We Are Not Headed for a Great Depression, page 2

reply to post by tide88

---

That's not true. The government tried, but their efforts were futile. Hoover and his gov't bought farm surpluses, made emergency loans, raised tariffs to try and bring more money into the system, and pushed out big public works projects to supply jobs.
It just didn't work. Many of his decisions were wrong (Hawley-Smoot), the rest were just ineffective.

Here's a good link with some more information.

Originally posted by Ismail
If the global economy collapses, I think ten years is really a minimum sentence.... One year ? It took twenty and a world war to bring america back from 1929...

I agree if the economy collapses. My predictions are based on the rescue plan working. If it fails then I agree with you. Okay so there was some things the government did that did not work. I stand corrected. However they did not do the same things we are doing today. ONe of the main causes of the great depression were bank failures. Hopefully this rescue plan with prevent that.

The even larger question is whether it was largely a failure on the part of free markets or largely a failure on the part of governments to curtail widespread bank failures, the resulting panics, and reduction in the money supply. Those who believe in a large role for governments in the economy believe it was mostly a failure of the free markets and those who believe in free markets believe it was mostly a failure of government that compounded the problem

source Hopefully the great depression taughts us how to avoid it from happening again. Guess we will all find out. I pray it has.

[edit on 9-10-2008 by tide88]

reply to post by tide88

---

Our monetary sytem ensures that there is always more debt that liquidity. You can not create liquidity without creating even more debt. The government is powerless in my opinion, because even a 10 trillion injection to save the banks would only create more debt and more inflation. The money they are trying to save people with is created out of thin air, fresh from the fed's mints and the bankers/traders know this.

The mistake far too many people are making is looking at the Great Depression and comparing it exactly to today's world.

Yeah, the banks failed back in the 30s and that was a huge part of the problem. Yeah, no FDIC insurance back in the 30s, so people lost their savings.

We're experiencing some similarities today, but not only are they on a different scale, but there are issues today that didn't exist 85 years ago.

Here's the breakdown. Credit markets are frozen. Banks aren't lending to each other, and if they are it's at extremely high rates.
Banks are very quickly beginning to stop loans to commercial entities. Short term loans, the type of "credit" today's business model relies on. Do you think Target pays with a wad of cash when their stores get a shipment of Halloween goods? Do you think your local grocery hands over a stack of $100s when their bread shipment comes in?
These purchases are made on CREDIT. They get an invoice, and they pay it back in a week or a month or three months. Nearly every business operates in this manner. My restaurant does. Your local JC Penney's does. The corner gas station does. A short term line of credit is extended from vendor to buyer, the buyer has a short term line of credit from the bank to pay the vendor, the buyer pays the bank back when its inventory has sold.

THOSE LINES OF CREDIT ARE DISAPPEARING FAST.
Everything the government is doing is to "open up" the credit markets. We've all heard that on the news. The bailout is to open up the credit markets. The rate cut is to open up the credit markets. The injection of hundreds of billions of dollars is to open up the credit markets.
They're not opening up! The LIBOR has shot up to the highest point of the year, the TED spread has shot up to an all time record. It's not working. The banks do not trust each other because no one knows how much exposure banks have to not just toxic debt, but to the Credit Default Swap market. Dumping over a trillion dollars into toxic debt is NOT going to restore trust. It will not work that way.

Until the exposure to the CDS market is sorted out, we're stuck. Banks will fall. Until the banks fall, we will have NO WAY TO KNOW how much crap they have under their belts. Until we go through this domino cascade of banks falling and CDS contracts coming due, we're STUCK.

Why do you think the gov't wants to make loans to private companies? It's because the banks won't do it! And that puts us into a damned if you do, damned if you don't situation. If the gov't doesn't make those loans available, you are going to see food shortages, gas shortages, clothing shortages, shortages of everything sold retail. Restaurants will close. Big retailers will go bankrupt. If the gov't does make the loans, we'll see the big stores stay open - but as people continue to reign in their spending, less will be sold. And people ARE reigning in, and they WILL CONTINUE to do so because banks are still pulling back on the credit market. Credit cards are becoming more difficult to get, limits are being lowered, and it's going to get worse. People will have to live within their means for once, and that means less spending.
The less spending, the more layoffs. The more layoffs, the less spending. It will continue down that path until the economy rights itself again.

We are headed into new territory here, and comparing the current situation to the Great Depression is short sighted and the complete opposite of correct.

Our current episode has more in common with the 1870s depression which, as Nelson notes, was considerably worse. It was primarily caused by over-indebtedness in the commercial real estate sector, which mortgages were based on new forms of financing which were intermingled on the balance sheets of commercial banks with less rarefied assets that the banks added by making business loans.

itulip.com...

Here's a great comparison I read recently showing how the 1929 depression is not as closely related to our current situation as the 1870's depression.

reply to post by stikkinikki

---

That was ironic, right ?

reply to post by ThatsJustWeird

---

I didn't feel like quote-worms so a clean break.

Comparitively we are a far, far past industry production today than then. While GDP is higher remember that we are dealing with far different scales as to what a dollar is in 2008 vs 1930. Today less than 25% (very conservative estimation) is industry producing domestic goods. When in 1930 it was more like 75%. Therefore a smaller rop today is a much larger impact.

Personal investment in the markets is far higher than you are thinking. In 1930 good (above minimum wage) jobs offered pensions. Today you have 401K for retirement. Also look at how profit is divided by a company. Large executive salaries and bonuses versus investment in pension funds and reinvestment and expansion within the company.

Gold standard was alreay gone but the silver standard was not. Then again it was a fairly new transition at the time. Today a dollar is a dollar's worth of labor for many manufacturing hourly workers it is roughly 5 minutes. For management in is a few seconds to a couple of minutes wasted at the coffee pot or surfing the net. Changing the litterbox takes about five minutes so does changing a tire once everything is laid out. If I gave you a dollar for either you would more than likely feel offended, but yet offering $12/hr in a factory is acceptable for many even if the factory does $37 million in sales and could easily afford to pay you more.

In 1930, most people knew how to preserve meat without refridgeration. Sure we can say salt it or smoke it, but do you know exactly how to do that today? Does the majrity of the people? In the grocery store you will pass up hambermeat that is grey on the edges as "no good". Meat naturally greys within hours after processing as the remaining bit of blood drains out and the meat becomes oxidised. Much how an apple turns the brownish-yellow if you take your time eating it. That grey hamber in the package simply did not get enough red dye before being wrapped.


I could go on and on in comparing and constrasting but I don't want to bore too many people. But I will sum it up as this, if it happenes we will make the Great Depression look like a picnic.

[edit on 9-10-2008 by Ahabstar]

reply to post by Ahabstar

---

Agree with most of that, but the Gold Standard was definitely in full effect. It was the full removal of the Gold Standard in '71 by Nixon that doomed us to this eventual fate!

reply to post by HimWhoHathAnEar

---

Quite right...I was thinking of Sweden and Britian dropping the Gold Standand in 1931. During the Depression the US bumped the price of gold at $35/ounce (up from $20/ounce) and the rest of the world pegged to the US dollar as the standard after WWII when the US made the $35/ounce a fixed rate.

Nixon nuked the gold standard in 1971 in order to afford Vietnam. While destroying the value of a dollar by pure inflation and lack of tangible value we left the world a complete mess as it became the Petrol-Dollar thanks to OPEC (forced) adoption.

Originally posted by Ismail
reply to post by anachryon

---

Doom and gloom ? I see the collapse of the globalized capitalist system as an opportunity to change things, big time... Doom and gloom is going back to being a wage slave for 50 years, and living like a sheeple in a society which controls my every thoughts and actions.

Amen brother, that is what I'm saying. I feel bad for all who are experiencing hardships right now and will in the future, but I personally am cheering every time we get closer to rock bottom. The old paradigm is dead and a new system requires this coming collapse and some birthing pains.

Russian scientists reach buried Antarctic Lake Vostok
  Posted 4 days ago with 83 member flags

Google announces privacy settings change across products; users can\'t opt out
  Posted 17 days ago with 78 member flags

Monsanto quits as GM results announced (EUROPE)
  Posted 6 days ago with 72 member flags

BREAKING: Israel teams with terror group to kill Iran\'s nuclear scientists, U.S. officials tell NBC
  Posted 2 days ago with 72 member flags

Strange noises reported around North Battleford
  Posted 17 days ago with 67 member flags

FDA\'s New Claim: "Your Body Is a Drug—and We Have the Authority to Regulate It"
  Posted 9 days ago with 53 member flags

Ayatollah: Kill all Jews, annihilate Israel
  Posted 5 days ago with 49 member flags

Bill Gates Backs Climate Scientists Lobbying For Large-Scale Geoengineering
  Posted 4 days ago with 41 member flags

Newest topics, updated in real-time:

Newest topics getting flags, in real-time:

Newest topics getting replies, in real-time: