Morgan Stanley Fears Policy Makers Repeating Mistakes of 1930s

Fiscal policy stimulus could avert relapse into recession: economist

by Sue Chang
Market Watch

Policy makers are repeating the types of mistakes that prolonged the Great Depression, economists at Morgan Stanley warned Thursday.

High debt, deflation, slower growth and lower yields on top of policy missteps have often been identified as the prime culprits for extending the Great Depression in the 1930s.

“We think that the current macroeconomic environment has a number of significant similarities with the 1930s,” said a team led by Chetan Ahya, global co-head of economics at the firm.

[…] “The critical similarity between the 1930s and the 2008 cycle is that the financial shock and the relatively high levels of indebtedness changed the risk attitudes of the private sector and triggered them to repair their balance sheets,” Ahya said.

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