Now what makes a depression different than a recession is that depressions follow a period of wild credit excess, and when the bubble bursts and the wheels begin to move in reverse, we are in a depression. A recession is a correction in real GDP in the context of a secular expansion, which is what all prior nine of them were, back to 1945.
But this was not a mere blip in real GDP — it is a post-bubble credit collapse. This is not a garden-variety recession at all, which an economic downturn triggered by an inflation-fighting Fed and excessive manufacturing inventories. A depression is all about deflating asset values and contracting private sector credit. In a recession, monetary and fiscal policy works, even if the lags can be long. In a depression, they do not work. And this is what we see today.
The markings of a depression, meanwhile, are also in a market that doesn’t react as it should to rate cuts:
(snippet)
Even with a 0% funds rate, the economy could still not turn around, and that is exactly what happened in the 1930s in the U.S. and in the 1990s in Japan. When the central bank takes rates to zero and that does not do the trick in helping the economy or the markets find the bottom, and then has to engage in an array of experimental strategies and radically expand its balance sheet, then you know you are in a depression.
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Consumer leverage has sealed the eventual outcome and after those bs GDP numbers for 2009 Q4 and 2010 Q1 we will be officially heading down again and into a double dip by the end of the year and an official depression soon afterwards. We will be in bad shape until at least 2020.
ReplyDeleteAgreed, except the USA as a single giant corporation will not exist in 2020. Long gone before that.
ReplyDeleteAnd this article and so many like it posted here goes to show that these experimental attempts to revive the dead patient were not the opposite: attempts to destroy the middle class like some people falsely claim. As ill-conceived as they were, they could have done far worse in less time. They have delayed the demise but only for so long.
ReplyDelete12:49 : LIE.
ReplyDeleteYou want the readership to fail to consider that Bankers know how this works. That is their business to understand how economies work, what a bubble is , what happens when a bubble bursts, what happens when you print more money than fits a certain yeild/interest curve. You hope that the readership remains blissfully ignorant of the full knowledge of outcomes entertained by Greenspan and those ordering up his policies.
You don't fool me.
1:59: Let's ask 12:49 to explain how Bill Clintons sending our manufacturing to China and Bush Jr's signing away millions of hi paying silicon valley tech jobs to India and Pakistan is not an all out war on the middle class.
ReplyDeleteGreenspan in collusion with Bush Jr ordered up a huge housing bubble to conceal the immediate poverty America as a whole would have felt immediately after several million hi paying tech jobs went overseas.
Easy: Depression = de(e)p re(ce)ssion.
ReplyDelete/The Viking
There is no depression.
ReplyDeleteSmart people do what I do!
We will all be put out of our misery by December 22, 2012.
ReplyDelete1:59, why don't you settle down. Also let the other "Readership" think for themselves, if they are able to. You are not.
ReplyDeleteOn the contrary, I do not hope you all remain ignorant. I would rather you acted smart and actully used your f*cking brains, but that is likely asking too much.
As for what greenspan and clinton have done, yes, but it is all in the game of politics and money. I suppose all the corporations who have shipped jobs away to India are in collusion with the New World Order, too. GET REAL MAC. You are full of CHEESE.
SOMETIME, SOMEWHERE, FANTASY BECOMES REALITY
ReplyDeleteSUCH WILL BE THE CASE FOR OUR MONETARY SYSTEM