THIS ECONOMIC CRISIS doesn't have to be a second Great Depression - if government does nearly everything right, and soon. But if government doesn't do more, and fast, this could be worse than the 1930s. Why? Three big reasons:
Finance: A Doomsday Machine. The financial system is in far worse shape than it was when the stock market crashed in October 1929. In the 1920s, there was a stock market bubble, mainly because people could play the market "on margin," borrowing to invest in stocks. There were also scams like the original Mr. Ponzi's. Like in the present decade, the Federal Reserve helped to enable the game, with low interest rates and few rules.
But today, thanks to "securitization" of loans and the ability of insiders to create exotic and unfathomable financial instruments, the speculative system makes buying stocks on margin look like child's play. In the aftermath of the crash of 2008, the process of sorting it all out and getting banks functioning again is something that markets simply cannot do.
We are not even clear who owns what. The wise guys on Wall Street invented a doomsday machine from which there is no market escape.
In 1929 when the stock market crashed, the banking system was relatively healthy. Bank customers played these speculative games and took the losses, not banks. This time, the banks drank their own Kool-aid.
It took until the awful winter of 1932-'33 for the general depression to fully infect the banking system, and cause over 7,000 banks to fail. But Roosevelt's cure - deposit insurance and a temporary bank holiday to sort out good banks from bad - quickly got the financial system up and running again. Today, the banking mess is still dragging down the real economy, with no effective cure in sight.
Wealth, Deficits, and Demand. The economy now bears all the hallmarks of a depression. Between the housing collapse and the stock market crash, American households are out several trillion dollars (in the 1920s, there were no 401(k) plans and less than 2 percent of Americans owned stock).
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A desperate attempt to revive the stock market began last Monday with Warren Buffet on four networks preaching how good things are. The former head of GE was on one also saying the same thing. This came within a week of Obama telling everyone to buy stocks. Today, Sunday, Bernanke was on a major network saying the recession will end this year. This entire "Goebbels" act of talking up the markets is an extreme danger signal, and to me verifies the fact that our country is in very bad shape.
ReplyDeleteyou're absulutely right
ReplyDeleteYes no kidding guys , saw all of them preaching on MSM, chearleading the people again to get suckered . ONLY fools at this point would invest a dime into anything , let alone on the words of those fools, rememeber , This sub prime crisis seems to be contained - Bernanke , The American financial system is in good fundamentals - Paulson and it goes on and on
ReplyDeleteYou might add to that list Obama and Geithner on TV Monday morning talking up the markets about 50 DOW points. Market manipulation like this, during market hours, should be illegal. But then again, these people are above the law!
ReplyDeleteThey did the exact same devious thing during The Great Depression. Talked about how great everything is, this is the bottom, buy stocks blah, blah. This was the reason so many committed suicide from the remarks of this criminal government and their ponzi friends
ReplyDeleteOnly worse to come:
ReplyDeletehttp://www.4hurtingchristians.com/the_global_financial_and_economic_crisis_lead_to_one_world_government.html
It started with the pumpkin from Omaba which made me rush to buy stocks then rush for more $$$ after the bearded monkey said that he will not let the banks fail.
ReplyDeleteHoray more SSSS so the saga continued with the bearded monkey on 60 minutes more blah,blah more $$$$. Like the old song goes "It's my party and I do what I want to.......SOLD all yesterday went to dinner at an upscale restaurant. Were we were the only one at the bar for 2 hours.
By the way the market doubled during the depression, Well its my party where the bottom is in my estimation do the DOW 4000.
It look like I will be getting new shorts this summer and visit more upscale restaurants.