There is a lot of wellfounded concern about the enormous, worldwide impact of the COVID-19 virus pandemic, and the accompanying economic consequences.
Unemployment has soared. A great many people face the prospect of bankruptcy. Huge numbers of businesses, large and small, are struggling with their debts. Some major firms have already gone bankrupt.
Several measures have been taken to mitigate the enormous economic hardships. The Great Depression provides some experiences with attempts to stem an economic crisis, particularly by using debt relief measures.
Most people view the great stock market crash of October 1929 as the cause of the Depression. While that was the trigger for the sharp economic downtown, conditions continued to spiral downward until 1932-33, when a bottom was finally hit.
As unemployment and business closures soared, prices began to fall significantly as attempts were made to maintain markets during dropping demand.
Economists call this development deflation. While some might view the fact that things were becoming cheaper as a benefit, people still needed money in order to buy. That money was becoming increasingly hard to earn.
Among the hardest hit were people with debts. While those with jobs and income had a means of managing those debts, the unemployed and destitute had no way of paying the interest, let alone any of the principal owed on those debts.
Governments responded by offering debt relief, mainly by legislating longer terms and lower interest rates on those debts.
However, governments themselves struggled with their own debt levels. On April 1, 1936, the Alberta government defaulted on its bonds, thereby becoming the first provincial government in Canada to become technically bankrupt. Three more bond defaults followed.
The Alberta government brought in a number of extraordinary measures to deal with the debt collapse. One of the strongest was known as the Reduction and Settlement of Debts Act.
It sought to eliminate compounding interest. It made foreclosures on farms and homes extremely difficult. It also greatly restricted the ability of municipalities to seize land with large tax arrears.
While generally popular, the experience of the Hillsdown school district, east of Red Deer, showed some of the unintended shortcomings of the legislation.
In the boom years prior to the First World War, James and Alonzo Geissinger built up at ranch holding totalling a couple of thousand acres.
This became known as the Bar E.P. Ranch, after James Edge-Partington, one of the original landholders.
Starting in 1908, the Geissingers began to shift to other business interests. Chunks of the E.P. Ranch were sold off, with the largest piece (1,440 acres) being sold in October 1911 to Alex, George and Cesar Coudsi and some other Armenian investors.
The price paid was $20,000, considered at the time to be an astonishing sum.
The Coudsis had lived in Damascus, but with growing persecution of Christians in the Middle East, they had emigrated to Montreal. They then decided to try their hand at cattle ranching in central Alberta.
Unfortunately, a sharp recession set in during 1913. Economic conditions worsened in the summer of 1914, with the outbreak of the First World War.
George and Cesar Coudsi left. Alex continued to own much of the E.P. Ranch. However, he often found it difficult to pay for the management and taxes on the holdings. With such a large ranch often not paying its taxes, the Hillsdown school district was frequently very short of funds.
With the Reduction and Settlement of Debts Act, the ranch could not be seized for tax arrears. It fell upon the others in the district to come up with enough funds to keep the local school open.
At one point, the local teacher, G. Harold Dawe, was paid with a promissory note, as the school board didn’t have enough money to cover his salary.
Fortunately, things improved by the end of the 1930s. In 1942, the E.P. Ranch was sold to the Lawrence brothers of Pine Lake. It became the home of Ben and Mabel Lawrence, and their two sons, Tony and Tom.
Red Deer historian Michael Dawe’s column appears Wednesdays.