JOBS | Metro NY and NJ

September data on Metro Area non-farm jobs shows an increase of 130,500 jobs in the Greater New York area, which includes all of Long Island. This is the best performance of metro areas in New York State. In fact, jobs grew substantially in New York State only in the Hudson River corridor from New York City through Kingston to Albany.

Metropolitan area	State	Sept. 2013  (‘000)	Sept. 2014(p) (‘000)	Change (‘000)	Change (%)
Trenton-Ewing, NJ	New Jersey	247.2	252.0	4.8	1.9
Ocean City, NJ	New Jersey	46.8	47.2	0.4	0.9
Vineland-Millville-Bridgeton, NJ	New Jersey	57.3	57.8	0.5	0.9
Atlantic City-Hammonton, NJ	New Jersey	138.7	128.7	-10.0	-7.2
New York-Northern New Jersey-Long Island, NY-NJ-PA	New York	8,710.1	8,840.6	130.5	1.5
Kingston, NY	New York	60.3	60.8	0.5	0.8
Albany-Schenectady-Troy, NY	New York	448.2	451.3	3.1	0.7
Buffalo-Niagara Falls, NY	New York	551.9	554.5	2.6	0.5
Elmira, NY	New York	38.7	38.8	0.1	0.3
Poughkeepsie-Newburgh-Middletown, NY	New York	254.0	254.4	0.4	0.2
Ithaca, NY	New York	70.4	70.5	0.1	0.1
Rochester, NY	New York	515.7	516.2	0.5	0.1
Binghamton, NY	New York	106.3	106.1	-0.2	-0.2
Glens Falls, NY	New York	55.0	54.8	-0.2	-0.4
Syracuse, NY	New York	317.3	316.1	-1.2	-0.4
Utica-Rome, NY	New York	128.0	127.3	-0.7	-0.5

Source: BLS Metro Areas report, October 29, 2014.

In New Jersey, the state capital, as in New York State, gained jobs but growth was weaker in the rest of the state. Atlantic City remains in economic crisis, losing 7.2 percent of its jobs, 10,000 of them, in the year ending September 2014.

For cities, density remains destiny. The bigger cities survive economic downturns best, and so do state capitals, where the state taxes go.

FOMC | More Choices–Rip van Winkle Awakes

Oct. 29, 2014–What's the FOMC going to do today? A quick sampling of forecasts is that it will move away from QE3, its makeshift easy-money policy during the period of zero-bound interest rates.

I've been following the Fed since I worked there and at the FDIC five decades ago as a financial economist.

The latest week's Initial Unemployment Claims, which FRED (the wonderful database of the St. Louis Fed–thank you, James Bullard) graphs for us, has fallen to 283,000.

That's about to where it was briefly in 2000 before the dot-com bubble burst. Not since the early 1970s have initial claims been lower. This suggests inflation should be waiting to ambush us.

It's certainly taken a long time to get to this point. In January 2009, former Fed Governor and inflation hawk Laurence Meyer of Macroeconomic Advisers told a packed luncheon group sponsored by the New York Association for Business Economics that recovery was "at least 18 months away". He wasn't kidding.

Now, nearly six years later, we seem there. Unemployment is below the 6 percent threshold where the Fed historically (using the NAIRU) has started to worry about inflation.

However, wages have not kept pace, which shows slack in the labor market. And, as Paul Krugman reminds us, there are still no signs of overall inflation. (See graph - the Personal Consumption Expenditures chart shows the same pattern.)

So the Fed doves - Chair Janet Yellen, Gov. Daniel Tarullo, and Fed Bank Presidents William Dudley (NY), Charles Evans (Chicago) and Eric Rosengren (Boston) don't want to raise interest rates yet.

They point to the big mistake of FDR's economic policymaking in 1937, when interest rates were raised too soon. Wall Street has an adage: "When the Fed starts to crunch, it's time to go to lunch."

Fed hawks, however - Bank Presidents Richard Fisher (Dallas), Jeffrey Lacker (Richmond) and Charles Plosser (Philadelphia) - are concerned to stay ahead of the curve. They have their eyes on the 1970s when it seemed the Fed had lost control over prices because of the oil crisis... although former Fed Chair Paul Volcker proved in the early 1980s that if you closed your eyes to the temporary pain, the Fed can always dampen inflationary expectations.

At least in the coming months the FOMC will start getting back to the job it is familiar with, controlling T-bill interest rates through open market operations. A zero-bound interest context doesn't leave much latitude for policy options. Larry Meyer in 2009 even suggested, tongue in cheek, that  the FOMC take a long vacation. If they had followed his advice, they would just now be getting back to work. Like Washington Irving's Rip van Winkle, they may find it hard to settle back in to their traditional role after all these years.

WW2 | 10. Other Family in the Resistance (Updated Feb. 16, 2015)

Related chapters (see outline):
6. The Brave CS6 - Jan "Canada" Boissevain, Mies & Sons Janka and Gi.
8.  Hiding Jews - Bob Boissevain, Sonia, and Their Six Children.

9.  Financing the Resistance - Wally, Tilly, Gi, Frits and Maurits van Hall.

Other Close Relatives

Harry Boissevain's Sisters

My parents in 1972 contacted Harry Boissevain (NP 60, 63), who sent a letter back in January 1973 with the following interesting lead:

During the Nazi Occupation I lived in Arnhem and Enschede. Two of my sisters were the secretaries of General van Mook who headed up the Dutch underground in Amsterdam but they have steadily refused to write about their hair-raising experience.

Harry had nine siblings, six of them sisters, of whom four lived till the war. So two of the following four sisters might have been General Hubertus van Mook's secretaries: Ellegonda Duranda Boissevain Veltman (1914-1943), Marie Renée Boissevain (1922-1988), Louisa Maria Antonia Boissevain (1924-), and Dr. Mia Boissevain (1926-). See NP 60-61. There is information in Erik Schaap's biography of Wally van Hall (2nd edition, 2014) about Marie Renée (Iet) Boissevain, but the name of the second secretary is a mystery.

General van Mook was Minister for the Colonies in Indonesia. He returned to organize a Dutch government in preparation for the end of the war. One of his tasks was to prepare plan for greater Indonesian independence.

Most of the Dutch public, as expressed through the underground papers, favored making concessions to Indonesian independence. Only Trouw (Bride) tried to hang on to the prewar status ante quo.

Thea Boissevain

Louis's sister Theodora Margaretha Boissevain (Thea, 1917-, NP 128) spent time in the Ravensbrück concentration camp. [Need more information.]

Evert Hissink

Petronella (Nella) Boissevain Hissink (1881-1956, NP 69) wrote to her sister Olga, my grandmother, about her son Evert, who refused to sign the oath of loyalty to Hitler:

Ever since we heard that you lost your dear Willem, my thoughts and prayers have often been with you. You see, Evert [her eldest son] also will never come back. He was such a noble, independent, loving man; he was a rock, always to be trusted. He was three weeks away from getting his degree from Amsterdam University. Then the Germans wanted him to sign an affidavit of loyalty. Evert refused. He was taken to a work camp in Germany. Half a year later, he was killed by a bomb in Berlin.

More Distant Relatives of the Boissevains

The van Marles

Hilda de Booy's daughter Olga de Booy, named after my grandmother, Hilda de Booy's sister, married a van Marle. The Yad Vashem recognizes Mijndert van Marle (November 12, 1888-?) and Johanna Bosbeen van Marle (1894-?) who were married in 1915, as Righteous Gentiles who have been shown to have hidden a Jewish target of the Nazis.

The Marlins became a good friend of one of the van Marle branches, but it does not seem to be closely related to the two van Marles recognized by Yad Vashem. Olga van Marle was my mother's contemporary.

Our Granny Olga Boissevain van Stockum had made a pact with her sister Hilda Boissevain de Booy that they would name their daughters after each other. So the next generation had a Hilda van Stockum, our Mother, and an Olga de Booy, who married a van Marle. The third generation did the same thing so we had Olga Marlin and a Hilda van Marle. Hilda van Marle named a daughter Olga, but Olga Marlin did not have biological children (though she had many babies in Kenya named after her by their mothers who had been pupils of Olga) and Brigid Marlin only had boys...

My sister Brigid Marlin became friends after the war with the younger sister of Hilda van Marle, Henriette. (There also was a boy just under the age when he would have had to go to a labor camp in Germany.) Brigid said in an email to me in 2014: 

Although Henriette was 16 and I was only 11, we became great friends, because we both loved to create things and invent stories and plays. Looking back, I think that Henriette needed to reclaim her childhood, which was taken away by the terrible war. So we had a marvelous time together, because I stayed with Henriette who lived in a house like a castle and seemed to me like a fairy princess! We kept up the friendship for years, and Henriette came to stay when we both had children. Sadly, she has died. 

Henri and Marguerite van Eeghen

Henri and Marguerite van Eeghen appear in the Yad Vashem list of Righteous Gentiles. Maria Boissevain (1869-1959), the eldest daughter of Charles Boissevain (1842-1931) and therefore my mother's aunt, married Cornelis van Eeghen (1861-1940). However, there is no Henri among their descendants. The Henri van Eeghen must therefore be a distant relative.

Baron Otto Maximiliaan and Ursula Cunera van Boetzelaar and their Housekeeper Nicolasina Kerkhof van Vugt

Baron Otto van Boetzelaar and Lex van B?

Dina Frank (later Oppenheimer) graduated from Amsterdam’s Jewish secondary school just before the German invasion of Holland. Her physician father, Dr. Benjamin Frank, was arrested by the Gestapo in August 1942 and was deported to Auschwitz, where he died.

On September 7, 1942, Dina was given the address of Baron Otto van Boetzelaer and his wife Ursula, who lived at Zwanenburg, an old country home near Dinther, North Brabant.

Dina’s mother, Julie Frank Vecht (later Gomperts), and her brother Rudolf, initially remained in Amsterdam, but on May 28, 1943, they joined Dina at the estate. The Jewish writer Leonard de Vries, a friend of Dina’s from Amsterdam, also hid there. 

Ursula Cunera van
Boetzelaar

Otto, respected in the community, lived reclusively, thus reducing the likelihood of discovery. Only a few very close neighbors knew of the presence of Jews in the house and none betrayed them. Otto and Ursula prepared a hiding place under the stairs, where the Jewish guests hid during a German search. The van Boetzelaers’ young housekeeper, Nicolasina ("Toos") Kerkhof van Vugt was helpful to those in hiding. 

Otto thought of Dina as his own daughter. Julie Frank paid a small sum towards her and her children’s upkeep, but Otto and Ursula’s motives for rescuing them were humanitarian and religious. 

The van Boetzelaers had two sons. One was active in the Resistance and  was caught and executed by the Germans. The other lived in Utrecht. Allied paratroopers liberated the Franks and Leonard de Vries in September 1944.  (More detail from db.yadvashem.org/righteous.)

Sources and Resources:

Amsterdam Stadsarchief, visited February 17, 2015.

Boissevain, Charles, emails especially January-February 2015.

NIOD, visited February 18, 2015.

Schaap, Erik. Walraven van Hall: Premier van Het Verzet (Walraven van Hall: Prime Minister of the Resistance),  Inmerc, 2006. 2nd edition, 2014. Dutch language only. The price is a reasonable €24.95 but it cost me an additional €45 plus €4 tax to have it sent to the United States.

Other Chapters

The above post is a draft chapter of the book. For the full outline go here: How Dutch Families Fought the Nazis

JOBS | Which David Brooks Should We Listen To?

David Brooks tackles every problem with earnestness and when he figures out the answer he expresses his dismay, often enough that Congress doesn't get it or hasn't acted.

In his Op-Ed today, he is on to the low labor force participation rate, the "lowest in decades".

He has read another book and he is distraught at the options facing young people: "Millions are in part-time or low-wage jobs that don’t come close to fulfilling their capacities. Millions more are in dysfunctional or unhealthy workplaces, but they don’t feel they can leave."

Transcending his University of Chicago roots, he favors favors a crash program of infrastructure investment.

The federal government should borrow money at current interest rates to build infrastructure, including better bus networks so workers can get to distant jobs. The fact that the federal government has not passed major infrastructure legislation is mind-boggling...

He warns Congress that young people are watching.

[O]ver the past five years, the political class has done essentially nothing. That will fill future generations with astonishment and should fill the current generation with rage... 

It makes sense to me. Borrowing resources today is appropriate to pay for the infrastructure needs of the future, just so long as the projects themselves are worthwhile. This was President Obama's intent when he came into office in 2009, to use stimulus money to accelerate state and local "shovel-ready" projects.

But nearly two and a half years ago Brooks was distressed at our era of indebtedness. He was appalled that any generation would "borrow money from the future to spend on itself". His article pillories debt of all kinds - Federal, state, local, business, personal. The title of his Op-Ed piece is "The Debt Indulgence".

Mr. Brooks, you are a reasonable person and you are seriously trying to come up with answers to big problems. But if we borrow to create jobs for our young people, won't we just be indulging ourselves in more debt?

BLS | Boy Cries "Wolf" Again on Unemployment Data

Funny... but unfair. (Washington Post cartoon, 2011)

Onto her 23, 2014–A New York Post columnist yesterday wrote that Los Angeles, "the city known as America’s story factory", is "making up Census data".

This is a reprise of a challenged report last year  emanating from Census worker Julius Buckmon that the BLS had been "faking" the unemployment numbers in Philadelphia in 2012 to make President Obama look good for his reelection.

The columnist, John Crudele, says the new whistleblower reports that Census workers in the Los Angeles region have been manipulating economic data and that she is now coming forward because she “applauds” whistleblowers in Denver and Philadelphia.

Crudele's report last year was in support of former GE CEO Jack Welch, a self-identified Republican who publicly criticized the BLS in September 2012 when the U.S. unemployment rate dropped to 7.8 percent from 8.1 percent. Welch tweeted:

Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change numbers.

His tweet was widely critiqued by people who noted GE's own reputation for earnings manipulation. Sample conclusions:

• In the Atlantic, Jordan Weissman argues that poor survey data wouldn't make much difference. He says the unemployment data historically mirror the payroll-jobs data, which are more broadly based. 

• The Census Bureau’s Office of Inspector General looked into Buckmon's report and concluded:

Our investigation did not find any evidence to support allegations that supervisors in the Philadelphia Regional Office manipulated, or attempted to manipulate, the unemployment rate prior to the 2012 presidential election.

• Commerce Inspector General Todd Zinser found wrongdoing on the part of Buckmon, but not his supervisors.

The reason for public concern is that the Census Bureau conducts a survey of about 60,000 households each month to find out who is working and who is unemployed. These surveys are turned over to the Bureau of Labor Statistics, to compute and estimate the monthly unemployment rates, which are usually reported on the first Friday of every month and are closely watched by Wall Street and politicians contemplating reelection.

The LA whistleblower brings to four the number of regions where survey problems are alleged by Crudele - Philadelphia, Chicago, Denver and now LA. (No problems have recently surfaced in the other two regions, New York and Atlanta.)  Each region is divided into Field Service Areas (FSAs) with 10-15 field reps reporting to one supervisor. The BLS requires a 90 percent success rate for interviews to be included in the Current Population Survey. The LA whistleblower told The New York Post:

There are some FSAs that month after month had a 100 percent response rate. That alone should raise flags! I can understand an occasional 100 percent response rate but you have to raise an eyebrow when some FSAs have 100 percent every month.

At any rate, the unemployment rate was just reported as having fallen in September to 5.9 percent, below the benchmark 6 percent rate - historically considered the rate below which inflationary pressures are supposed to start. So the decline in 2012 was certainly not off the trend line.

CITYECONOMIST | Blog at 110K views, October 2015

Thank you for reading my blog.

The most-read posts in October were (in order of the number of page views during the month):

Demography, Destiny and the Employment-Population ... Oct 10, 2014

President Obama Visits Chelsea NYC, One-Time Alin... Oct 7, 2014

Workplace Innovation - Where Brazil Was #1 in 2014... Jul 29, 2014

Job Growth Strong, Unemployment Below 6% (Comment)... Oct 3, 2014

How Candy Cigarettes Contribute to the U.S. Budget... Jan 1, 2012

NYC More Catholic, Jewish, Muslim Feb 15, 2008

If you're so smart, why ain't you rich? Oct 11, 2014

Low Labor Force Participation Rate - More Theories... Oct 18, 2014

How FDR's Team Calmed the Panic and Created 70 Yea... Oct 16, 2014

What Caused the Depression? Oct 16, 2014

LABOR | Low Participation II (Job-Finding and Disability)

Chart 1. BLS Data on Labor Force Participation Rates
(FRED chart, St. Louis Federal Reserve Bank).

I am continuing to think about the low U.S. civilian labor-force participation rate, encouraged by Marcus Roberts and the other busy demographers at MercatorNet in Auckland, New Zealand.

If the stubbornly low employment-population ratio (and the still-declining labor-force-participation rate shown in Chart 1) are explained by demographic shifts in work-family choices - such as men and women taking more time off from working as a lifestyle decision - then government policies may not require change. We might just have to accept that we will have fewer people working.

However, I just read a summary of a Working Paper (#20183) by Robert E. Hall, "Quantifying the Lasting Harm to the U.S. Economy from the Financial Crisis." It appears in the National Bureau of Economic Research (NBER) October Digest. Hall suggests two interesting explanations for the continuing low labor-force-participation rates, as of 2013, beyond the six mostly demographic ones that I suggested.

1. "Job-finding rates" are low. When recessions or job interruptions are short, workers can go back to what they were doing before. But when a high level of unemployment has occurred over a long period, some jobs are being destroyed completely in the interim. Workers who have been laid off can't shift over to another employer. Many examples of clerical jobs displaced by computers come to mind, such travel agents handling low-cost travel who are being displaced by increasingly user-friendly internet reservation systems.

Chart 2. Applications for Disability Aid and Acceptances,
1999-2013.

2. Disability (SSI) and food stamp program beneficiaries are growing rapidly. The number of  receiving SSI (disability) and food stamp assistance has, says Hall, been increasing persistently. The high implicit taxes on earnings that result from losing benefits means that this group of people has very little incentive to participate in the labor force.

Comment

The number of applications for disability assistance has certainly been increasing, at least through 2010 (see Chart 2). But the percentage of applications that are being rejected is increasing as well. More than half of applications were accepted in 1999 whereas in 2013 the acceptance rate was down to one-third. The number of applications that are being accepted has been declining since 2010.

The NBER Digest summary doesn't provide policy recommendations, but the demographic, job-finding and disability theories have some interesting implications.

• To the extent that the continued low labor-force participation rate (despite lower unemployment) reflects personal lifestyle choices or the changing composition of the American work force, government action may not be very useful. 
• But if the job-finding problem is driving low labor-force participation, it might be useful for the Department of Labor to educate displaced workers to the changing needs of the workplace and get across the fact that experience in a skill that is no longer called for isn't going to count for much in a new job.
• For displaced workers to get back into the work force it may require working hard to stay relevant, especially in tech-related jobs. 
• Returning to the work force may also require a lowering of income expectations and a conscious effort to be tolerant of "diversity", which means in part more co-workers looking and behaving in ways that were not usual five or ten years ago. 
• The job-finding problem might be partly addressed through entrepreneurship training, although entrepreneurs typically won't show up on payroll-jobs data (which are generated from filings for state unemployment-insurance programs) until they start paying themselves. At the same time, they also probably won't show up in the household surveys as unemployed or looking for work. Entrepreneurs may or may not appear in the labor force.
• The theory that disability payments make it unattractive to work raises the question of the direction of causality. One reason that disability enrollments are rising could be that those who are unemployed and are discouraged by the lack of good jobs turn to disability programs when their unemployment compensation expires. So one reason for the larger number of disabled is the high unemployment rate. 
• This causality would also help explain the higher rejection rates - the long-term unemployed are casting around for a replacement for their expiring unemployment checks and disability might look like a solution. 
• We should have enough data on earnings of disabled people to assess whether it would make sense to reduce the earnings penalty, i.e., the loss of benefits tied to levels of earned income.

Thank you for reading. Please comment - john (at) cityeconomist (dot) com.

WOODIN | 12. Facing Fear, 1933 (Updated July 7, 2016)

This post, a chapter in a book, has been transferred to a private blog. To obtain access, contact John Tepper Marlin at jtmarlin@post.harvard.edu.

THE DEPRESSION | Causes

The red bars are the years of GDP
decline, i.e., recession/depression.
The Depression started August 1929.

Martin Kelly posts, under about.com, useful summaries about different points and periods  in American history. He recently posted on "The Causes of the Great Depression". Understanding the causes of the Depression is vital to avoid repeating the mistakes we made in the 1920s.

Since I am working on a biography of FDR's first Treasury Secretary, William H. Woodin, I was interested. Woodin faced the brunt of the initial Federal response to panic that greeted FDR's arrival in Washington. (I believe the stress killed him. He resigned for health reasons at the end of 1933 and died not much more than a year after FDR took office.)

I think some of Kelly's statements in his first two "Causes" about the timing of the Depression and the timing of bank failures are erroneous. Americans should remember the facts about their history correctly.  I will limit myself to the first two on his list.

Cause #1 - The "Stock Market Crash of 1929"

Kelly considers the stock market crash of October 1929 as the first cause of the Great Depression. Here are his words:

Many believe erroneously that the stock market crash that occurred on Black Tuesday, October 29, 1929 is one and the same with the Great Depression. In fact, it was one of the major causes that led to the Great Depression. Two months after the original crash in October, stockholders had lost more than $40 billion. Even though the stock market began to regain some of its losses, by the end of 1930, it just was not enough and America truly entered what is called the Great Depression.

The Depression of 1929-1933 ended with FDR's
New Deal. But the The Recession of 1937-1938,
resulted from a weakening of the New Deal.
 World War II revived the economy in 1938.

My Comment: The Bureau of Economic Analysis at the U.S. Department of Commerce has kept track of the size of the American economy, the Gross Domestic Product (GDP), since after World War II. GDP is a measure of all goods and services produced during a year.

Business cycles are dated by an independent Business Cycle Dating Committee, also known as the Wise Men although not restricted to men. It reports through the National Bureau of Economic Research.

The Committee dates the Great Depression by two declines in GDP.

• The first was August 1929 (or more broadly the third quarter of the year) through March 1933 (the first quarter), lasting three years and seven months. Starting with the arrival of FDR, the economy was recovering from the 26.7 percent decline in the economy.
• The second was the recession from May 1937 (second quarter) to June 1938 (second quarter), when the economic decline was a serious 18.2 percent. This was precipitated by lower profits, and by misguidedly tight fiscal and monetary policies.  

So... the misleading statements in Cause #1 in Kelly's post I think include the following:

• The stock market crash occurred two months after the Depression started. Since the Depression started before the crash, something else was at work.
• America did not enter the Great Depression at the end of 1930, but 18 months earlier.
• The crash of the New York Stock Exchange is not a cause of anything except through the opinions of investors, of which it is simply an indicator. The cause of the Depression must be sought in the high value placed on stocks in the late 1920s, and the reason for the high level of speculation, i.e., borrowed money. The reliance of investors on debt subject to margin calls increased the riskiness of the stock market and added to the intensity of the revaluation of stock prices.
• The $40 billion loss by investors in two months doesn't sound like a lot in today's stock market. It would be more meaningful to say that the 1929 high value of all stocks on the New York Stock Exchange was $87 billion and this valuation fell to $19 billion in 1933 - a drop of 78 percent. More than three-fourths of the value of listed stocks was wiped out.

Cause #2 - Bank Failures

One of the sources of the Great Depression is the instability of the banking system and therefore of the stock market that depended on it and the national economy that depended on both.

Throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured and thus as banks failed people simply lost their savings. Surviving banks, unsure of the economic situation and concerned for their own survival, stopped being as willing to create new loans. This exacerbated the situation leading to less and less expenditures.

Bank failures virtually ended in 1933 with passage of the
Glass-Steagall Act, which created federal insurance of bank
deposits (via the FDIC) and, as a price for that, separated
banking from more speculative financial activities.

My Comment: The problem in making bank failures the cause of the Depression is  the timing. For A to cause B, A must precede B. The Depression is dated 1929-1933. There were no bank failures between 1926 and 1929 (see chart). The largest number of bank failures were the result of stress tests (bank examinations) by the Treasury's Comptroller of the Currency, in 1933, after the previously cited March 1933 end of the Depression.

There were bank failures in 1925, but that's a long time before the onset of the Depression and a lot of growth occurred in the late 1920s.

An underlying problem was the belief by depositors that they should be able to convert their deposits into gold or currency without limit. But the attempt to do so made banks illiquid and insolvent.

Printing greenback dollars that were not backed by gold or silver was no longer controversial. It was problematic when Lincoln did it to pay the Union Army, but by 1929 paper dollars were well established. However, in the 1920s, depositors were still of the belief that some or all of their deposits were backed by gold or silver. Some of the dollars were marked "gold certificates" with a yellow color on a part of the bill to indicate their special status.

Some depositors still believed that if they asked for it they would be entitled to redemption of their money in gold. In fact, what started to happen in the 1920s and especially in the early 1930s, is that banks could not redeem demand deposits even with paper money. They were out of cash. Relatively few were insolvent, but many were illiquid.

The fear that a bank could fail and depositors could lose their money was a basic underlying flaw in the banking system, leading to "runs on banks".

So here I think is what is wrong with what Kelly said about bank failures as a cause of the Depression:

• Bank failures were not the cause of the Depression - they were a symptom of problems in the banking system that contributed to the Depression. As Warren Buffett has said: "Only when the tide goes out do you find out who is not wearing a bathing suit.”
• Bank failures did not occur "throughout the 1930s". They occurred mostly before FDR was inaugurated in March 1933. The banks that were closed by the Treasury's Comptroller of the Currency were already insolvent.
• Bank deposits were uninsured only until 1933. But starting in 1933, the Glass-Steagall law created the Federal Deposit Insurance Corporation, insuring most deposits and virtually ending bank closings. In 1934, only 57 banks closed, and after that the FDIC's guarantee and oversight was enough.

The year 1933 was crucial. Withdrawals of paper money and gold from banks occurred in February 1933 at three times the previous rate of $5 million per day. That month, Louisiana declared a bank holiday, and then Michigan did the same, closing the banks for eight days. By the day that FDR took office, 400 more banks closed. In the month before the inauguration, $320 million was withdrawn, and most of it $226 million, was withdrawn in the last week.

On Inauguration Eve, March 4, 1933, at 1 a.m., FDR ended discussions with Hoover about the crisis and told everyone go to sleep. Instead, Secretary Woodin suggested to Barnard Professor Raymond Moley, leader of FDR's brains trust and the man who recruited Will Woodin to work for FDR that they go over to the Treasury to meet with outgoing Treasury Secretary Ogden Mills and his key staff, who were working on declaring a bank holiday the next day. Woodin and Moley found that the Treasury was following the lead of 21 governors who had announced a bank holiday on Monday. The Treasury had called the remaining governors. All but New York Governor Herbert Lehman had been persuaded to follow suit. Woodin and Moley asked  the President of the Federal Reserve Bank of New York to go to Lehman's house to ask him to agree to a bank holiday, which he did at 4:20 a.m. The bank holiday was now in effect in every state,  starting the next day, Monday, March 5.

FDR and Secretary Woodin followed the three-day national bank holiday (through Wednesday, March 7) with measures to stop the export and hoarding of gold. Woodin personally supervised printing more dollars in three shifts. The bank holiday was extended to Tuesday, March 13, and Woodin made it a priority that the Comptroller of the Currency would perform stress tests quickly so that the healthy banks could be reopened.

These measures restored calm. Confidence returned. The public began putting their money back in the banks. The country returned to a growth in its GDP. Moley said:

If ever there was a moment when things hang in the balance, it was on March 5, 1933 - when unorthodoxy would have drained the last remaining strength of the capitalist system. Capitalism was saved in eight days, and no other single factor in its salvation was half so important as the imagination and sturdiness and common sense of Will Woodin.  (Moley, After Seven Years, NY: Harper, 1939, Chapter V, p. 155.)

If you're so smart, why ain't you rich?

Urban folk humor.

We know from "Who wants to be a millionaire?" that the best source of information when the contestant is stumped is "Ask the Audience". On this principle, someone has set up a web site called Quora where people ask questions, other people answer them, and the people who go to the site vote the answers up or down. Democracy at work.

Why are many people who are very smart not also rich? is a question recently asked and answered.

I attended good schools in both the United States and England and have seen many of my classmates succeed financially and many fail. The question is one I have thought about a lot. What distinguishes the economic successes from the economic failures?

The best answer up-voted so far is by Mark Simchock, who describes himself as "Chief Alchemist". Here are his first two and last two answers:

1. IQ isn't everything.2. Money isn't everything. ...
9. They [the less rich] know too much (i.e., fear of failure).10. They are successful (on their own terms), you're just not smart enough to recognize it (based on your criteria).

These seem to me to be good answers, from what I have seen.

I would add: The biggest successes have the right mix of enthusiasm and practicality - the enthusiasm to appreciate life and be curious about why things work and don't work, and the practicality to get their ideas into a form where they can earn some money from it.

JOBS | Low Labor Participation Puzzle - I (Demography)

Chart 1. September's unemployment rate
(red) fell to 5.9%, but the employment-
population rate is still in the doldrums.

Economists are famously good at predicting next month's numbers based on previous months, but they are not so good at identifying in a timely way big, important things like the oil crisis in the 1970s or the huge, interminable impact of the financial crisis of 2008.

MercatorNet in New Zealand, whose slogan is "Demography Is Destiny", is devoted to looking at long-term trends affecting the people living on planet earth.

The Good Jobs News for September

They picked up on my post on last Friday's September job numbers.  My main question was why the New York Times coverage the next day asserted that the favorable job numbers would not help Democrats running for office.

Chart 2. The employment-population ratio looks
weak under Obama, but the sharp occurred
under Bush 43. In the 1950s and 1960s, it was
 two percentage points lower than the Carter low.

Surely, I thought, it was good news that the United States was finally breaking through the 6 percent unemployment number (see the red line in Chart 1, which does not reflect the breakthrough September data). At one time in history that number meant it was time for the Fed to start worrying about an accelerating rate of inflation.

However, if someone is looking for bad news, they point to the stuck employment-population ratio, which fell unusually fast and far after the financial meltdown.  See how the blue line in both Charts 1 and 2 drops during and after the last recession (Chart 2 is older but shows the presidential administrations).

Given their focus on long-term demographic trends, MercatorNet is interested in what the job numbers in the United States suggest about changes in American working habits and perhaps working habits worldwide.

Europe has historically had fewer people working relative to the population, which could reflect (1) higher preference for leisure, (2) fewer jobs available, (3) fewer women working, (4) earlier retirement, (5) more attractive and longer-term unemployment benefits. However, Europe's labor-force participation and employment-population ratios have recently been rising faster than the U.S. numbers.

The Employment-Population Decline Puzzle

So we have a puzzle here. Does the low U.S. employment-population rate reflect a slowdown or even a turnaround in the increase in women in the labor force that accounts for the shift in the employment-population ratio since the 1960s? Are retirements of baby boomers accelerating? Are young people taking longer to find jobs? Did the financial meltdown of 2008 cause such a loss of faith in American government and Wall Street that many people lost their taste for the money game? Or is it possible we are seeing major shifts in some other U.S. worker attitude or preference?

Labor Force Participation Rate

For 40 years it seemed that the increasing participation of women in the workforce would continue forever. The labor force participation rate rose from 25 percent in 1950 to 70 percent in 1990 for married women, growing slowly after 1990. It grew from 70 percent for single women to 80 percent in 1990.  During this period, the participation of men in the workforce was decreasing.

"In the middle of one night / Miss
Clavel turned on her light/ And
said: "Something is not right."

During the last few years, however, more European women have been entering the workforce, while women have been dropping out in the United States and men have continued dropping out in Europe and the United States.

Data on labor force participation rates among different age cohorts can help answer a couple of the questions relating to age. In this century, people have been working longer - the labor force participation rate of those 55 and older rose by nearly 8 percentage points as of 2012. So retirees have not been dropping out. However, the participation of adults under 55 has fallen from 80 percent at the turn of the century to about 75 percent. To quote Miss Clavel in Madeline: "Something is not right."

Possible Stories

Here are six possible explanations of the low employment-to-population ratio:

1. Some married men are dropping out of the labor force, or reducing their hours, to allow their successful wives to devote themselves entirely to the stresses of the workplace.
2. Some working women are rethinking their priorities and are taking more time at home.
3. Baby boomers not tethered to the workplace because of the financial setbacks from the 2008 financial crisis are leaving so that they can start small businesses, which would take them off payrolls until their business starts paying salaries. (Or they are just deciding to retire–greater longevity means the proportion of adults who are retirees will get bigger as time goes on.)
4. The competitive workplace is getting harder to enter and compete in, extending the time that young people spend in career-oriented studying.
5. As the workplace becomes more demanding, people who were accumulating wealth for its own sake are deciding they want to work fewer hours.
6. The Affordable Care Act means that some people who were uninsured no longer have to set aside as much of their income for health care, for themselves or their families.

These kinds of explanations will be studied in the coming weeks and months, because finding the best explanations will lead to better policies. Meanwhile, the U.S. employment-to-population ratio and its cousin the labor force participation rate will, I think, be closely watched...

See follow-on posts on Job-Finding and Disability and on Nonemployment.