October 02, 2011

Worried? Good. But Your Worst Nightmare Will Probably Not Come to Pass.

FSG partner Patrick Marren chronicles a century of late-summer anxiety…and wonders what it all means for the pressing worries of 2011. 

August 1911: The specter of Anarchism grips America. Anarchist Ben Reitman, disciple of Emma Goldman, counsels a rally of New York laborers to commit murder if necessary to bring about change: “If the rich thought that you would destroy their property or injure them, they would pay attention to the unemployed…. Your hope, I tell you, lies in your ability to injure society.” (N.Y. Times, Aug. 31, 1911)

August 1921: The Emergency Quota Act is enacted, restricting the number of immigrants from 'the eastern hemisphere' to no more than 3% of the number of their nationalities already in America in 1910. It set the maximum number of immigrants in any year at 357,000. These are in response to popular fears that “real Americans” will soon be overwhelmed by the newcomers and the “American culture” destroyed.

August 1931: Governments, still haunted by the German hyperinflation of a decade previous, cling to conservative fiscal policies in the face of the Depression, either running tiny deficits or, as in the case of Britain in August 1931, advocating massive cuts to balance the budget and “save the pound.” Prime Minister Ramsay MacDonald abandons his Labour Party to form a National Government with Conservatives and Liberal Party members in order to push through these cuts and forestall inflation.

August 1941: Less than two years after a Gallup poll showed more than 84% of Americans wanted to remain out of any European war, isolationist “America First” members, led by national spokesman Charles Lindbergh, continue to make any overt move by FDR to join forces with the Allies impossible. It is estimated that a solid majority of Americans still oppose being drawn into another war more than they fear Adolf Hitler.

August 1951: Surveys show that Americans’ greatest fears are, in order, the atomic bomb, the disease of poliomyelitis, and a communist takeover of the United States.

August 1961: Gallup Poll question for August, 1961: “If Communist East Germany closes all roads to Berlin and does not permit planes to land in Berlin, do you think the U.S. and its Allies should or should not try to fight their way into Berlin?” 85% of Americans are ready to risk war to keep American troops in Berlin.

August 1971: In response to what Life magazine calls “the country’s worst economic crisis in years,” on August 15, 1971, President Richard Nixon imposes wage and price controls for 90 days, and suspends convertibility of U.S. currency into gold. America is gripped by what Life calls “an inflation psychology,” which saw inflation spiking to the unheard-of level of 6% in 1970, and remaining at a lofty 4% in 1971.

August 1981: The Reagan administration insists that there is a gap between a menacing buildup of Soviet offensive capability and what candidate Reagan called the “unilateral disarmament” of the United States during the 1970s. “A window of vulnerability is opening, one that would jeopardize not just our hopes for serious productive arms negotiations, but our hopes for peace and freedom,” Reagan would warn a few weeks later.

August 1991: American corporations fear that the Soviet Union, object of massive investment, may disappear, after Mikhail Gorbachev is overthrown in a coup. "Now we're back into a period of uncertainty," says James F. Munsell, a partner with a New York law firm helping to develop a securities system for the Soviet Union. "And business people find it difficult to function in an environment where you're asking 'who is in charge?' and 'where does authority lie?'"

August 2001: Shark attacks and Chandra Levy’s disappearance dominate the headlines. But the Bush tax cuts may have fixed a problem that Alan Greenspan identified in testimony to Congress: the threat that the Treasury will pay off all its debt, thus leaving the world without a benchmark upon which to base prices for other financial instruments.

August 2011: A Second Great Depression? Historic budget deficits? Islamist terror? Afghanistan? Iraq?

So, what’s the lesson here? Chances are, if you are worried about it today, it will either not occur, or will be rendered quaint by 2021.

Thoughts?