(SOUNDBITE OF ARCHIVED RECORDING)
RICHARD DURBIN: You can't reach a budget balance with 15 million Americans out of work. We need to invest in things that count - education and training for our workers, innovation so that we have that kind of spark of creativity that creates new businesses and new jobs.
(SOUNDBITE OF SONG, "PAST IN PRESENT")
FEIST: (Singing) The scarlet letter isn't black. Got to know who's got your back.
CHANA JOFFE-WALT, HOST:
Hello, and welcome to PLANET MONEY. I'm Chana Joffe-Walt.
ALEX BLUMBERG, HOST:
And I'm Alex Blumberg. Today is Tuesday, February 22. And that was Senator Dick Durbin, a Democrat from Illinois, you heard at the top speaking on NBC's "Meet The Press." On our program today, we read someone's diary. Not just anybody's diary, but a man trying to come to grips with a sweeping economic catastrophe that is taking place all around him.
JOFFE-WALT: But first, we need to do our PLANET MONEY indicator from our own Jacob Goldstein. Jacob, what do you have for us today?
JACOB GOLDSTEIN, BYLINE: Today the PLANET MONEY indicator is 4.1 percent. U.S. home prices fell 4.1 percent last year. That's according to the latest Case-Shiller numbers, which came out today. And one of the striking things when you dig into these numbers, it's not just crazy housing bubble towns we see falling. You know, it's not just Vegas and Miami bringing everybody down. Prices actually fell last year in 18 out of the 20 metro areas that Case-Shiller tracks.
JOFFE-WALT: What are the two areas where prices did not fall?
GOLDSTEIN: D.C. and San Diego.
JOFFE-WALT: OK. So that basically means five years that home prices have declined - right? - 'cause the housing market peaked in 2006. So for five years it's been declining.
GOLDSTEIN: Almost. It'll be five years in the middle of this year, which is a long time, right? And if you step back and look at the picture, look at a graph, what you see is of course prices went way up for several years. And then between 2006 and 2009, they just fell through the floor. It's just - you know, it's like the roller coaster going downhill. And then for the last year and a half or so, we've kind of been bumping along the bottom - you know, up a little, down a little. Not much net change since then.
BLUMBERG: So we've been sort of basically plateauing at this level. And the real question is, is it going to start a long climb upward? Or is it going to continue its sort of arrested decline downward?
GOLDSTEIN: Well, there are definitely some signs that the housing market is still in pretty bad shape. For one thing, the percentage of mortgages in foreclosure, that just tied an all-time high. It's nearly 5 percent. There's still this glut of houses on the market. Interest rates are actually going up, so that means mortgages are going to get more expensive. It makes it harder for people to buy houses.
BLUMBERG: So rising interest rates, more foreclosures on the market, more inventory on the market. It does seem hard for there to be a real recovery when all those things are true.
GOLDSTEIN: It certainly looks that way.
BLUMBERG: All right. Thanks so much, Jacob.
JOFFE-WALT: Thank you, Jacob.
GOLDSTEIN: Thanks, guys.
JOFFE-WALT: So on today's show, we're going to look at one of the most studied periods of economic history - the Great Depression. But we're not talking to any academics. There's not a single economist in this podcast. We have one man's diary right here in front of us - a man named Benjamin Roth who was a lawyer in Youngstown, Ohio, and who writes a diary through the entire Great Depression as it is unfolding around him.
BLUMBERG: And we have his diary today because it was recently published as a book called "The Great Depression: A Diary." It's edited by Benjamin Roth's son Daniel and by James Ledbetter, a journalist with Reuters. And what makes this book interesting is that we collectively today have sort of a popular narrative of what happened with the Great Depression.
This narrative has been brought to us through books and films and photographs. Most of us would sort of cite "The Grapes Of Wrath" or "It's A Wonderful Life" or those Dorothea Lange photographs. But Benjamin Roth, he is writing this diary in real time as it's happening. And he's writing at a time when no one knew what the narrative was yet or, more importantly, how it would end.
JOFFE-WALT: Which makes it a really interesting read. So Benjamin Roth has now passed. But we invited his son Daniel to come into the studio with his father's diaries. We thought he'd be sort of the best person available to read some of our favorite entries to you. And Daniel Roth, the son, started telling us that his dad was writing these diaries throughout his entire childhood. But he had no idea that that was happening until he was an adult.
BLUMBERG: It wasn't until Daniel became a lawyer like his dad. And in 1956, he graduated from law school and moved to Youngstown to join his dad's practice. And the summer before Daniel started to work with his dad, his dad came to him and said, son, to understand this practice, you need to understand our clients - clients who have lived through the Great Depression. And in order to understand them, you need to read my diaries.
DANIEL ROTH: That's actually the first time I ever even knew they existed.
JOFFE-WALT: And how many notebooks was it? Was it, like, a stack of notebooks?
JOFFE-WALT: Fourteen notebooks?
JOFFE-WALT: What did he say to you about them? Like, how did he describe them?
ROTH: Well, he said that he would go to his law office each day. And when he had the time, he would quietly try to analyze the financial events of the day not only locally but nationally and globally.
JOFFE-WALT: As he did that, Benjamin Roth was writing a very different story than the one that we mostly hear about the Great Depression because Benjamin Roth wasn't sort of the person that at least I have in my mind when I picture the Great Depression. He wasn't an Okie. He never stood in soup lines. He was a professional guy. He was a lawyer. And all his family and friends went to college. They were doctors and dentists.
He kept his law practice the entire Great Depression, which is not to say he was making a lot of money. His business wasn't exactly thriving. And he writes a lot about how his fees shrunk. And the work that he got started to be all depressing work. Like, foreclosures and receiverships and bankruptcies were basically the only jobs that he could get. He wrote sometimes that people would pay him with a passbook to a savings account that was in a closed bank. That was how they would pay his fees.
BLUMBERG: In other words, if this bank opens back up and they still are solvent, you can have all the money in my account. But who knows if that's going to happen? And on August 18, 1931, he writes, quote, "the town is fast becoming panic-stricken. Everybody is talking about the depression and wondering where it will end. Dr. W, our family dentist, stopped me today and urged me to continue to send my family in for dental work even though we could not pay promptly. It was a very unusual thing for him to do. But people have simply stopped worrying about dental needs. If a tooth aches, they have it extracted but neglect all other dental services that may be expensive."
JOFFE-WALT: The thing I kept thinking reading these entries is that this is actually probably the way that most people in America were experiencing the Great Depression and not the way that we have in our minds, not those Dorothea Lange photographs on the farm. You know, unemployment was more than 20 percent, but that still means the majority of workers were like Benjamin Roth and had jobs.
BLUMBERG: But they were still freaked out. And what Benjamin Roth did with his freaked-outedness (ph) was he obsessively followed the news and tried to understand as best he could, what in the world was going on? Why was all this happening all around him? For example, in one diary, he asked the question, why are all these local banks - the Home Savings and Loan, the Metropolitan Savings and Loan, the Federal Savings and Loan - those are the names of all these banks in there - why are they all of the sudden saying to their customers, you can't have your money back? Here's Benjamin's son Daniel reading the entry.
ROTH: (Reading) August 5, 1931 - the town is stunned by the news that the Home Savings and Loan Company has suspended payments and would demand 60 days' notice of withdrawals. This is followed quickly by similar announcements from the Federal Savings and Loan Company and the Metropolitan Savings and Loan Company. All of these loan companies paid 5 1/2 percent on savings deposits and earned their money by lending on real estate.
(Reading) With the coming of the Depression, people stopped making payments on their mortgages. Mortgages became frozen, and the banks had no way to get cash. This is very interesting what we're seeing here. Mortgages are a safe investment but cannot be liquidated quickly and are not a good investment for a bank, which has agreed to pay out its deposits on demand. For the past three days, these institutions have been besieged by hysterical depositors demanding their money.
BLUMBERG: One of the more shocking things about reading these diaries is how contemporary a lot of the stuff feels. Like that line, mortgages are a safe investment, but they can't be liquidated easily. You would think of any of the lessons that we would've learned that that would be the one. But of course we all just learned that lesson all over again in this current crisis.
JOFFE-WALT: Right. And it's actually - I mean, it feels sort of scary reading this account of a man who is in the middle of an economic crisis because he keeps trying to figure out what's coming next. And reading it sort of makes you question every, you know, economic rebound story you've read in the newspaper in the last three years because Benjamin Roth writes his diaries for years. And he always thinks things could not possibly get worse than the exact moment that he is writing it.
ROTH: August 7, 1931 - quote, "Business is at an absolute standstill, and the big stores are deserted even though they are all running sales and almost giving the merchandise away. Since the Home Savings and Loan Company and other loan companies stopped paying out, nobody has any money, and everybody seems scared and blue. We seem to have touched bottom in Youngstown, and it hardly seems possible that things could get worse." Then he went back. And on March 8, 1933, almost two years later, quote, "this was a poor guess. Conditions in 1932 were much worse."
JOFFE-WALT: And your dad does this throughout the book. He sort of - he goes back into his diary and amends what he wrote before to update it with what actually happened.
ROTH: (Laugher) He annotated his own writings and was very quick to point out where he had been wrong.
JOFFE-WALT: Benjamin is constantly trying to figure out where he was right and where he was wrong. And there's this one theme that comes up again and again in his diaries that he's really struggling to figure out, and he never quite does. And that is gold. So when Benjamin started writing his diaries, the U.S. was still on the gold standard, meaning every dollar was backed by gold. And there was an idea floating around that countries should ditch the form of money that citizens all knew, gold, and just leave it behind.
BLUMBERG: And that's something we of course have been talking about a lot here at PLANET MONEY. Last week, we did two podcasts on the gold standard. And a couple of years into Benjamin's diaries, the gold standard was coming under assault. Governments around the world were talking about dropping it, and the reason was so that they could print more money. If they didn't have it tied to gold, they could just print as much money as they wanted to. And they thought, if we can print more money, this will solve a bunch of problems, including a problem Benjamin Roth was seeing all around him.
ROTH: (Reading) On September 13, 1931, we bought peaches yesterday at 75 cents a bushel. The trees are still loaded to the ground and will go to waste because the fruit cannot be sold. In the meanwhile, thousands are starving. It is hard to understand. There is no sign of a pick-up this fall. If anything, things are worse. There is simply no money in circulation.
BLUMBERG: All right, so even though Benjamin Roth is seeing this problem, he is still very skeptical about the solution being proposed by governments to leave the gold standard.
ROTH: (Reading) This scarcity of money is what makes people think if more money were printed, business would be better. This is a false and vicious theory.
JOFFE-WALT: So this is one of the first times that Benjamin Roth starts writing about the gold standard. And in this very first entry, he is quite clear it sounds like a crazy, false, vicious theory that the U.S. should leave the gold standard. But it is this big conversation happening all around him. And there's lots of economists who are arguing for it. There's newspaper articles all the time about how it's a good idea. And so Roth starts reading economic textbooks and anything he can get his hands on to try to educate himself and try to understand the arguments for why this is a good idea. And he cannot figure it out.
ROTH: (Reading) September 29, 1931 - I am a little puzzled by the complications of international finance, but I am learning fast. And a good deal of what I was taught in college as theory is now being put to the test of actual practice. What is meant by a country going off the gold standard? As far as I can see, it is like a bank refusing to pay out deposits because of lack of funds. I can see I will have to read up on the subject, and I shall get started at once. Politics, economics and international finance - the Depression has been a postgraduate college course for me and from that standpoint at least has been a worthwhile experience.
BLUMBERG: But like a lot postgraduate experience, he emerged even more confused about what to think (laughter).
JOFFE-WALT: He was quite perplexed. So he never actually figures out, you know, what to think about the gold standard. To read the entire diaries - and they go all the way to 1941 - and Roth is never convinced that leaving the gold standard was the right thing to do.
BLUMBERG: This is one of the other things that's really interesting about reading these diaries. For most of us, the story of the Great Depression - President Franklin Roosevelt is the protagonist of the story, but he is not Benjamin Roth's protagonist. Benjamin Roth did not vote for him as president any of the times that he ran. And Benjamin Roth was skeptical of Roosevelt's policies even when it seemed like maybe things were starting to get better.
ROTH: (Reading) January 2, 1937 - I am told the managed economy, the New Deal, has eliminated future booms and depressions, but I do not believe it. Banks are piled high with deposits and do not know how to invest it because good bonds bring in only 2 percent. Only yesterday the Union National Bank announced it would not accept savings accounts in excess of $1,000 because it could not use the money. When business really expands enough to borrow this bank surplus, there is danger that we will have overexpansion, perhaps an inflationary boom and then a crash. Government officials say they can control this coming boom, but I do not believe they can.
BLUMBERG: All right, so a couple things about that last diary entry. First of all, can you imagine banks saying, you know what? We don't want your money, especially if you have a lot of it. We can only take a little bit. You know, you can't invest it with us. But second of all, he's again voicing this anxiety that sounds really contemporary. You hear a lot of people today worrying about that things are bad now. But after all this government intervention, there's going to be inflation and that we're just laying the seeds for future booms and busts. The argument that he's laying out sounds very, very contemporary.
JOFFE-WALT: Well, I feel like that's true for most of the central questions of his diaries. They're still huge questions today. Like, how much should a government control an economy, and how much can a government actually control an economy anyway, and where does a person safely invest their money - all huge questions still.
BLUMBERG: Right. And how you think about these questions, it has a lot to do with what sort of history you've lived. Let's end the podcast here with a story that Daniel, Benjamin Roth's son, told us. He finished reading the diaries in the summer of 1956, a very different time than the Great Depression's peacetime. There was a big economic boom underway. And his dad says, OK. You are now ready to work in my practice because now you understand our clients, all these people who like me lived through the Great Depression. They've been shaped by it. Daniel told us his father basically said, now, son, you're ready.
ROTH: It helped me understand the trauma that they had lived through. And one of my favorite recollections is that I accompanied one of his clients to a bank because he was considering turning over a lot of his assets to be held in a trust fund for his family. And here I'm sitting there as a young lawyer with a very well-to-do client.
And the client said to the trust officer, I want in writing that you will never invest any of my money in anything other than government bonds. Well, both the trust officer and I were shocked. But the trust officer of course wanted the business. And he did put it in writing. But when you stop to think about it, here's a man who was so traumatized by the Depression that he did not trust any security whatsoever other than a Treasury bond.
BLUMBERG: There's probably a lot of people today who feel the same way after what we've just gone through. And that's one of those things that I kept thinking as I was, like, reading these diaries and listening to this interview. You know, this experience that we've all had, that we've all just gone through, one day it will be history.
JOFFE-WALT: Right. Like, if Benjamin Roth were alive today and he could see the popular account of the Great Depression, the historical account of the Great Depression, how much would it seem to him like the thing that he actually lived through?
BLUMBERG: Right. I know that one day there's going to be some popular historical narrative of what we all went through. And I wonder how much it will actually resemble anything close to what we all personally experienced?
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FEIST: (Singing) When a wrong becomes a right, when a mountain fills with light, it's a volcano. It's a volcano. It's a volcano. It's a volcano.
JOFFE-WALT: You can find out more about the Case-Shiller housing index and Jacob's predictions for the future of housing at our blog, npr.org/money.
BLUMBERG: We'll also throw up a link to the book. And if you have any questions, comments or concerns, please send them to email@example.com. I'm Alex Blumberg.
JOFFE-WALT: And I'm Chana Joffe-Walt. Thanks for listening.
(SOUNDBITE OF SONG, "PAST IN PRESENT")
FEIST: (Singing) Present, so, so much past inside my present, inside my present, inside my present, so, so much past inside my present, inside my present, inside my present.
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