Monday, August 22, 2011

Will There Be A New Recession?

Edward Seaga

The American economy is in deep trouble again; so is the worldeconomy. Over the last century, whenever there has been a global financial crisis, events show that it started in the United States. In 1929, the stock market was almost totally wiped out by a free-fall loss of 89 per cent of its assets. It started when the US Congress proceeded to impose wide-scale punitive duties on 20,000 items of import. Sensing that there would be retaliation by the imposition of similar duties on exports to other countries from America, Wall Street stockholders embarked on a panic sell-off which eventually created the Great Depression........

Rather than turn away good money, Wall Street developed financial derivatives, including fraudulent schemes, to sop up the excess. This led to the creation of subprime mortgages (mortgages with little or no collateral). Trillions of dollars of this virtually worthless paper was wrapped with regular mortgages and sold as investment packages to investment houses, insurance companies and banks throughout the world. When this was discovered, financial houses realized that the worthless investments were pushing them to the brink of financial collapse. Many did.......

........ the only sustainable way out of this crisis is for them to work harder, cut wages, produce goods more cheaply to compete better, and improve earnings at home and abroad, from which they must save more in order to borrow less and thus strengthen their currency, failing which the value of the reserve currency, the US dollar, will continue to slide until - like it or not - the US will no longer be the largest, strongest, most powerful economy in the world, but a second-rate economic power?

Would they be prepared to say that the prosperity dream, as they have known it, is now ending? A lower level of living is inevitable? I doubt it. A cultural shift of oceanic dimensions would be needed to do this. But it is the willingness to grasp the deep dimension of these consequences which will determine whether new recessions will follow and the cries continue for jobs, jobs, jobs.


  1. Good Article. It seems we're all saying the same thing. At least the people are beginning to wake up and see who our real enemies are. For more:

  2. bad article, they keep saying recesssion, but in reality it has been a depression since 08

  3. The writer has only stated the obvious results of the problem without identifying the real causes and missed the point that one of the reasons china has grown to be a large player in the manufacturing world is that america buys its products. Woe to us having fed the dragon. Also the sub-prime lending schemes were federally pushed into play, they were not needed.


Everyone is encouraged to participate with civilized comments.