In a bear market, there is always a bull run on Chicken Little helmets.
We are not headed for a Great Depression. There are no souplines stretching for city blocks. Yes the market may drift lower, but here are the major differences between then and now.
The United States of Bailouts
Yes we are now living in the United States of Bailouts, as the government has created a $700 bn mega-dumpster to buy at auction rotting paper that was crafted by habitually self-deceiving, hubristic hustlers on Wall Street, who, unburdened by conscience, felt entitled to follow their own codes of conduct as they went berserk enriching themselves.
Not just Wall Street, but taxpayers, will be staring morosely at this mountain of rotting paper for some time. And now we have Bailout 2.0, with the government exercising its powers under the former bill to buy equity stakes in damaged financial institutions (the prior bill said it could buy any type of distressed asset).
Readers, who I so appreciate, know I’ve been saying since last fall that the free market has turned into a free-for-all, that Wall Streeters have sewaraged the once white-shoe reputation of finance with a kind of thinking that exists only on the margins of the Bell Curve.
It is their unfathomable stupidity, and the fact that these exotic derivatives that so enriched Wall Street but now have the same rights to the US Treasury as plain vanilla Treasurys, that is engendering a voter outrage hot enough to melt platinum. Perhaps the upside here is that we may get a voter turnout this coming presidential election bigger than the turnout in Mali or the Sudan.
And yes, as I've noted, we have come full circle, as with a great thundering thump, the Federal Reserve took the unthinkable step of converting the last two major investment banks standing, Morgan Stanley (MS) and Goldman Sachs (GS) into traditional bank holding companies.
The Differences Between Then and Now
However, the differences between today and the Great Depression are many and sundry:
The Dow Jones industrial average is down more than one-third from its high a year ago. The stock market lost 89% of its value from its peak during the Great Depression. During the most recent bear market, from March 2000 to October 2002, the market lost about 50%. Same for 1973-1974 and two other times since 1937.
With stocks down 36%, we are closer to a bottom than a top. Most, if not all, of the bear damage may have already been done.
*One big difference is that during the Great Depression, there was no deposit insurance, causing a huge run on banks (watch out for bank runs England-deposit insurance there is a paltry $4,000). As customers withdrew their money, you had banks failing right and left. About 7,000 and 8,000 failed between 1929 and 1932. Today, 13 have collapsed, with 117 on the government's watch list. Yes today's banks are much bigger than the banks of the '30s--but so far, absent Washington Mutual and Wachovia, the big banks have not toppled. And these two banks are being taken over by bigger players.
*Industrial production dropped by 45% during the Great Depression. So far it is down 1.5% this year, led by the downturn in the automotive sector. US manufacturing remains in a recession, however.
*During the Great Depression, the whole economic policy stance then was bad, analysts note. The Federal Reserve was designed to come to the aid of banks that were in trouble. For some reason, it didn't. Now it is.
*Gary Becker, a Nobel prize-winning professor of economics at the University of Chicago, notes in a Wall Street Journal editorial that although we are in the most severe financial crisis since the Great Depression of the 1930s, this is a far smaller crisis, especially in terms of the effects on output and employment.
*Becker reiterates that the United States had about 25% unemployment during most of the decade from 1931 until 1941, and sharp falls in GDP.
*Becker says with efficient auctions, the government may well make money on its actions, just as the Resolution Trust Corporation that took over many savings-and-loan banks during the 1980s crisis did not lose much, if any, money.
*Becker adds too that the crisis that kills capitalism has been said to happen during every major recession and financial crisis ever since Karl Marx prophesized the collapse of capitalism in the middle of the 19th century. He says he is confident that sizable world economic growth will resume before very long under a mainly capitalist world economy.
Even capitalism needs intervention here and there. Just like the speed limit is 65 on the highway, the US needs boundaries. The human nature factor, e.g. GREED, would be detrimental if not capped by some form of intervening.
Socialist we are not, but a socialist move to keep capitalism in check is a must. Imagine the wild west mentality with the turds we have on Wall Street. They've already proven they are in this for themselves and themselves only, not you and I.
Inflation will be big in the near future, but as it props up home values most people with large mortgages won't complain.
Good luck to everyone!!! We need some good news for a change.
October 9, 2008 at 11:53 am
Jeremy Hanson, B.A. Economics
"There are no souplines stretching for city blocks."
-YET!!!
"Yes we are now living in the United States of Bailouts."
-First financials, then the auto industry; what's next- California?!
"Perhaps the upside here is that we may get a voter turnout this coming presidential election bigger than the turnout in Mali or the Sudan."
-Great. Except both candidates support this wreckless spending!
"The Dow Jones industrial average is down more than one-third from its high a year ago. The stock market lost 89% of its value from its peak during the Great Depression. During the most recent bear market, from March 2000 to October 2002, the market lost about 50%. Same for 1973-1974 and two other times since 1937.With stocks down 36%, we are closer to a bottom than a top. Most, if not all, of the bear damage may have already been done."
- Hey, we are really only a month or so in to this. Results take time to manifest themselves and measure.
"*One big difference is that during the Great Depression, there was no deposit insurance, causing a huge run on banks (watch out for bank runs England-deposit insurance there is a paltry $4,000). As customers withdrew their money, you had banks failing right and left."
"Great! So the gov't just prints money to cover it and now you have worthless paper with pretty green ink."
"About 7,000 and 8,000 failed between 1929 and 1932. Today, 13 have collapsed, with 117 on the government’s watch list."
- Right. But banks are 1000x bigger than they were in the 1920's and 30's (even adjusting for inflation).
"*During the Great Depression, the whole economic policy stance then was bad, analysts note. The Federal Reserve was designed to come to the aid of banks that were in trouble. For some reason, it didn’t. Now it is."
-Treating the symptoms of cancer. Banks still have to make loans to high risk people out of political correctness. Home ownership is not a Right!
"a Nobel prize-winning"
-Chosen by the same idiotic group who chose Hitler, Stalin, and Gore. Again, time will tell.
"*Becker reiterates that the United States had about 25% unemployment during most of the decade from 1931 until 1941, and sharp falls in GDP."
-The "Crash" was in Oct 1929. It took year or two to get to 25%. Again, time will tell.
"*Becker says with efficient auctions, the government may well make money on its actions, just as the Resolution Trust Corporation that took over many savings-and-loan banks during the 1980s crisis did not lose much, if any, money."
-Who is going to buy them and with what currency? The rest of the world is worse off than we are!
"*Becker adds too that the crisis that kills capitalism has been said to happen during every major recession and financial crisis ever since Karl Marx prophesized the collapse of capitalism in the middle of the 19th century. He says he is confident that sizable world economic growth will resume before very long under a mainly capitalist world economy."
-We have lost capitalism, bit by bit, whenever we have had a financial crisis. We will be lucky to only become socialist like the rest of Europe, who seem to be doing so well during this crisis!
Well, at least some of the illegal immigrants are going home since we're going to the sewer.
Thank you Evangelicals for giving us McCain! Your bigotry of Romney has left us without a choice this election. We need a conservative, not another Washington insider who can't make up his mind if he is a Republican or Democrat!
I'll just "cling to my guns and religion," and store up food and firewood.
October 9, 2008 at 11:42 am
Bellevue
Whether we are heading for a Great Depression or Disney (probably about as bad once you see the $9 12 oz. coca cola's ! - hey, least Disney you see that crazy dog, great depression, you don't get Goofy, you don't get Donald, you don't even get Disney), I'll say it's important to consider WHERE we are heading at all.
And I say this only after seeing Paulson's face in a photo a second ago - and I asked myself, hey, does he have a broader plan ? longer term he's not coming forward with ?
US Treasury to take ownership in US banks ?
pinch me
Anyone else ? Get a chill from this following the transition of investment banks ?
Seeing it happen in the UK too ?
I seriously have to ask if a transition to post Bretton Woods II.
I forgot to hit send apparently.
I do loathe newscorp, but a handful of employees are probably all right.
October 9, 2008 at 11:40 am
Ralph Harrison
Elizabeth, please write a blog defining economic terms correctly. Capital is things and labor. Money is a medium of exchange. Injecting capital meaning money dilutes the value of the money and misdirects the investment of true capital(things and labor
Lowering interest rates by a central authority, the Fed, is the agent for misdirection of the investment which leads to poor business decisions which causes malinvestment and ultimately the layoff of the labor added to the malinvestment. This is now called a recession. Take this simple description and apply it to the current situation and you have a financial crisis, a recession, a depression, a great depression what have you. With more government intervention meaning lower interest rates or funny money, you get socialism. Is there any wonder the DJIA is dropping like a rock. The solution is simple. Vote all the 168 yeas of TARP out and replace them with a coaliton of nays. Begin a policy of intelligent economic education for the new members and if the new socialistic president, McCain or Obama, tries more intervention, render him impotent.
October 9, 2008 at 11:33 am
vfor
I think America in general has become lazy.
Go to work.
If you can't work then learn.
If you can't learn then collect disability.
Most of the people who lived through the great depression are not making decisions anymore.
They saved their money and worked hard to create our economy.
Their children partied it up with the movements of the sixties and seventies.
Now all of us got used to the good life and forgot how we got it so to stay on top we borrow to keep our rich lifestyle.
Again like in the twenties we need a wake up call.
A call to get back to work like China does.
The government may slow down the process but unless we get back to work making physical assets we will find ourselves slowly getting poorer and poorer.
Get off the couch and work. If you can't work then learn. (That should be americas new slogan)
October 9, 2008 at 11:28 am
M Patton
My Economics professors from college back in the mid 70's said we would never have a "Great Depression" simply because the Government would not allow it! The Government is now "not allowing it." I guess we should be thankful for them not "allowing it," I am not convinced the methods and tools being used are the correct ones. I am very concerned in the fact that our Government is now in an ownership role.
October 9, 2008 at 11:28 am
Steve
The flaw in your position is assuming there is only one way for a Depression to occur - that of the 30's. Without those circumstances being present today, we couldn't possibly be heading into a Depression.
Hah!
October 9, 2008 at 11:21 am
Becky
Thank You for some common sense thinking---I am sick of all the doom and gloom---I know it is not all roses and sunshine, but we will survive.
October 9, 2008 at 11:14 am
Jerry
The Fundamentals of the Economy are Strong.
Agreed. This statement has been totally taken out of context by the hate-America crowd in hopes they can bash McCain with it. The fact is though, if you're favorite sports team has 5 years running where they've only lost 3 games being nearly undefeated, and never lost two in a row in those five years, and then they at some point do loose two in a row, are they all of a sudden a sorry team? Or are the fundamentals of that team still strong?
We are an incredibly strong country and we will make it through this. We need to make sure we don't loose ourselves in the process of panic, enacting a socialist government while freaking out in the eye of the storm. Take a step back. This is America. We'll be here tomorrow. Strong, powerful, able to get up and brush ourselves off when the going gets tough, look it in the eye, and move forward not letting anything stand in our way. One step at a time we'll make it through this. The Fundamentals of the USA are STRONG!
McCain/Palin 08!
October 9, 2008 at 11:13 am
EcoMom
Guys,
If you read Great Depression history, government intervention was the key to a recession becoming a depression. The government is intervening like crazy here, which we need to stop or else we will head the same direction. Also, the Great Depression took years to develop. It was not immediate. We have just begun. I don't have anything to gain from this thinking. I'm a mother of three. I DO think that if we can gain control of our government by putting people in office that actually support the Constitution, this recession can be a lot less painful. NOT by intervention, but by the government PULLING-OUT in a lot more ways than one-- the government needs to shrink drastically, through its spending and otherwise, we need to not be intervening worldwide like we've been, and we need to have a sound monetary policy for starters. And don't give me all of that "we need to put the fire out first business." We get rid of the fire by going to the source. Ask any firefighter. Tax money can go to work on the basics if we put the government back in line with the Constitution. We need to let the free market work, which is putting faith back into the American people! A recession is unavoidable because of the huge bubble our government created, but if we act now the pain will be a lot less and the recovery more swift!
October 9, 2008 at 10:56 am
Ken
I think the next logical step for The government is to start buying large oil companies. We (our government) may even turn a profit by jacking fuel prices really high. Then we will not depend on Foreign oil, because we will own it. Would that not be awsome or what?
October 9, 2008 at 10:49 am
Robert_in_Phoenix
Your probably right Liz but the the possibility of a drastic downturn later during the scary part of October could cause more harm for even the most "thick skinned" investor.
Reading about the '29 crash, many of the same indicies exist in a different form.
Individual investors, government intities, contributing large sums of stability finances to the market during an August and September roller coster ride in New York...
The going joke was that "even the shoeshine boy on the corner purchased stock...
Investors borrowed large amounts of money to prop up less than stable stocks which declined due to "word of mouth" This could be related to short selling of today...
Thankfully we due have an improved means of governance in the stock exchange than 80 years ago protecting the investor and Americans in general. But is that enough in a system derived to handle US based business and less global input?
Robert
October 9, 2008 at 10:44 am
RHarris
I sincerely hope we can avoid a depression, but I don't see how. The entire world economy has been pumped up so artificially with credit and borrowing well beyond sustainable levels in my opinion.
I don't know who would benefit from a depression, I don't invest in gold and have no intentions of doing so. The consequences of a worldwide economic collapse are just too unpredictable to fathom. If you believe the future is like the past then maybe you can draw parallels from past events. But to me this is all new ground and I don't believe that the future will be like the past.
Pessimism or realism? There is always something that we can do using human ingenuity to cope with the situation as it unravels, but keeping our heads in the sand isn't one of them.
October 9, 2008 at 10:41 am
Bellevue
I have a 66% chance (probably) of being wrong most of the time, including this post.
October 9, 2008 at 10:36 am
Bellevue
Iceland, a nation state, is on the brink of bankruptcy.
Oh, indeed, like the Flood commercials trying to raise money for next year's pool of funds ! "Oh, it CAN happen to you"
meaning, the US as a nation state.
China can break the US right now.
All it has to do is call in on some Treasuries.
But you know ?
China JUST announced (and this is NOT typical a Chinese move here) they are going to lower rates - FIVE TIMES - till 2009.
Why the announcement ? How sure are they !? I say though with Bretton Woods II I think there exists a hidden 'false security' in a currency too.
I see the Yuan pushing the dollar up, but I see that dollar not really being up... So, like Jack Lemmon in the China Syndrome, dropping water rates (Bernanke and the Fed by analogy here) ? Because he didn't know the meter was broken, and the water levels were REALLY LOW !?? Yeah, indeed, they could have had a meltdown and possibly rendered life for all on this planet - far less quality.
Yes, one China Syndrome meltdown of just one nuclear power facility can ruin you, and your childrens childrens childrens childrens day - now, THAT's worth cheap energy right ? Shoulda gone Wind is what you'll say.
The dollar is already responding to China's semi-long term plan to drop rates 5 times.
I think if Bernanke drops rates here, he might be thinking, wow - the Dollar is up, we can do this, we can do this... Meanwhile - uh, no, it only APPEARS up, because the Yuan is being forced down.
Great Depression ?
No
Great change though- certainly.
Whether it's new currency, and after our wake up to see oil function as gold since March this year ? I hope to god no one has plans to peg the new currency to petro !
ya know ? to formalize it !
October 9, 2008 at 10:32 am
Bellevue
I forgot to get to my point.
Which is - if Bush and Paulson are bringing in the same folks who brought disaster to Wall Street ? into Treasury ?
Shouldn't we expect the US economy to REALLY be undermined this time around ?
From within the Treasury the same minds who brought us this fiasco
will be probably hitting the repeat button.
Hey, Treasury interviews should mandate a question for anyone coming from Wall Street 'And what would you do different ? '
I really don't think we'll get much response to that question.
so ? Great Depression no
Complete take down of the US economy and currency, sure.
October 9, 2008 at 10:25 am
Justin
Nope. It'll be worse this time around. The wealth of the savers will be completely destroyed through hyperinflation. The way the government keeps nationalizing bad debt, I reckon it'll set on sooner than later.
October 9, 2008 at 10:24 am
bill
"efficient auctions, the government may well make money on its actions".
When has the government ever run anything EFFICIENTLY" and if you believe the taxpayers will make money, you might want to buy stock in my new restaurant chain "Cow Pies and Rat Droppings"
October 9, 2008 at 10:20 am
John
So the government buys of all these "toxic" mortgages that cannot be paid by those who arranged for them. Just how do you suppose that the government (that's us in this case) is going to get all this money and make money to boot
Remember there are over 1 million homes in foreclosure.
October 9, 2008 at 10:13 am
12packBambi
I see in the news as of yesterday - the US following suit with England in protecting the banks. Seems Treasury wants to take part in ownership of the US banks.
3 people in a boat, if 2 are the Fed and Banks, I'd say the consumer/citizen (the third) probably has to sit far back in the boat now to keep it balanced.
Ok, that visual might promote an unrealistic POV for this.
But I find myself thinking, Fed prints the money, if takes ownership of banks, then ? well...
People go to banks for loans, or manage deposits or investments and yet ? This means the Federal Gov. will FINALLY formally be getting into Wealth Management ?
great ?
I might think so if I didn't see a trend of x-wall street execs that helped drive investment banking down, being brought into Treasury.
Now, if people who were negligent and responsible for their own corporate investment firms/banks ? take their SAME thinking system over to Treasury ?
Shouldn't we expect even WORSE results now for commercial banks as the so quickly dinosaur investment banks ?
SHOULD Paulson pick someone who was tied to the entire process that got us where we are ? to manage the new band-aid fund ?
Wow - Sure is some strange restructuring going on with the Federal Reserve/Treasury and US banks.
I don't think I satisfactorily understand what's going on yet.
hopefully in time... with many POV's ... we can sort through the fog.
October 9, 2008 at 10:10 am
Cats
The "next Great Depression" advocates are those who have something to gain from a total economic collapse; say "next Great Depression" enough times, it becomes a self-fulfilling prophecy, and they win. You have to believe that there is a fundamental change in the U.S. and world's economies that will drive good companies into the ground. I am not ready to buy into that type of "coffin" pessimism. I do agree with John McCain that the fundamentals of this economy are strong and resilient. I do not share the cynicism of Barack Obama and the Democrat Party. Investors who have a long-term time horizon (probably 5-10 years or more) will probably look back and say these were bargain-sale times on equities.
Elizabeth MacDonald is the stocks editor for Fox Business Network. She is recognized as one of the top prize-winning business journalists in the country, and has received 14 awards, including the top prize in business journalism, the Gerald Loeb Award for Distinguished Business Journalism, and the Newswomen's Club of New York Front Page Award for Excellence in Investigative Journalism.
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john dough
Even capitalism needs intervention here and there. Just like the speed limit is 65 on the highway, the US needs boundaries. The human nature factor, e.g. GREED, would be detrimental if not capped by some form of intervening. Socialist we are not, but a socialist move to keep capitalism in check is a must. Imagine the wild west mentality with the turds we have on Wall Street. They've already proven they are in this for themselves and themselves only, not you and I. Inflation will be big in the near future, but as it props up home values most people with large mortgages won't complain. Good luck to everyone!!! We need some good news for a change.
Jeremy Hanson, B.A. Economics
"There are no souplines stretching for city blocks." -YET!!! "Yes we are now living in the United States of Bailouts." -First financials, then the auto industry; what's next- California?! "Perhaps the upside here is that we may get a voter turnout this coming presidential election bigger than the turnout in Mali or the Sudan." -Great. Except both candidates support this wreckless spending! "The Dow Jones industrial average is down more than one-third from its high a year ago. The stock market lost 89% of its value from its peak during the Great Depression. During the most recent bear market, from March 2000 to October 2002, the market lost about 50%. Same for 1973-1974 and two other times since 1937.With stocks down 36%, we are closer to a bottom than a top. Most, if not all, of the bear damage may have already been done." - Hey, we are really only a month or so in to this. Results take time to manifest themselves and measure. "*One big difference is that during the Great Depression, there was no deposit insurance, causing a huge run on banks (watch out for bank runs England-deposit insurance there is a paltry $4,000). As customers withdrew their money, you had banks failing right and left." "Great! So the gov't just prints money to cover it and now you have worthless paper with pretty green ink." "About 7,000 and 8,000 failed between 1929 and 1932. Today, 13 have collapsed, with 117 on the government’s watch list." - Right. But banks are 1000x bigger than they were in the 1920's and 30's (even adjusting for inflation). "*During the Great Depression, the whole economic policy stance then was bad, analysts note. The Federal Reserve was designed to come to the aid of banks that were in trouble. For some reason, it didn’t. Now it is." -Treating the symptoms of cancer. Banks still have to make loans to high risk people out of political correctness. Home ownership is not a Right! "a Nobel prize-winning" -Chosen by the same idiotic group who chose Hitler, Stalin, and Gore. Again, time will tell. "*Becker reiterates that the United States had about 25% unemployment during most of the decade from 1931 until 1941, and sharp falls in GDP." -The "Crash" was in Oct 1929. It took year or two to get to 25%. Again, time will tell. "*Becker says with efficient auctions, the government may well make money on its actions, just as the Resolution Trust Corporation that took over many savings-and-loan banks during the 1980s crisis did not lose much, if any, money." -Who is going to buy them and with what currency? The rest of the world is worse off than we are! "*Becker adds too that the crisis that kills capitalism has been said to happen during every major recession and financial crisis ever since Karl Marx prophesized the collapse of capitalism in the middle of the 19th century. He says he is confident that sizable world economic growth will resume before very long under a mainly capitalist world economy." -We have lost capitalism, bit by bit, whenever we have had a financial crisis. We will be lucky to only become socialist like the rest of Europe, who seem to be doing so well during this crisis! Well, at least some of the illegal immigrants are going home since we're going to the sewer. Thank you Evangelicals for giving us McCain! Your bigotry of Romney has left us without a choice this election. We need a conservative, not another Washington insider who can't make up his mind if he is a Republican or Democrat! I'll just "cling to my guns and religion," and store up food and firewood.
Bellevue
Whether we are heading for a Great Depression or Disney (probably about as bad once you see the $9 12 oz. coca cola's ! - hey, least Disney you see that crazy dog, great depression, you don't get Goofy, you don't get Donald, you don't even get Disney), I'll say it's important to consider WHERE we are heading at all. And I say this only after seeing Paulson's face in a photo a second ago - and I asked myself, hey, does he have a broader plan ? longer term he's not coming forward with ? US Treasury to take ownership in US banks ? pinch me Anyone else ? Get a chill from this following the transition of investment banks ? Seeing it happen in the UK too ? I seriously have to ask if a transition to post Bretton Woods II. I forgot to hit send apparently. I do loathe newscorp, but a handful of employees are probably all right.
Ralph Harrison
Elizabeth, please write a blog defining economic terms correctly. Capital is things and labor. Money is a medium of exchange. Injecting capital meaning money dilutes the value of the money and misdirects the investment of true capital(things and labor Lowering interest rates by a central authority, the Fed, is the agent for misdirection of the investment which leads to poor business decisions which causes malinvestment and ultimately the layoff of the labor added to the malinvestment. This is now called a recession. Take this simple description and apply it to the current situation and you have a financial crisis, a recession, a depression, a great depression what have you. With more government intervention meaning lower interest rates or funny money, you get socialism. Is there any wonder the DJIA is dropping like a rock. The solution is simple. Vote all the 168 yeas of TARP out and replace them with a coaliton of nays. Begin a policy of intelligent economic education for the new members and if the new socialistic president, McCain or Obama, tries more intervention, render him impotent.
vfor
I think America in general has become lazy. Go to work. If you can't work then learn. If you can't learn then collect disability. Most of the people who lived through the great depression are not making decisions anymore. They saved their money and worked hard to create our economy. Their children partied it up with the movements of the sixties and seventies. Now all of us got used to the good life and forgot how we got it so to stay on top we borrow to keep our rich lifestyle. Again like in the twenties we need a wake up call. A call to get back to work like China does. The government may slow down the process but unless we get back to work making physical assets we will find ourselves slowly getting poorer and poorer. Get off the couch and work. If you can't work then learn. (That should be americas new slogan)
M Patton
My Economics professors from college back in the mid 70's said we would never have a "Great Depression" simply because the Government would not allow it! The Government is now "not allowing it." I guess we should be thankful for them not "allowing it," I am not convinced the methods and tools being used are the correct ones. I am very concerned in the fact that our Government is now in an ownership role.
Steve
The flaw in your position is assuming there is only one way for a Depression to occur - that of the 30's. Without those circumstances being present today, we couldn't possibly be heading into a Depression. Hah!
Becky
Thank You for some common sense thinking---I am sick of all the doom and gloom---I know it is not all roses and sunshine, but we will survive.
Jerry
The Fundamentals of the Economy are Strong. Agreed. This statement has been totally taken out of context by the hate-America crowd in hopes they can bash McCain with it. The fact is though, if you're favorite sports team has 5 years running where they've only lost 3 games being nearly undefeated, and never lost two in a row in those five years, and then they at some point do loose two in a row, are they all of a sudden a sorry team? Or are the fundamentals of that team still strong? We are an incredibly strong country and we will make it through this. We need to make sure we don't loose ourselves in the process of panic, enacting a socialist government while freaking out in the eye of the storm. Take a step back. This is America. We'll be here tomorrow. Strong, powerful, able to get up and brush ourselves off when the going gets tough, look it in the eye, and move forward not letting anything stand in our way. One step at a time we'll make it through this. The Fundamentals of the USA are STRONG! McCain/Palin 08!
EcoMom
Guys, If you read Great Depression history, government intervention was the key to a recession becoming a depression. The government is intervening like crazy here, which we need to stop or else we will head the same direction. Also, the Great Depression took years to develop. It was not immediate. We have just begun. I don't have anything to gain from this thinking. I'm a mother of three. I DO think that if we can gain control of our government by putting people in office that actually support the Constitution, this recession can be a lot less painful. NOT by intervention, but by the government PULLING-OUT in a lot more ways than one-- the government needs to shrink drastically, through its spending and otherwise, we need to not be intervening worldwide like we've been, and we need to have a sound monetary policy for starters. And don't give me all of that "we need to put the fire out first business." We get rid of the fire by going to the source. Ask any firefighter. Tax money can go to work on the basics if we put the government back in line with the Constitution. We need to let the free market work, which is putting faith back into the American people! A recession is unavoidable because of the huge bubble our government created, but if we act now the pain will be a lot less and the recovery more swift!
Ken
I think the next logical step for The government is to start buying large oil companies. We (our government) may even turn a profit by jacking fuel prices really high. Then we will not depend on Foreign oil, because we will own it. Would that not be awsome or what?
Robert_in_Phoenix
Your probably right Liz but the the possibility of a drastic downturn later during the scary part of October could cause more harm for even the most "thick skinned" investor. Reading about the '29 crash, many of the same indicies exist in a different form. Individual investors, government intities, contributing large sums of stability finances to the market during an August and September roller coster ride in New York... The going joke was that "even the shoeshine boy on the corner purchased stock... Investors borrowed large amounts of money to prop up less than stable stocks which declined due to "word of mouth" This could be related to short selling of today... Thankfully we due have an improved means of governance in the stock exchange than 80 years ago protecting the investor and Americans in general. But is that enough in a system derived to handle US based business and less global input? Robert
RHarris
I sincerely hope we can avoid a depression, but I don't see how. The entire world economy has been pumped up so artificially with credit and borrowing well beyond sustainable levels in my opinion. I don't know who would benefit from a depression, I don't invest in gold and have no intentions of doing so. The consequences of a worldwide economic collapse are just too unpredictable to fathom. If you believe the future is like the past then maybe you can draw parallels from past events. But to me this is all new ground and I don't believe that the future will be like the past. Pessimism or realism? There is always something that we can do using human ingenuity to cope with the situation as it unravels, but keeping our heads in the sand isn't one of them.
Bellevue
I have a 66% chance (probably) of being wrong most of the time, including this post.
Bellevue
Iceland, a nation state, is on the brink of bankruptcy. Oh, indeed, like the Flood commercials trying to raise money for next year's pool of funds ! "Oh, it CAN happen to you" meaning, the US as a nation state. China can break the US right now. All it has to do is call in on some Treasuries. But you know ? China JUST announced (and this is NOT typical a Chinese move here) they are going to lower rates - FIVE TIMES - till 2009. Why the announcement ? How sure are they !? I say though with Bretton Woods II I think there exists a hidden 'false security' in a currency too. I see the Yuan pushing the dollar up, but I see that dollar not really being up... So, like Jack Lemmon in the China Syndrome, dropping water rates (Bernanke and the Fed by analogy here) ? Because he didn't know the meter was broken, and the water levels were REALLY LOW !?? Yeah, indeed, they could have had a meltdown and possibly rendered life for all on this planet - far less quality. Yes, one China Syndrome meltdown of just one nuclear power facility can ruin you, and your childrens childrens childrens childrens day - now, THAT's worth cheap energy right ? Shoulda gone Wind is what you'll say. The dollar is already responding to China's semi-long term plan to drop rates 5 times. I think if Bernanke drops rates here, he might be thinking, wow - the Dollar is up, we can do this, we can do this... Meanwhile - uh, no, it only APPEARS up, because the Yuan is being forced down. Great Depression ? No Great change though- certainly. Whether it's new currency, and after our wake up to see oil function as gold since March this year ? I hope to god no one has plans to peg the new currency to petro ! ya know ? to formalize it !
Bellevue
I forgot to get to my point. Which is - if Bush and Paulson are bringing in the same folks who brought disaster to Wall Street ? into Treasury ? Shouldn't we expect the US economy to REALLY be undermined this time around ? From within the Treasury the same minds who brought us this fiasco will be probably hitting the repeat button. Hey, Treasury interviews should mandate a question for anyone coming from Wall Street 'And what would you do different ? ' I really don't think we'll get much response to that question. so ? Great Depression no Complete take down of the US economy and currency, sure.
Justin
Nope. It'll be worse this time around. The wealth of the savers will be completely destroyed through hyperinflation. The way the government keeps nationalizing bad debt, I reckon it'll set on sooner than later.
bill
"efficient auctions, the government may well make money on its actions". When has the government ever run anything EFFICIENTLY" and if you believe the taxpayers will make money, you might want to buy stock in my new restaurant chain "Cow Pies and Rat Droppings"
John
So the government buys of all these "toxic" mortgages that cannot be paid by those who arranged for them. Just how do you suppose that the government (that's us in this case) is going to get all this money and make money to boot Remember there are over 1 million homes in foreclosure.
12packBambi
I see in the news as of yesterday - the US following suit with England in protecting the banks. Seems Treasury wants to take part in ownership of the US banks. 3 people in a boat, if 2 are the Fed and Banks, I'd say the consumer/citizen (the third) probably has to sit far back in the boat now to keep it balanced. Ok, that visual might promote an unrealistic POV for this. But I find myself thinking, Fed prints the money, if takes ownership of banks, then ? well... People go to banks for loans, or manage deposits or investments and yet ? This means the Federal Gov. will FINALLY formally be getting into Wealth Management ? great ? I might think so if I didn't see a trend of x-wall street execs that helped drive investment banking down, being brought into Treasury. Now, if people who were negligent and responsible for their own corporate investment firms/banks ? take their SAME thinking system over to Treasury ? Shouldn't we expect even WORSE results now for commercial banks as the so quickly dinosaur investment banks ? SHOULD Paulson pick someone who was tied to the entire process that got us where we are ? to manage the new band-aid fund ? Wow - Sure is some strange restructuring going on with the Federal Reserve/Treasury and US banks. I don't think I satisfactorily understand what's going on yet. hopefully in time... with many POV's ... we can sort through the fog.
Cats
The "next Great Depression" advocates are those who have something to gain from a total economic collapse; say "next Great Depression" enough times, it becomes a self-fulfilling prophecy, and they win. You have to believe that there is a fundamental change in the U.S. and world's economies that will drive good companies into the ground. I am not ready to buy into that type of "coffin" pessimism. I do agree with John McCain that the fundamentals of this economy are strong and resilient. I do not share the cynicism of Barack Obama and the Democrat Party. Investors who have a long-term time horizon (probably 5-10 years or more) will probably look back and say these were bargain-sale times on equities.