WEALTH

MACRO
To Henry Ford, history was bunk, Karl Marx thought
it was tragedy repeated as farce, while German
Chancellor Konrad Adenauer considered it the
sum total of things to be avoided. For Barry Eichengreen,
however, history is a mirror that distorts as much as it
reflects.
“My argument is that history doesn’t teach lessons,
people teach lessons,” he explains. “The way history is
written, talked about and taught is influenced and shaped
by the context in which that history is written, talked about
and taught. The setting influences how history is framed
and organized.”
This is a central theme of his recent book, Hall of Mirrors:
The Great Depression, the Great Recession, and the Uses – and
Misuses – of History (2015), and Eichengreen clearly shows
its relevance to our current economic mess. When the
world economy went into a tailspin in 2008–2009, stunned
policymakers only had events from the Great Depression of
1929–1933 to refer to. As they sought to contain market
collapses, bank runs and soaring unemployment, they dug
back 80 years for guidance.
BLINDSIDED
BY HISTORY
History never repeats, but it sure can rhyme, as an
interview with economist Barry Eichengreen highlights
STRIKING PARALLELS
Eichengreen, an economic historian from the University of
California, Berkeley, believes that knowledge of events in
the 1930s has been a mixed blessing. Received wisdom
enabled modern policymakers and central bankers to
prevent the worst from recurring. However, they failed to
sufficiently grasp the parallels between then and now –
and the differences.
“The parallels are remarkable,” Eichengreen comments,
speaking with PROJECT M on the eve of the US Federal
Reserve’s decision in December 2015 to raise short-term
interest rates for the first time since the financial crisis.
In Hall of Mirrors, he deftly weaves together the stories of
the two slumps. Rich with anecdotes and an array of vivid,
often villainous, characters, he shows how the Great
Recession, like the Great Depression, occurred against the
backdrop of a sharp credit boom and a real-estate bubble.
Radical new technology (radio and electricity in the
1920s and the Internet more recently) inspired faith in
rising productivity. Similar to the “new era” of the 1920s,
The Great Moderation that lasted from the mid-1980s
54 • Allianz