History Repeating: 1937

In 1937, the Federal Reserve and the Roosevelt administration decided the Great Depression was over and that it was time to stop spending. The result of the fiscal and monetary tightening was a second downturn in Gross Domestic Product (GDP). Today, the Obama administration has decided to seek spending freezes and to trim deficits. Is history repeating?

Hopefully not, but a time plot of real GDP during the great Depression shows that the bottom was hit around 1932. The episode in 1937 was a brief downturn compared to the Crash itself.