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2nd Great Depression Update

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posted on Mar, 31 2010 @ 01:31 PM
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Professor Barry Eichengreen -- the question is whether the new policies (compared to 1929) -- "will work" --

www.voxeu.org.../3421



www.voxeu.org/index.php?q=node/3421


www.voxeu.org.../101

What do the new data tell us?

Barry Eichengreen Kevin H. O’Rourke
8 March 2010



This column updates the original Vox columns by Barry Eichengreen and Kevin O’Rourke comparing today’s global crisis to the Great Depression. The three previous columns have shattered all Vox readership records with over 450,000 views. This latest edition covers up to February 2010 showing that, while there is cause for optimism, there is no room for complacency.




To sum up, globally we are tracking or doing even worse than the Great Depression, whether the metric is industrial production, exports or equity valuations. Focusing on the US causes one to minimise this alarming fact. The “Great Recession” label may turn out to be too optimistic. This is a Depression-sized event. That said, we are only one year into the current crisis, whereas after 1929 the world economy continued to shrink for three successive years. What matters now is that policy makers arrest the decline. We therefore turn to the policy response.


Now notice Eichengreen's last paper comparing the 1929 Crash and Depression to today -- the corporate elite "free marketers" had a hissy fit since the constant Friedman Austrian fascist corporate-state mantra is that tariffs cause the crash of 1929 -- not exchange rates:

www.economicthought.net...

But this is clearly a basic, fundamental point of international relations as Eichengreen details:

voxeu.org.../3280



Countries that remained on the gold standard, keeping their currencies fixed against gold, were more inclined to impose trade restrictions. With other countries devaluing and gaining competitiveness at their expense, they adopted restrictive policies to strengthen the balance of payments and fend off gold losses.... Monetary stimulus benefited the initiating country but had a negative impact on its trading partners, as shown by Eichengreen and Sachs (1985). The positive impact on its neighbours of the faster growth induced by the shift to “cheap money” was dominated by the negative impact of the tendency for its currency to depreciate when it cut interest rates. Thus, stimulus in one country increased the pressure for its neighbours to respond in protectionist fashion.


Keep in mind that Eichengreen -- an IMF senior advisor -- wants a global financial new world order to build on the WTO:

www.econ.berkeley.edu...




International financial transactions relying on credit such as the carry trade, where investors borrow in markets like Japan where interest rates are low and invest in emerging markets promising higher yields, will be more difficult to finance. It had of course been the same carry trade that contributed to the unstable equilibrium of the late 1920s, as investors funded themselves at 3 per cent in New York and Paris in order to lend to Germany at 6 or 8 per cent. Then as now, the migration of capital from low- to high-interest-rate countries was predicated on the mirage of stable exchange rates, which ultimately dissolved, with disastrous consequences. This points to the urgency of one policy reform, namely greater exchange rate 9 flexibility on an ongoing basis to remind market participants of this risk, so they do not repeat, yet again, this same dangerous mistake.


But given the current crash is still based on the huge multi-trillion dollar derivatives speculation bubble based on currency exchange trading -- it seems to me that the same current depreciation crisis is at the basis of this crash, just like in 1929.

So here's how it happened in 1929 and again now:

The Fed tried to tighten money but the Fed bank members just loaned more to non-bank lenders to Wall Street so that the "small man" could continue to increase credit borrowing for highly leveraged stocks....

Yep -- the classic crash. The dump and pump from manipulated "buyer pools" has been repeated when investment and commerical banks combined again.... And the tax rate on the wealthy has decreased and decreased -- just like in the 1920s.... Productivity has boomed but wages have decreased!!

Sound familiar!

It's a classic case of overproduction which is at first driven by war but then when the war is over there's no market for the goods -- YET -- the investor class is already invested in increased productivity!!

So the banks just increase more money supply -- lower interest rates, etc.

And so you get a worse boom in the consumer sector -- houses and student loans.... And BOOM -- the great bust.

Just watch this great CRASH OF 1929 documentary from the mid-1990s:

video.google.com...#

[edit on 31-3-2010 by drew hempel]

[edit on 31-3-2010 by drew hempel]

[edit on 31-3-2010 by drew hempel]

[edit on 31-3-2010 by drew hempel]

[edit on 31-3-2010 by drew hempel]

[edit on 31-3-2010 by drew hempel]




posted on Mar, 31 2010 @ 01:36 PM
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1. The FED has eased money supply now and not tightened yet. So not sure where you are drawing that assumption from.

2. Taxes on the rich haven't been going down. Far from it, you sound quite misinformed and it is also quite hard to read when you skip lines when you are typing. Just wait till Obama rolls out the wealth tax and increases estate taxes in 2011.

The rich have always paid all the taxes in this country, it sounds like you like to cut and paste without researching yourself.



posted on Mar, 31 2010 @ 01:39 PM
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reply to post by GreenBicMan
 


www.rose-hulman.edu...



Ivan Wright (1929) discovered that commercial banks provided more loans and discounts to firms that had previously relied on the commercial paper market. These firms' former lenders moved into the call market from which banks had been discouraged by the Federal Reserve.



[edit on 31-3-2010 by drew hempel]

[edit on 31-3-2010 by drew hempel]



posted on Mar, 31 2010 @ 01:47 PM
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Originally posted by GreenBicMan

The rich have always paid all the taxes in this country, it sounds like you like to cut and paste without researching yourself.


www.abovetopsecret.com...

Here's my "Super Rich tax you to death" thread -- with plenty of information for you to acquaint yourself with.



posted on Mar, 31 2010 @ 01:48 PM
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Originally posted by GreenBicMan
1. The FED has eased money supply now and not tightened yet. So not sure where you are drawing that assumption from.


www.rose-hulman.edu...



Ivan Wright (1929) discovered that commercial banks provided more loans and discounts to firms that had previously relied on the commercial paper market. These firms' former lenders moved into the call market from which banks had been discouraged by the Federal Reserve.



posted on Mar, 31 2010 @ 01:54 PM
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Originally posted by GreenBicMan

2. Taxes on the rich haven't been going down. Far from it, you sound quite misinformed and it is also quite hard to read when you skip lines when you are typing. Just wait till Obama rolls out the wealth tax and increases estate taxes in 2011.


www.hoanewsnetwork.com...



To help them screw their own clients, the major investment banks employ high-speed computer programs that can glimpse orders from investors before the deals are processed and then make trades on behalf of the banks at speeds of fractions of a second. None of them will admit it, but everybody knows what this computerized trading — known as "flash trading" — really is. "Flash trading is nothing more than computerized front-running," says the prominent hedge-fund manager. The SEC voted to ban flash trading in September, but five months later it has yet to issue a regulation to put a stop to the practice.



posted on Mar, 31 2010 @ 01:56 PM
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Originally posted by GreenBicMan
Far from it, you sound quite misinformed and it is also quite hard to read when you skip lines when you are typing.


There I edited out the skipped lines to address anyone's special remedial reading needs.



posted on Mar, 31 2010 @ 02:00 PM
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Originally posted by GreenBicMan
1. The FED has eased money supply now and not tightened yet. So not sure where you are drawing that assumption from.



www.hoanewsnetwork.com...



And what did the banks do with the proceeds? Among other things, they bought Treasury bonds, essentially lending the money back to the government, at interest. The money that came out of the magic Rumanian Box went from the government back to the government, with Wall Street stepping into the circle just long enough to get paid. And once quantitative easing ends, as it is scheduled to do in March, the flow of money for home loans will once again grind to a halt. The Mortgage Bankers Association expects the number of new residential mortgages to plunge by 40 percent this year.



posted on Mar, 31 2010 @ 02:02 PM
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reply to post by drew hempel
 



Friedman Austrian fascist corporate-state mantra




Keep in mind that Eichengreen -- an IMF senior advisor -- wants a global financial new world order to build on the WTO:


So tell me, who are the fascists?



Break it down people. Who and what brought us to this point? Government and Bankster manipulations in the market.

Their solution, give them more control.

Wow, something comes to mind............what is it............oh yeah.

Cause problem, offer solution.

Classic!

If one looks at the GD and the current Depression (by the way, the DEFINITION of a depression is 4 straight quarters of GDP decline) a similarity will emerge. Follow the money. Who profited in both.

You got it, the banksters and the mega corps. They purchased up devalued assets due to their manipulations. See how that works. Do not even have to be a paid shill from the IMF and Federal Reserve to see who gets the gold.

Now, which entities have amassed fortunes during this depression?

Did the same thing happen last depression?

This time, is there a disconnect from the US market and actual employment?

Imagine that you wanted to decimate the US, could it be done if the market was not connected to employment in the US?

Just ask the easy questions and you will see the answers you seek.

Interdependent, instead of sovereign markets have been the downfall this time. Watch for the solution, one world currency, one world governance and regulations.

This has nothing to do with fixing the economies. This has to do with POWER centralized in only a few hands. PERIOD!

edit to fix numerous gramma


[edit on 3/31/2010 by endisnighe]



posted on Mar, 31 2010 @ 02:03 PM
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Originally posted by GreenBicMan


2. Taxes on the rich haven't been going down. Far from it, you sound quite misinformed and it is also quite hard to read when you skip lines when you are typing. Just wait till Obama rolls out the wealth tax and increases estate taxes in 2011.


www.abovetopsecret.com...



In the 1950s the marginal tax rate on those earning more than $3 million a year (in today’s dollars) was 91 percent. By 1990 it was 28 percent. The IRS says that the top 400 richest tax filers actually paid a rate of just 16 percent in 2007 (the latest numbers we have). Yep, the richest earners — people who took in an average of $343 million each — probably paid a lower rate than you did. Something to consider as you sign your 2009 return.



posted on Mar, 31 2010 @ 02:14 PM
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Well apparently GreenBicman or whatever wants to just ignore the information claiming it's too difficult to read quotes of texts from other citations, etc. Ha reading is difficult!

Check out this 2008 blog claiming tax revenues from the rich in the 1920s increased due to cutting the tax on the wealthy -- thereby confirming the Laffler Curve -- and so the great crash of 1929 precipitated the same B.S. of 2008 for the great crash of 2009.

mjperry.blogspot.com...



posted on Mar, 31 2010 @ 05:10 PM
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Originally posted by GreenBicMan
1. The FED has eased money supply now and not tightened yet. So not sure where you are drawing that assumption from.

2. Taxes on the rich haven't been going down. Far from it, you sound quite misinformed and it is also quite hard to read when you skip lines when you are typing. Just wait till Obama rolls out the wealth tax and increases estate taxes in 2011.

The rich have always paid all the taxes in this country, it sounds like you like to cut and paste without researching yourself.


His interpretation of what Austrians say caused the crash is also grossly misinformed.

Barry Eichengreen is a douche bag of maximum proportions that has predicted nothing, contributed nothing, and whose policy recommendations have been complete and utter failures.

This is akin to listening to Paul Krudman speak on economics.

Totally pointless when he's been wrong about everything and continues to be wrong about everything to this day.

For real economic information, people should turn to people like Peter Schiff, Tom Woods, and other economists that have actually predicted what was about to occur.



posted on Apr, 1 2010 @ 01:45 AM
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reply to post by mnemeth1
 


Sorry but I never noticed Eichengreen talking about Austrians -- do you have any specific quotes or references?

Still I appreciate your strong opinion about Professor Eichengreen -- he is a senior advisor to the IMF. So I'm assuming as advisor he deals with future scenarios as that's what advisors do.

Not that I agree with him but he knows his stuff.



posted on Apr, 1 2010 @ 02:32 AM
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Originally posted by GreenBicMan
1. The FED has eased money supply now and not tightened yet. So not sure where you are drawing that assumption from.

2. Taxes on the rich haven't been going down. Far from it, you sound quite misinformed and it is also quite hard to read when you skip lines when you are typing. Just wait till Obama rolls out the wealth tax and increases estate taxes in 2011.

The rich have always paid all the taxes in this country, it sounds like you like to cut and paste without researching yourself.


Seriously dude, you are the biggest Wall St. fanboy I have ever seen. A fiscal Uncle Tom banking on the next boom coming along and whisking you out of your parent's basement. I got some bad news for you boy - it ain't happening. You aren't going to ever be rich. You are firmly affixed in that bottom 90% of the population who live on 30% of the wealth in this country while the top 10% live extravagantly on the other 70% of the wealth. That's from 2007 by the way, things have gotten a lot more top-heavy in the meantime. I hope you get over your Stockholm syndrome and realize that these assholes are stealing out of your pocket just as much as they are mine.



posted on Apr, 1 2010 @ 10:06 AM
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Originally posted by drew hempel
reply to post by mnemeth1
 


Sorry but I never noticed Eichengreen talking about Austrians -- do you have any specific quotes or references?

Still I appreciate your strong opinion about Professor Eichengreen -- he is a senior advisor to the IMF. So I'm assuming as advisor he deals with future scenarios as that's what advisors do.

Not that I agree with him but he knows his stuff.


Here's Eichengreen coming out and saying they were wrong all along.

www.nationalinterest.org...


THE GREAT Credit Crisis has cast into doubt much of what we thought we knew about economics. We thought that monetary policy had tamed the business cycle. We thought that because changes in central-bank policies had delivered low and stable inflation, the volatility of the pre-1985 years had been consigned to the dustbin of history; they had given way to the quaintly dubbed “Great Moderation.” We thought that financial institutions and markets had come to be self-regulating—that investors could be left largely if not wholly to their own devices. Above all we thought that we had learned how to prevent the kind of financial calamity that struck the world in 1929.

We now know that much of what we thought was true was not. The Great Moderation was an illusion. Monetary policies focusing on low inflation to the exclusion of other considerations (not least excesses in financial markets) can allow dangerous vulnerabilities to build up. Relying on institutional investors to self-regulate is the economic equivalent of letting children decide their own diets. As a result we are now in for an economic and financial downturn that will rival the Great Depression before it is over.


This of course is totally off base. Markets were not left to their own devices. They were wildly seduced by artificially low interest rates AND THE MORAL HAZARD of the Fed.

and he still doesn't get it:


The late twentieth century was the heyday of deductive economics. Talented and facile theorists set the intellectual agenda. Their very facility enabled them to build models with virtually any implication, which meant that policy makers could pick and choose at their convenience. Theory turned out to be too malleable, in other words, to provide reliable guidance for policy.


This shows a total lack of understanding about why Austrians saw the housing bubble coming yet Keynesian's didn't.

He's saying that deductive logic led to our problems, which is a total joke. It was the absolutely abstract INDUCTIVE logic of the neo-liberals that was totally detached from the reality of cause and effect.

Keynesian's think all economic behavior can be boiled down to mathematical models, so much so to the point where there have been arguments put forth that the fed could be run by a computer algorithm.

This is absurd.

No program, no intervention, and no person can know what the market wants or needs. This has been proven time and time again. Central economic planning does not work. Yet the Keynesian's persist in this insanity. What he's saying is that "our math models became detached from reality, but this next time around we'll get em right!" - a totally ridiculous assumption.

But lets continue on with Eichengreen being totally incorrect all the time.

In 2008:
www.cnn.com...


Candidate Obama spoke of $150 billion of fiscal stimulus. But if this recession turns out to be the deepest since World War II, as now seems certain, the appropriate figure will be at least four times that large. Anything less would fail to cushion the downturn.
...
If Obama wishes to help Americans impacted by import competition there are better ways. He can expand trade adjustment assistance for displaced workers. He can propose wage insurance -- partial compensation for a limited period for workers moving to lower-paid jobs.

He can ramp up spending on education and training. He can address concerns over the environment by proposing a carbon tax rather than allowing blame for global warming to be shifted to Mexico and China.



He's calling for a stimulus (which failed), he's calling for MANAGED TRADE (NAFTA is not free trade) which has failed us, he's calling for increased social welfare spending, and HE'S CALLING FOR CARBON TAXES!

This is a prescription for disaster!

He's a f'n moron!

He's a loon!

He's a nut!

He's a mental retard!









[edit on 1-4-2010 by mnemeth1]



posted on Apr, 1 2010 @ 01:46 PM
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reply to post by mnemeth1
[mo

Well in my environmental economics class I wrote a paper called the "Incorrect Supply and Demand Model" -- the whole fiscal stimulus versus monetary stimulus debate is a joke.

You say the monetary stimulus people predicted the housing bubble -- well Greenspan is a monetary stimulus person -- and

www.alternet.org...



DEAN BAKER: ....That was a reasonable thing to do if the bubble was real, in other words, if prices were going to continue to rise, as people like Alan Greenspan and Ben Bernanke were telling them. So now that prices have reversed, we have this situation where all these people owe more than the value of their house.





I mean, the fact is there are easy things you could do if you wanted to help homeowners. The policy I’ve been advocating for over two years, almost three years now, is simply give people the right to stay in their home as renters paying the market rent for five to ten years, some substantial period of time. That will also give banks an incentive to renegotiate mortgages, if they can’t just throw people on the street. But the key thing there is that that would give people stability in their housing that this plan doesn’t give them. So, why President Obama’s team is not looking in that direction, obviously, the banks don’t like that, because, again, everything—it’s important to understand—everything been proposed to date, entirely optional on the part of the banks. If you said that people had the right to stay in their homes, they couldn’t just be thrown out following the foreclosure, well, you’ve given a big bargaining chip to homeowners. And for whatever reason, President Obama’s not looking in that direction.


[edit on 1-4-2010 by drew hempel]



posted on Apr, 1 2010 @ 01:47 PM
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Originally posted by drew hempel
reply to post by mnemeth1
[mo

Well I'm my environmental economics class I wrote a paper called the "Incorrect Supply and Demand Model" -- the whole fiscal stimulus versus monetary stimulus debate is a joke.

You say the monetary stimulus people predicted the housing bubble -- well Greenspan is a monetary stimulus person -- and

www.alternet.org...



DEAN BAKER: ....That was a reasonable thing to do if the bubble was real, in other words, if prices were going to continue to rise, as people like Alan Greenspan and Ben Bernanke were telling them. So now that prices have reversed, we have this situation where all these people owe more than the value of their house.





I mean, the fact is there are easy things you could do if you wanted to help homeowners. The policy I’ve been advocating for over two years, almost three years now, is simply give people the right to stay in their home as renters paying the market rent for five to ten years, some substantial period of time. That will also give banks an incentive to renegotiate mortgages, if they can’t just throw people on the street. But the key thing there is that that would give people stability in their housing that this plan doesn’t give them. So, why President Obama’s team is not looking in that direction, obviously, the banks don’t like that, because, again, everything—it’s important to understand—everything been proposed to date, entirely optional on the part of the banks. If you said that people had the right to stay in their homes, they couldn’t just be thrown out following the foreclosure, well, you’ve given a big bargaining chip to homeowners. And for whatever reason, President Obama’s not looking in that direction.



No, I said Austrian economists predicted the bubble.

How many times do I have to say this.

What part are you not understanding?



posted on Apr, 2 2010 @ 01:25 PM
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Star for you.

The greatest trick the wealthy ever pulled was convincing the middle-class that they could one day be rich, too. (with apologies to Verbal Kint and Kaiser Soze)

EDIT: This was supposed to be a reply to wanderingwaldo's reply to Greenbicman; I must have hit "Quote" by accident.



[edit on 2-4-2010 by kreinhard]



posted on Apr, 2 2010 @ 01:36 PM
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reply to post by GreenBicMan
 


Sit down and be quiet. You have no clue what you're talking about.

The ratio of executive salary to the average paycheck during the mid-twentieth century was about thirty to one. In the last decade it has ranged from three hundred to over five hundred to one.

The richest four hundred Americans were worth an average of about $13 million each in the middle of the century, using today's dollars. Now they average over $260 million each.

The top taxpayers in America now pay the same proportion of their income in taxes as those earning less than $75,000 per year. Those taxes on the wealthy went from being more than half of their income fifty years ago to about a sixth today.

In the past three decades, the income of the richest Americans quadrupled, while the income of the lowest ninety percent actually fell. Today, the median wage is lower than it was in the 1970s, even though productivity has grown by nearly fifty percent.

So yes the rich should be sharing the majority of the burden of taxes. They own all the wealth. The top 1% of own 98% of the wealth in this country.



posted on Apr, 2 2010 @ 02:30 PM
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reply to post by mnemeth1
 


Greenspan did not predict the bubble. The average U.S. citizen does not know about the "Austrians" -- unless they've studied economics. Greenspan though was an "Austrian" economist! I equate Austrian with monetary stimulus versus fiscal stimulus.

mises.org...



Whatever comments he makes concerning "aggregate demand" and "aggregate supply," Alan Greenspan's actual policy views may stem from his tryst with Austrian economics about forty years ago, when he was a successful, independent economic consultant and member of Ayn Rand's "inner collective" of Objectivist intellectuals. Austrian School writings were especially emphasized by various members of that group, which at one time included preeminent Mises scholar Murray Rothbard.





If Mises's former student Alan Greenspan was influenced by Mises and other Austrian School economists, part of that course may shed some light on the current discussion of Fed policy, especially Greenspan s lectures on "time preference" and "the rate of future discount."




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