World War II was, especially compared to our current challenge. In today’s effort, President Trump has invoked the Defense Production Act, ordering General Motors to prioritize manufacturing of ventilators and requiring medical suppliers to make more swabs for coronavirus testing. Travel and leisure companies have been especially squeezed. Disney, for example, closed its theme parks and cruise ships, and DreamWorks was forced to release its new Trolls movie by home-streaming rather than in-theater viewing. This, no doubt, is a hardship. But consider what Disney management faced in the early 1940s. Although the Disney headquarters in Burbank was thousands of miles from any bombs or rifle shots, shortly after the Japanese attacked Pearl Harbor on December 7, 1941, 500 American troops marched through the gates of the Disney Studios and took over. The troops had two missions. First, they were protecting a nearby Lockheed aircraft plant. Second, they turned the Disney fantasy machine into a war machine, producing everything from military logos to training films. Disney designed a logo for the Navy’s torpedo boats, also known as mosquito boats. It was a menacing mosquito straddling a torpedo. Dumbo showed up on air squadrons riding bombs and saying, “We never miss.” Over 90% of Disney’s film production in 1942 was devoted to the war, and the Navy pressed the studio to churn out 6 times as much feet of film as they had been during peacetime. Though Walt Disney was a patriot and proud that his company could serve the military, even he was startled when an old Navy commander camped out in his personal
To offset the COVID-induced Great Cessation, the Federal Reserve and Congress have pumped in unprecedented levels of monetary and fiscal stimulus, fearing that the economy would otherwise sink like a dense dumpling in a bucket of broth at a 1930s soup kitchen. In April, Congress green-lit $3 trillion of spending, while the Federal Reserve has bought about $3 trillion worth of securities, including corporate bonds of nearly 800 private companies. President Trump and Congress will likely up the ante this summer. The 2020 budget deficit looks to hit about 18% of GDP, and the ratio of debt to GDP is hurdling over the 100% mark – numbers not seen since Franklin Roosevelt was photographed with a cigarette holder jauntily protruding from his patrician lips.
They turned the Disney fantasy machine into a war machine, producing everything from military logos to training films.
Assuming we eventually defeat COVID-19 and do not devolve into a dystopic Terminator scene that would bring Arnold Schwarzenegger out of retirement, how will we avoid the fiscal cliff and national bankruptcy? To answer these questions, we should grasp some lessons from the World War II era. That war did not bankrupt us, and even though the debt-to-GDP ratio soared to 119%, by the time of the Vietnam War, that ratio had slid to just above 40%. Before talking finance, though, it’s helpful to realize how sweeping and all-encompassing
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July 2020
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