The Great Depression analogy will not provide easy answers

[WhiskeyGirl]

The 1929 crash had no obvious cause, but two very plausible solutions. The European banking disaster of 1931 was exactly the other way round. No academic laurels are to be won by finding innovative accounts as its cause: The collapses were the result of financial weakness in countries where bad policies produced hyper-inflation, which destroyed banks' balance sheets. Intrinsic vulnerability made for heightened exposure to political shocks, and disputes about a Central European customs union and about war reparations was enough to topple a house of cards.

The U.S. doesn't have war reparations, we just have payments for all the Bush and Obama spending due to China.

The consequence of the long academic and popular discussion of the 1929 crisis is that people have come to expect that there must be easy answers. But the collapse of Lehman Brothers in September 2008 was a 1931-like event, highly reminiscent of the world of depression economics. Austrian and German bank collapses would not have driven the entire world from recession into depression if those countries had simply been isolated or self-contained economies. But they had built their economies on borrowed money - chiefly from America - in the second half of the 1920's.

The U.S. economy is built on borrowed money from China.  We import more than we export.  Are we self contained economies?  Firewalls for security?  It seems like 'globalization' has been tried before. 

Firewalls and fences make good neighbors.

How will our childrent, grandchildren, and great grandchildren pay this back?

Governments undoubtedly merit praise for stabilizing expectations, and thus preventing crises from worsening. But it is misleading when officials tout simple, if not simplistic, policy proposals as the basis for hoping that we can avoid a long period of difficult economic adjustment.

Is government borrowing the problem?  The problem Bush and Obama are passing onto our children?  Grandchildren?  Great Grandchildren?

http://www.dailystar.com.lb/article.asp?edition_id=1&categ_id=5&article_id=101820

jmho

[WhiskeyGirl]

All the facts Ahamed collects in his book strongly prove his observation that "the Great Depression was not some act of God or the result of some deep-rooted contradictions of capitalism, but the direct result of a series of misjudgments by economic policy makers ... by any measure the most dramatic sequence of collective blunders ever made by financial officials."

What blunders helped our mortgage and real estate bubble?  Giving mortgages to sub-prime and fraud cases?  Not checking applications?  Instant financing?  Verifying income and employment?  Legal status?

Allowing investment banks and firms like AIG, Fannie, & Freddie to regulate themselves?  Or, be under the thumb of politicans?  Conflicing interests?

The world is now experiencing a global economic downturn, which resulted from the US subprime mortgage crisis. And the root of the problem, as Chinese economist Fan Gang once told Shanghai Daily, lies in the de facto dollar standard currency system.

How does the U.S. protect from the next bubble?  From bubbles elsewhere in the globe?

http://www.shanghaidaily.com/sp/article/2009/200905/20090509/article_400249.htm

[WhiskeyGirl]

He clearly makes the case that bankers were almost entirely to blame for the Great Depression. They were wrong about the gold standard, they were wrong about rates of interest, they were wrong in believing stock markets would correct themselves without intervention.

As we were then, we are now, being told the cure for the crisis is the restoration of trust in our banking system.

But what about trust in the men who run it? Why trust bankers whose attitude to the public is similar to that of vampire bats to their prey: suck the suckers dry, while taking good care to look after themselves?

read more here -
http://www.dailymail.co.uk/home/books/article-1179109/Crash-course-LORDS-OF-FINANCE-BY-LIAQUAT-AHAMED.html

Is now the time to wave good-bye to what is left of your 401k?  IRA?  Other 'investments'?

[WhiskeyGirl]

"Prosperity Is Just Around the Corner." Really? 

Back in the bad old days of the Great Depression, the breezy assurance of the Hoover Administration that “prosperity is just around the corner” became, as the years of depression dragged on, a mainstay of Vaudeville comedians and Hollywood screenwriters alike...

...history appears to be repeating itself, as pundits, including Fed Chairman Ben Bernanke, confidently predict an end to the recession later this year...there are all sorts of toxic assets still lurking on bank balance sheets, such as commercial real estate debt. For another, there are the immense deficits and multitrillion dollar national debt that the Bush and Obama bailouts have wrought, and the lack of political will to make any but a few inconsequential cosmetic cuts in government spending and tax rates (the 121 programs that President Obama, with great fanfare, has targeted for elimination amount to a mere $17 billion – a fraction of a percent of the whopping $3.6 trillion proposed Obama budget).

...the government is repeating the same glib assurances of a soon-to-come turnaround that our grandparents heard in the 1930s — even as policymakers commit the same errors that Roosevelt and Hoover did. Higher levels of debt, government spending, and government regulation only prolonged and worsened the depression 75 years ago, and will likely have the same results this time around.

http://www.thenewamerican.com/economy/commentary-mainmenu-43/1095

The worst is yet to come.  The worst will come when tomorrows children and grandchildren have to pay the bill to China.

imho

[WhiskeyGirl]

US stock gains not expected to last

http://www.asianinvestor.net/article.aspx?CIaNID=102874