Father Coughlin and the Great Depression

I recently finished Alan Brinkley’s Voices of Protest, which is a dual biography of Louisana politician Huey Long and radio firebrand Father Coughlin. Father Coughlin is known for being virulently anti-semitic, yet Brinkley takes pains to note that a focus on Jews only occurred towards the end of Coughlin’s career, long after he had ceased to be a major political figure. According to Brinkley, Coughlin is best understood as an heir to the midwestern populist tradition of William Jennings Bryan. And indeed there was quite a bit of overlap between the views advocated by Father Coughlin during the early 1930s and those of Bryan forty years earlier. The Principles of the National Union for Social Justice (Coughlin’s organization) supported the living wage, support for unions, a “conscription of wealth” in the event of war, and the nationalization of “banking, credit and currency, power, light, oil and natural gas and our God-given natural resources,”

Like Bryan, though, Coughlin’s main focus was on monetary policy. To quote Brinkley:

Many factors had conspired to create the Great Depression, Coughlin explained, but one loomed larger than all the others: a “cursed famine of currency money” . . . . Denouncing America’s rigid adherence to the gold standard (“Wedded to the false philosophy that gold is the value and not the measure; that it is the master and not the servant . . . we have been overwhelmed by catastrophe”), he urged immediate revaluation – a doubling of the price of gold per ounce from the present level of $20.67 to $41.34. The government would thus be able to issue twice as much currency on the basis of its existing gold supply. Revaluation would encourage, indeed, almost force the wealthy to put their “hoarded dollars” back into circulation; it would enable debtors to bear mortgages and other loans more easily; it would promote peace by making America’s allies better able to repay their wartime debts; and, most important of all, it would stimulate the economy sufficient to restore jobs and create prosperity for all.

Brinkley is dismissive of Coughlin’s prescriptions, saying that it amounted to little more than “a simplistic promise of quick and easy wealth.” And politicians at the time were equally dismissive (when FDR received a memo urging a large monetary expansion to fight the depression, he reputedly dismissed the idea with the comment “Too easy.”)

The irony, though, is that the standard view among economists today is fairly close to Coughlin’s. In their classic A Monetary History of the United States, Milton Friedman and Anna Schwartz argued that Fed mismanagement late 1920s had led to a contraction of the money supply by nearly a third. With less money circulating, it became impossible for banks and firms to meet contractual obligations or payroll, which led to a major fall in output and an increase in unemployment. So persuasive was Friedman and Schwartz’s argument that Ben Bernanke publicly apologized to Milton Friedman at his 90th birthday party on behalf of the Federal Reserve:

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.

Whether the Fed did, in fact “do it again” during the last recession is a matter of some dispute. While we have not seen anything approaching the problems of the 1930s, recovery has been slow and marginal, and unemployment remains high. More importantly, unlike in the 1890s or 1930s, there has been no major figure able to make a strictly moral case for monetary expansion, as opposed to a strictly technocratic one. Coughlin is an unappealing figure in a lot of ways, and to a lesser extent so was Bryan, but they show that it is possible to speak about monetary policy in a way that is both morally charged and substantively correct.

13 Responses to Father Coughlin and the Great Depression

  • Stephen E Dalton says:

    Fr Coughlin’s economic policies were leftist. Jeffery Goldburg’s ” Liberal Fascism” in pages 137-145 shows that Coughlin’s economics were leftist and socialist. He constantly denounced capitalism in his talks and literature. he is wrongly considered ‘right-wing’ because he turned against FDR. But as Goldburg shows, he actually turned against FDR because Roosevelt wasn’t as left-wing as he was!

  • Darwin says:

    Interesting post.

    More broadly, I would be really interested to read a history of popular attitudes towards inflation. At the moment, popular opinion on the right seems to be against inflation, while on the left the desire to fiscal stimulus is so strong that monetary policy seems more or less ignored.

    If anything, it seems like opinions on monetary policy were much more passionately held in the past than now, with Bryan as Exhibit A in that respect, but I’m not really clear on what the tides of opinion were and how they tied to other ideological trends.

  • Blackadder says:

    Darwin,

    It is odd that monetary issues would get people riled up so much more in the past than today (the closest we have to a Bryan today would be Ron Paul, who of course comes down on the other side of the question). I wonder if this had to do with the fact that government was a lot smaller back then. Nowadays populist rage can be channeled into issues ranging from health care to union pensions, and so forth, whereas back then monetary policy was one of the few things the government had a major role in.

    Nicholas,

    I thought Voices of Protest was pretty good. It dragged on a bit at the end (after Long died and Coughlin marginalized himself) but was very informative.

  • T. Shaw says:

    Interesting fact in the history of gold: the UK went off the gold standard in 1931. Did It help? Not so much.

    “Many factors had conspired to create the Great Depression, . . . ”

    In A Monetary History of the United States, 1867-1960, Milton Friedman and Anna Jacobson Schwartz repeatedly named federal government policies as culprits in the Great Depression:

    · The Federal Reserve reduced the amount of credit outstanding, and therefore the stock of money, in 1931 and again in 1933; Monetary Policy.

    · Congress passed and President Hoover approved a major tax increase in June 1932; Fiscal Policy.

    · Rumors that President-elect Roosevelt would devalue the dollar (which he later did) caused the final banking panic; regulatory and Monetary Policy.

    · The national banking holiday declared by Roosevelt on March 6, 1933, undermined public confidence so greatly that 5,000 banks didn’t reopen after the holiday expired, and 2,000 closed permanently. Regulatory Policy

    In the 1930s, the Smoot-Hawley Tariff Act caused a collapse in global trade.

    Elsewhere (rightist claims) besides Friedman: A Perfect Storm of D.C. policy caused the Great Depression:

    In the 1930s, the Smoot-Hawley Tariff Act caused a collapse in global trade. Trade Policy.

    The Fed allowed the money supply to shrink by one-third. Monetary Policy – the gold standard was unchanged

    Herbert Hoover raised taxes. Fiscal Policy

    Government regulation in the 1920s prevented banks from branching, which caused more than 10,000 to fail in the 1930s. Regulatory Policy

    I believe the “cross of gold” was minor compared to the above causes. Gold did not shrink by one-third, but M1 did . . . On the contrary, bankers and business people thought gold dollars would be devalued and that was a cause of panic.

    Today we have uncertainty about: the next idiotic mass mistake will Bernanke and Geithner dream up; how high will be tax hikes; how much will national health care cost; how many thousands of new job killing regulations will be imposed; how high will fuel costs go because of the untoward control exercised over the Obama regime by the AGW cult; how high will food prices rise; etc.

    Seems to me Father Coughlin was slightly more astute at economics than Bernanke, Geithner or Obama. That’s not saying much. He should have stayed with saving souls.

  • Art Deco says:

    the UK went off the gold standard in 1931. Did It help? Not so much.

    O yes it did. The British economic recovery began almost immediately upon devaluation of the currency in September 1931. The United States retained the gold standard. The succeeding 18 months were among the most economically harrowing in United States history. The year-over-year decline in domestic product (comparing 1932 to 1931) was 13%. Among the measures the Roosevelt Administration employed in 1933 was a large devaluation of the currency. The next three-and-a-half years were a period of rapid economic expansion.

  • Art Deco says:

    Today we have uncertainty about: the next idiotic mass mistake will Bernanke and Geithner dream up; how high will be tax hikes; how much will national health care cost; how many thousands of new job killing regulations will be imposed; how high will fuel costs go because of the untoward control exercised over the Obama regime by the AGW cult; how high will food prices rise; etc.

    Neither Mr. Geithner nor Dr. Bernanke have any responsibility for policy in the realm of health and safety regulations, environmental regulations, labor law, or welfare spending. Dr. Bernanke’s agency has no responsibility for any dimension of fiscal policy. Mr. Geithner’s department collects taxes, maintains the intramural payments system, sells bonds, operates the mint and currency printing plant, and has a hand in regulation of the financial sector. It does not write the budget. Neither the Treasury nor the Federal Reserve can unilaterally raise taxes.

  • G-Veg says:

    This seems a good forum for asking a question I’ve wanted to ask for some time.

    It seemed to me that interest rates were kept artificially low for many years before the collapse in 2008. The low interest rates supported the housing market and fueled the bubble. They also left us nowhere to go in stoking the economy as it faltered: since we couldn’t spur investment with interest rate cuts, we were forced into an infusion trap, essentially de-valuing currency through stimulus measures.

    The first part of my question is whether I have it right and the second is, if I am right, what does this tell us about policy?

  • T. Shaw says:

    Father Coughlin should have stuck to saving souls. Camus: “All attempts to create Heaven on Earth result in Hell on Earth.”

    I dunno. In the UK, was it going off gold or was it Keynes? Plus, UK still had its Empire (Canada and India) and huge resources and trade advantages.

    AD: Obviously. The two blind mice merely fuel fear and uncertainty. The other phrases, behind each semi-colon, are independent of each other. Sadly, they all may combine to give the US a perfect economic storm.

    G-V: Low rates were one of a large number of factors leading up to the housing bubble, and too true made open market operations (easy money) unavailable to help the economy.

    No one in power understands the causes of all this “pomp and circumstances.” No one learned from the S&L crisis or the dot.com bubble burst, Fed acts around LTCM caused an attitude that they’d be bailed out, FDIC deposit insurance, FNMA/FHLMC corrupted Congress, HUD, CRA, etc. Got to run.

    Alan Greenspan is excoriated for his recent Fed performance. Few people remember that he was also on the wrong side of the run-up to the S&L crisis.

    I blame Bush.

  • Art Deco says:

    It seemed to me that interest rates were kept artificially low for many years before the collapse in 2008.

    The Federal Reserve was raising the discount rate in increments throughout the period running from 2002 to 2006.

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