Debt Reduction Causes Depressions
Data compiled by Professor Frederick Thayer
of George Washington University
From the "Letters to the Editors", Christian Science Monitor, Feb. 16, 1996
"A Link Between Debt Reductions And Depressions"
" My thanks for the opinion-page article, "Too Many Goods, Too Few Buyers
- A Repeat of 1929?", Feb. 2, [CSM], and the author's sensible warning to today's,
An equally interesting set of data was recently released by Prof.
Frederick Thayer of George Washington University. He linked the American
historical sequence that begins with budget-balancing and ends with
depressions. Among his findings of past debt reductions:
From 1817 to 1821, the national debt was reduced by 29 percent to
$90 million, and our first major depression began in 1819;
From 1823 to 1836, the national debt was reduced by 99.7 percent to
$38,000, and a major depression began in 1837;
From 1852 to 1857, the national debt was reduced by 59 percent to
$28.7 million and was followed by a major depression in 1857;
From 1867 to 1873, the national debt was lowered by 27 percent to
$2.2 billion, and a major depression began in 1873;
From 1880 to 1893, the national debt was reduced by 57 percent to
$I billion and was followed by a major depression in 1893; and
From 1920 to 1930, the national debt was reduced by 36 percent to
$16.2 billion; our sixth major crisis - the Great Depression - began in
"The consistent, historical evidence indicates that deficits never cause
depressions, while crusades to reduce the national debt are, always,
followed by depressions. The author, poignantly, reminds us that the
legitimate needs, of all members of society, justify special programs. It
is helpful, if we remember that these programs and their costs, also, are
integral to the health of our nation's economic well-being.
Letter submitted by:
John Hymes JR., Alexandria, Va.
Another Result of Debt Reduction.
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