nonsense.
“Property may be destroyed and money may lose its buying power; but character, health, knowledge and good judgment will always be in demand in all conditions.”
-Roger Babson
Extinguish Depression
God’s Point of View on Money
Sources
A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 Supreme Court”s Decision (1935), Washington, DC, United States
Armstrong, Herbert, The Autobiography of Herbert W Armstrong, Volume 1, ? 1978 Herbert Armstrong, Everest House, New York, United States.
Arieli, Yinon, Get the Right Perspective on the Market Drop, 1 Aug 2008, Yalicoo Blog, United States
Babson, Roger W, Fundamentals of Prosperity, ?1920 Kissinger Publishing Company, New York, United States
Editors, Heroes, Wags, Sages, Monday, 25 Nov 1929, Time Magazine, New York, United States
Shales, Amity, The Forgotten Man, Copyright 2008 Amity Shales, Harper Collins Pub, New York, United States
-Wily Elder
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