How bad will "Great Depression II" get?

[Truth Talks]

I'm working on an article/website focusing on the global economic crisis, which I refer to as the Second Great Depression, or Great Depression II (GDII). I'm not a complete cynic; I concede that it might not get much worse - but I think it probably will. In fact, I think there's a significant chance (e.g. 10% or more) that it will be worse than the original Great Depression (GDI).

This post is an attempt to start a discussion and sort of a homework help request at the same time. I'd like to explain WHY I think the economy is going to get worse and solicit feedback. Do you agree or disagree with any of my ideas? Can you tell me where I'm wrong or contribute your own ideas?

I'll do my best to keep it reasonably short.

* * * * *

First, I recognize three primary causes of the crisis...

1. Globalization
2. Public Apathy, Ignorance and Greed (Americans simply got used to the good life and are no longer thrifty, are detached from politics, etc.)
3. Corporate Corruption

I'm using globalization in the broadest sense of the word; it basically translates "a changing world." The gulf in life styles between the industrialized nations and developing nations simply can't last forever. China alone has upset the apple cart. Similarly, environmentalists have long warned that we can't continue raping the planet without consequences (e.g. peak oil, global warming, etc.).

I break corporate corruption down into the following:

> Deregulation
> Privatization
> Job Outsourcing
> Corporate Welfare (As in inflated CEO salaries, outrageous tax breaks, allowing Bill Gates and other corporate execs to exploit schools and children, etc.)

(Can you think of any other major examples of corporate corruption I should include? I have taken the government and media into consideration; I consider both examples of corporate corruption, since they're now run by corporate interests.)

It is my perception that the government is ignoring these problems, which is one reason I expect the economic crisis to get much worse. I don't believe any stimulus program by itself could bail us out.

* * * * *

Next, I compared the current crisis with the original Great Depression (GDI) and noted ten striking differences, all of which make the current crisis more volatile.

INTERNAL AFFAIRS

• Population Growth
• Urbanization
• Public Corruption
• Corporate Corruption
• Infrastructure

In a nutshell, the population of the U.S. is way bigger than it was in the 1930's, and a smaller percentage of the population are farmers. In other words, we have millions of people crowded into cities where it would be very difficult for them to be self-sufficient; they're dependent on government welfare. (Remember Hurricane Katrina?)

I think I'm safe in saying corporate/government corruption is significantly worse than it was in the 1930's; our military certainly wasn't privatized back then, and I don't think an outfit like Fox News would have been allowed on the air. But am I right about "public corruption"? Are people a little more stupid, greedy and selfish today?

And, though our infrastructure definitely has problems, is it really worse than it was during GDI?


EXTERNAL AFFAIRS

• Globalization
• Peak Oil
• WWII vs Iraqistan
• Blowback
• Global Warming

The terms globalization, peak oil, blowback and global warming didn't even exist during GDI. Here I'm assigning two definitions to globalization - 1) a changing world, and 2) corporate exploitation of that changing world (e.g. job outsourcing).

We were largely rescued from GDI by World War II, which put millions of Americans to work. At the same time, the Nazis destroyed European industry, leaving the U.S. king of the hill. Today, it's just the opposite; we're already bogged down in wars in Iraq, Afghanistan and Pakistan, and they're hurting the economy, not helping it (and making enemies, not friends). At the same time, corporate interests are destroying OUR industrial base, handing business over to Europeans, India, China, etc.

Our stand against Hitler won us many friends in the 1940's. Today, the U.S. is far less popular. Indeed, our invasions of other nations have won us many enemies, increasing the likelihood of blowback - anything from dumping the U.S. dollar to unleashing some horrible weapon on a major U.S. city.

Of course, global warming is just one example of environmental blowback. Global warming or peak oil alone could permanently impact the economy.

* * * * *

These are the reasons I think the current economic crisis could be even worse than the original Great Depression. But I'm not a hopeless cynic. I can't see the future and don't understand economics better than Alan Greenspan and Bill Gates. Perhaps the corporate media are actually telling the truth when they say the recovery has already begun.

But it always pays to know your enemy, and I think it's important to be prepared for the worse. There may even be a silver lining to the economic crisis.

Anyway, do you care to critique any of my ideas? Can you think of any other major issues that may either help or hurt us?

Thanks!

[notesdev]

1. Bad enough

that they won't call it #2, they will rename the first one to something along the lines of "The Long Recession".

Remember, WWI was supposed to be "the war to end all wars".

[griloco]

2. agreed

bush did for the "great depression"
what hitler did for the "great war".
now we hope Obama can do the same
for the "greatest generation"

[DCBob]

3. I tend to agree with you on all points and...

I think the only reason we are not in a depression now is because of the actions by the Obama administration. But one of my biggest concerns is the massive debt piled up. At some point that will have to have a negative impact. Also, the effects of the individual state's financial messes will be a major factor. California has a budget but few see it as a solution. They are just kicking the can down the road and could send CA backward for decades and create social chaos. There are many other states in the same predicament.

The picture is not pretty, however, generally speaking the US has many advantages over the rest of world. We will likely recover faster because we are still the most productive, most innovative, most aggressive, and largest economy in the world. But we may have to endure, as you say, "GDII" before we eventually come out of this. We have been living too fast, too high, too long. We now have to face reality.

I would like to see your website when you have it ready.

[notesdev]

4. Psst

a) We ARE in a depression right now

b) Obama's Treasury Secretary is part of the problem - and was long before he was at Treasury

c) The prime cause of our economic troubles is the fact that people are stealing massive amounts of money from our economy through all sorts of illegal financial schemes and our government - entrusted to protect us from just these sorts of people - has given this process of embezzlement its full faith and credit stamp of approval.

[DCBob]

9. The primary cause of this particular economic crisis was the real estate fiasco.

Watch CNBC's "House of Cards" for more information.

http://www.hulu.com/watch/59026/cnbc-originals-house-of-cards

[notesdev]

10. Right

And who was the primary regulator for the key institutions that were blowing the bubble?

Hint: initials are "T.G."

[DCBob]

11. No one idividual was to blame -- it was an "orgy" for all.

If you had to pick someone it would be Greenspan.

[notesdev]

13. If I had to pick names

The current and former Federal Reserve chairmen, and the current and former Treasury Secretaries all make the top ten.

[AnneD]

31. I'd take Volker off your list.....

he was the last honest Fed Chairman we had. Granted, he was dispensing Castor Oil but we did better afterwards.

[notesdev]

33. Volker isn't on my list

I meant Bernanke and Greenspan.

[Truth Talks]

15. Who's to blame?

Another good point. So many people point to George W. Bush - who's obviously up to his eyebrows in guilt. I think it's very appropriate that the 1930's term Hooverville is being replaced by Bush Town.

But Alan Greenspan or even Dick Cheney may be more guilty than Bush. But keep in mind that all these politicians are ultimately serving corporate interests. I think Bill Gates (who supported George Bush) may make the ideal Great Depression II poster boy. While the economy goes up in flames, he rants about the glories of "creative capitalism" in Davos, Switzerland. While millions of people are left unemployed or homeless, Gates says he finds the economic situation "interesting," but not really serious.

In the meantime, taxyapers are bilked out of money used to relocate the Bill & Melinda Gates Foundation's headquarters, even as Gates continues pretending to be a philanthropist. Adding insult to injury, the uniforms of the Seattle Sounders soccer team are little more than advertisements for Microsoft's computer game, X-Box. The Sounders play in a new stadium paid for by taxpayers and owned by M$ co-founder Paul Allen.

The stench is simply overwhelming.

[FatDave]

20. That's the same someone I would pick. (nt)

[Truth Talks]

12. Which economic crisis?

That's a major source of confusion for me. Is the global economic crisis really centered on real estate, or is real estate just one facet of a much larger economic crisis?

There are many ways of looking at it, but I'm leaning towards the position that corporate corruption has been increasing since World War II. Presidents from Nixon to Reagan and even Clinton set us up for George W. Bush, who left the barn doors open for terrorists (including Enron, Haliburton, Bill Gates, etc., etc.). For me, personally, the economic crisis started shortly after 9/11, when I was laid off. Actually, as a teacher, I was getting reamed every day even before George W. Bush stole the White House. It's all very confusing.

But I'm certainly going to note alternate viewpoints in my article. Thanks for the link.

[DCBob]

14. Clearly there are other big underlying issues that predated this current crisis...

and no one understands it all, but watch the CNBC documentary. It really helped me understand how the real estate mess caused our recent economic crash.

[jotsy]

5. A few DU peers to get familiar with.

First, welcome to Democratic Underground.
I believe you have more posts, but I've been here a couple months longer, guess I'm just shy!

I'd be inclined to agree that all of the factors you listed are in play, but might shift which of those play more prominent roles in how things have developed.

If you check out the DU journals, I believe some of our more...long standing members like TimeforChange can clarify how to form remedy to some of the issues you've spoken to here. From there, progressive radio hosts, all of them, are pretty good about where and how they get the info they share with us.

Things are indeed a mess. Abuse of power and authority are what I believe to be primary catalysts to this corporate created chaos we call contemporary times.

The PTB, (powers that be) have worked quietly behind the scenes for decades to get us to this point, It seems to me they're more blatant about it now, and it is because they think we don't have a choice. For that reason, I've adopted a motto of sorts, just four words.

Be Vocal, Buy Local

Happy hunting and good luck, we live in a world where one person can make a world of difference, go get em!

[Truth Talks]

6. Powers That Be

Though I think logic goes a long way in understanding our situation, I have to resort to conspiracy theory in an attempt to find the final piece to the puzzle: What do the powers that be - the elite, the ruling class, the establishment, the U.S. Chamber of Commerce, or whatever you want to call it - what do they want?

Is our economic crisis merely the symptom of their global crime spree, or do they, as many people have speculated, actually want to destroy the economy? Another popular theory is that they're in the process of "restructuring" the economy.

If they do intend to destroy the economy, then we're sunk. If they want to restructure it, we're sunk. If, on the other hand, they would prefer to salvage the economy, then we have a chance - though they still might have gone too far in screwing things up.

Thanks for your comments.

[jotsy]

8. For us to remain a Pavlovian public is at the heart of what makes them so successful.

Not sure if it matters what they want if it lies in contrast to principles laid out in the constitution.

My best guess: a return to a monarchy, where the rich rule and the rest of us learn to like sucking up or suffer.

[FatDave]

22. Return to monarchy

That's the only conservative endgame that makes sense to me. They want the poor willing to lick their boots for whatever scraps they decide to throw their way.

[glitch]

28. Great motto, belated welcome to DU! nt

[AdHocSolver]

41. Your motto, "Be Vocal, Buy Local", is one of the most salient comments on the economy.

Welcome to DU.

The biggest problem with the U.S. economy is the fact that just about everything we buy is manufactured elsewhere and imported into the U.S. This fact has two unfortunate results.

One result is the loss of jobs. Unemployed Americans have no income to sustain themselves, and they pay no income taxes so that governments have less revenue to supply needed services.

A second result is that the money we spend on foreign-made goods leaves the U.S., and eventually we buy on credit. The trade deficit and the debt to foreign countries is in the trillions of dollars. This level of debt is unsustainable. That is why the world economy is collapsing, it is not because of the stock market declines.

The stock market dropped because the frauds and Ponzi schemes were exposed. The solution the fraudsters themselves came up with is provide bailout money to support the stock market, and business will boom again. This is pure supply side economics. Give the rich people enough money, and they will provide a few jobs for the masses.

The bailout money was just to prop up the stock market so the rich speculators wouldn't lose their shirts. How do we know? They used the money to buy each others debt, and at the same time, laid off more workers to boost short term profits, and invite investors (who had any money left) to buy their stock and bid up its price.

The bailout money given to the banksters was as effective as throwing gasoline on a fire to put it out.

So why is your motto so useful? As we have seen, the government is making things worse, not helping. As Americans we can make a difference by following your advice. Refuse to buy any product not made in America. When you shop, tell the retailers you are only going to buy goods from them that are made in the U.S.A. They will stock American-made goods for you to purchase if they want your business.

This will reduce the trade deficit, and when the retailers decide to, at least, offer American-made goods, provide jobs for Americans.

Don't be taken in by the argument that American goods cost more. That is a big lie for several reasons. First, when U.S. made goods were still available, comparison shopping often showed that the American goods were comparably priced or even less expensive. The stores do NOT pass along cost savings from cheap labor to you the customer. The quality of imported goods is often less than that of U.S. made goods. Third, the huge trade deficits have resulted in creeping inflation. We see this in packaged goods where the prices are raised a little at a time, AND the quantities in the packages drops at the same time. This is due to the devaluation of the dollar as the debt incurred for imports increases.

I would slightly modify your motto for some to: "Be Vocal, Buy American."

[izquierdista]

7. Primary cause -- cronyism

As long as a small elite, be they Saudi royalty, Goldman Sachs, or the BFEE, determines how the world is run, boom and bust will continue, with each bust worse than the last. That's the way it was in the US until FDR put in market regulation and tried to treat everyone equally. Now that Glass-Stegall has been overturned and deregulation effected, is it any wonder that depression has replaced recession and the busts are shouldered by the working class, while the booms are enjoyed by the "haves and have-mores"?

Democracy is supposed to be the great equalizer, and "one man, one vote" leads to other types of equality as well. But that's not what the top 1% want. For all his yap about spreading freedom and democracy, Dubya didn't want equality of any sort at all. He's as concerned with economic equality as Kim Jong Il is concerned that every citizen receives "according to his needs".

Globalization is merely a small group of cronies looking world wide for the cheapest labor to exploit. Public apathy and ignorance are the result of a small group of cronies controlling the vast majority of the media. Oh sure, Amy Goodman isn't prevented from putting on a news show, but for each segment she does, there are hours of Hannity, Limbaugh, Beck, Cramer, and on, and on, and on. Corporate corruption -- that's just a small group of cronies who make sure the top executives are taken care of, fuck the workers, the shareholders, and everyone who is not VP material.

I think if you look at it carefully, the world has not advanced much since a few feudal lords ran a world of serfs. Now the lords have different names, Dubya called them Rangers and Pioneers, George Carlin call them the owners of America, but they get what they want, and you don't.

[Warpy]

16. Every day that goes by with corporations getting tax breaks to

offshore jobs, committing legalized fraud to hire cheaper H-1B workers, and allowed to work employees to death with mandatory overtime is a day the recovery is postponed. Every day that goes by without this country enacting tariffs that reflect those of the protectionist countries that now have our manufacturing base is a day that recovery is put off. Every single day that goes by that the government fails to enact commonsense measures like a progressive tax structure and universal health care with a strong public option is a day we will never get back.

We've done enough listening to conservatives in Congress whinging about how much everything is going to cost. Their purpose for collecting that paycheck, looking at the gold plated retirement, and enjoying the best socialized health care in the country is that they spot the problems and fix them. Instead of all the public hand wringing, they have to figure out how to finance everything. Instead of yowling about how hard it is to do, they need to do it or get the fuck out of office and let someone who is ready to work have the job.

We the people have had enough. Congress has stood in the way of real reform for too damned long. If they don't stop coddling their fat cat contributors and destroying us, the backlash is going to be incredible.

[jakeXT]

17. A couple of ideas

To compare it to the first depression, I think one should look at the dying British Empire at the time of the previous(first) globalization and compare it.

The foregn policy reminds me a bit of the hubris of the British Empire (smashing all your enemies to live another day).
For example encircling Russia with NATO bases and trying to deny resources to countries like China (Oil from Sudan,Iraq,Iran...)

Operation Unthinkable was a British plan to attack the Soviet Union. The creation of the plan was ordered by British Prime Minister Winston Churchill and developed by the British Armed Forces' Joint Planning Staff at the end of World War II.

Offensive operations

The initial primary goal of the operation was declared as follows: "to impose upon Russia the will of the United States and the British Empire." <1> (The word "Russia" is used heavily throughout the document, although at the time Russia as a political entity had been replaced by the Soviet Union.)
.
http://en.wikipedia.org/wiki/Operation_Unthinkable



Maybe a good read includes a link to a university paper

http://ftalphaville.ft.com/blog/2009/07/13/61656/who-saw-it-coming-and-the-primacy-of-accounting/">Who saw it coming and the primacy of accounting


This stuff isn't sustainable

The US used to need to attract 80 percent of global savings to pay their deficits when the global economy was flourishing and their deficits were a lot smaller. Today that these deficits have increased by 400 percent at least (if not 1,000 percent by the end of 2009) (5) while the planet has lost (and is still losing) thousands of billion-worth of financial assets (6), Washington’s daily problem has become: how to borrow 500 percent of global savings in 2009 (we suppose here that available global savings are stable when in fact asset devaluation is probably higher than savings growth because of the crisis)?
http://www.leap2020.eu/Towards-a-world-war-of-interest-rates-aimed-at-capturing-global-savings_a3291.html

[wuvuj]

21. Some think....

...the basic issue is peak oil/cheap oil...that was allowing the continual creation of debt...and the continual growth required to pay it off. IF the era of cheap energy is over....and there is still the great amount of overhanging debt to deal with...and no real forward growth to be found...how will it resolve for the US? The only way out is inflation or more bubbles?

While China has actual reserves...but mostly in $$.

[dixiegrrrrl]

27. good links, esp. that last one. Thanks.

[jakeXT]

34. pretty bleak, feel like 1929 but last like 1873-96

the current crisis is of historic dimension. Its duration for many countries (including the US) could be similar to the duration of the 1873-1896 crisis, while its socio-economic impact will resemble that of the 1929 crisis but on the scale of the planet (9).



It reminds me of Mandelbrot, who said the civil war, I believe.

http://www.youtube.com/watch?v=DLFkQdiXPbo

[leftofthedial]

18. how bad? I don't know, but worse.

and it will last for a long, long time.

[tomreedtoon]

19. Bad enough for civil war and anarchy.

Let's be honest. A nice guy like Obama will do nothing against the embedded greed and corruption. The megacorporations and the corrupt politicians want nothing to change. It will take civil war and a lot of death to cause any changes.

In the most recent riots in American history - the riots in the black communities - the rioters mostly destroyed their own homes and communities. But this time, the unrest will be systemic and running across all race and community bounds.

I would like to see...I hope for...some figure to come to the public light, to focus and direct the anger the public feels. This person would not pit race against race, like a Hitler, but would pit class against class. He would lead armies to fight CEO's, corrupt Congresscreatures (which means nearly all of them) and destructive companies like Wal-Mart. And I don't mean protest with signs and letters to the editor. I mean the kind of protest that leaves blood on the street - some of ours, but much more of theirs.

Unlike you, TruthTalks, I CAN see the future. And it is black and full of lightning bolts, pain and death. The only question is whose deaths will be greater - ours or theirs.

ON EDIT: This will probably sicken you. When I think about it, it sickens me. But I am certain that there is no other way. The democratic process has been ruined and has failed. And I don't kid myself that I would be a Rambo; I'll probably be among the first to be killed. But I will die with the hope that more of the greedy bastards will die.

[Name removed]

23. Deleted sub-thread

Sub-thread removed by moderator. Click here to review the message board rules.

[FatDave]

25. I see your scenario as a distinct possibility.

But I'm not convinced it'll reach that pitch. I'm just in an optimistic mood today.

But if it does reach that pitch (and it could reach it next week, for the only thing really missing is someone to lead the revolution) the poor will suffer numerous casualties, but the ultra-wealthy will be dead, exiled, or imprisoned. We have the numbers, and the elites never come out on top in a revolution.

[Truth Talks]

26. Viva la Revolucion!

"I would like to see . . . some figure to come to the public light, to focus and direct the anger the public feels. This person would . . . pit class against class. He would lead armies to fight CEO's, corrupt Congresscreatures (which means nearly all of them) and destructive companies like Wal-Mart. . . . I mean the kind of protest that leaves blood on the street - some of ours, but much more of theirs."

Wow, I never expected to read something like that on this forum. It mirrors my sentiments exactly. However, I seldom speak out quite that bluntly because 1) most Americans are too stupid to understand that kind of talk, and 2) U.S. citizens (especially liberals) have brainwashed into embracing a freakish civility.

But it's obvious to me that the only way to get back that which was stolen from us is to take it back.

To put it all in perspective, compare the anti-war protesters of the 1960's with today's anti-war protesters. In the 60's, protesters spit in returning soldiers faces, gave them the middle finger and called them "baby killers." Today's "protesters" claim to be outraged by the murder and torture of civilians - but they support the troops who are doing it. Is it any wonder protests were so much more successful in the 60's and 70's?

But the Vietnam War era protesters made one fatal mistake: They launched the civil rights and environmental movements and helped to end the war, but they never finished the job. Nixon and Kissinger should have been executed for war crimes; instead Nixon was pardoned, and Kissinger never even got a slap on the wrist.

There is a part of me that would like to see a civil war. However, I can scarcely imagine such a thing happening in the U.S. today. Americans are just too apathetic and too divided - not too mention clueless. How can people prosecute a successful revolution when they don't even know how to vote?

Nevertheless, hope springs eternal. If the Second Great Depression somehow pulls the plug on soap opera snd football games, maybe people will rally after all.

[tomreedtoon]

30. People need to recognize and accept their anger.

Too many people on DU have been brainwashed into thinking that anger is evil. It is NOT. It is the force that brings about change.

Small example: Mel Brooks was just about finished in Hollywood when his movie The Twelve Chairs flopped. He had only one last movie on his contract. So he let out all stops, brought in Richard Pryor as a writer, and let loose his anger about prejudice and minorities and "civility." The result, Blazing Saddles, revived his career and basically restarted comedy as an acceptable film form in Hollywood.

There's already anger out there. But people are chewing themselves up about it. Someone...this great leader I referred to, whom I don't think is publicly known yet...will have to tell people that it's okay to be angry, but to focus that anger on the bastards who are responsible.

Also, and I don't think I identified this enough, this leader will not villify a race or religion in this. This will not be a "blame it on the Jews" or "damn Mexicans stole my job" kind of campaign. It will be a "the rich and powerful stole our lives from us" campaign. If anything else, it will unite the races and creeds of America, much like Vietnam helped break down the barriers between the poor blacks and whites who fought that miserable war.

[truedelphi]

24. There is no real power base for the middle incomed any more. In GD I, 24 states

Banned foreclosure.

Here we sit in 2009, knowing that some eight million more homes will be foreclosed, and nothing is being done but piecemeal bits here and there.

Furthermore, the workers' movement of the twenties and thirties meant that when the Sheriff showed up in a big city to evict renters, they might have to dface down a large mob that woul d stand them off.

We don't have that kind of comunnity in the big citites any more. We sink or swim based on our own merits, and if we lose our jobs, in most cases, we float out to the Sea of Ruin all by ourselves, once unemployment and savings is exhausted.

[bvar22]

29. "Globalization" is not a cause of our problems.

Globalization is a thoroughly natural process, and has been occurring since the first caveman walked to the next cave and traded some meat for some spear points.

The REAL problem the result a deliberate plan to remove all trade restrictions from Large Corporations which allowed them to escape all public accountability for Environmental and Humanitarian responsibilities. The plan was well designed and well financed. It was executed during the Clinton Administration, and succeeded beyond the expectations of its designers. Part of the plan was to hype this "new" thing called "Globalization" as the cause to divert attention from the real cause...Greed and Power.

Ross Perot was right.

[Festivito]

32. I think the bubble was created by Republicans.

The Bush admin decides to unfetter banks from minimum holdings in relation to what they lend. Done long enough before election 2004 in order to make the economy look good by elections November 2004, and not reported until October 2008 after all economic hell breaks loose and further we're into elections for November 2008 where Republicans have already given up to Obama anyway. Besides it's too complicated to report anytime, let alone during an election cycle -- so it was ignored.

http://www.nytimes.com/2008/10/03/business/03sec.html

Why did they wait four years to report it?

Ten percent was always the limit. When lending went up to 90+ times the holdings, estimated at some huge trillions of dollars, the government stepped (under Bush of course) and gave the bankers enough of our tax dollars to bring banks back to ten percent.

Coincidence?

Also, if you feel up to it, check out the M3. Why Bush admin dropped reporting it and why did the private website keeping it calculated suddenly quit after reporting that the Fed had accumulated a huge amount of holdings.

Just saying.

[wuvuj]

35. M3

http://www.shadowstats.com/

• Subscription service provides website access to current and archived newsletter content, data on proprietary alternate estimates of the CPI, Unemployment and the GDP, an ongoing estimate of M3 growth -- where the M3 series no longer is reported by the Federal Reserve -- and a financial-weighted index of the U.S. dollar. Also available is an inflation calculator that estimates comparative prices between any two months, 1913 to date, using both the official CPI and the SGS-alternate measure. Postings to the website of all new material are advised directly to subscribers by e-mail.

[HamdenRice]

36. I can think of a dozen reasons why your scenario is unlikely

The first would be that politicians and economists simply didn't know what to do in 1929, and the social science of economics is simply more advanced and the political systems of the world have the techniques and institutions to prevent a Great Depression.

The theories of the greatest progressive economist in history, John Maynard Keynes, had not yet been recognized as fundamentally correct in 1929. It was thought that during a recession/depression, the government should cut spending, raise taxes and balance the budget.

Keynes demonstrated that the size of the economy could elegantly be summarized in the equation,

GDP = C + I + G

and that when a recession occurs, the government needed to borrow and increase spending. That's what most western governments, as well as the successful economies of Asia, have done, and they've avoided recessions turning into depressions. We have 70 years of data confirming Keynes theories and prescriptions. It's also what the Obama administration did with the Stimulus package.

So comparing what happened in 1929 to what's happening today is kind of like comparing two patients who get appendicitis, one before the medical profession figured out how to do an appendectomy, and the other after the medical profession figured out how to do an appendectomy.

[Truth Talks]

37. Nice in Theory...

You raise some good points, points I've considered. Yes, we do know more about economics today, and the First Great Depression inspired a number of laws and government policies designed to guard against similar disasters in the future. BUT...

If we're such economic experts, how did we allow ourselves to get into this mess in the first place? Moreover, corporate interests have been hard at work modifying or undoing laws and policies designed to protect us. (One project I want to work on is to simply list all the good laws that have been modified or repealed at the public's expense.)

Yes, nations around the world probably have economic safeguard that didn't exist half a century ago, but they're also up against new problems that didn't exist then. Thus, these safeguards may be reminiscsent of the French Maginot Line.

[earth mom]

38. Says one of DU's biggest bankster bailout cheerleaders.

"Thank gawd it passed!" was your mantra last fall.

It's clear to everyone around DU except die hard investors like you that the bankster bailout was the biggest ripoff of taxpayers this country has ever seen.

To the tune of trillions of dollars.

But it's all good since you got yours, right? :puke:

[HamdenRice]

44. ROFL! Why do you want Canadian baby seals to be beaten and slaughtered for their fur?

I just love it when the less capable at debate and discussion think they score points by making stuff up about other anonymous internet posters to explain why those other posters take the positions on issues they take.

By your logic, I can be assured that you take the positions you take because you just love it when those baby seals are beaten and their fur is stripped from them while they are still alive.

[AdHocSolver]

40. I wasn't going to reply to this thread until I read your post.

Sigh! Where to begin.

You wrote:

"The first would be that politicians and economists simply didn't know what to do in 1929, and the social science of economics is simply more advanced and the political systems of the world have the techniques and institutions to prevent a Great Depression."

The causes of the depression and the correct actions to take to alleviate it were known. It only needed for the public to elect FDR and enough Democrats to Congress to have some useful solutions implemented.

The depression of the 1930's was caused by the frauds perpetrated by the financial businesses in the 1920's, just as the current depression was caused by the frauds committed by corporations during the last 15 years.

The Democratic solution in the 1930's had two elements. Pass laws to regulate the corporations and the financial industry as a whole, such as the Glass-Steagall Act, to prevent the kinds of frauds that caused the meltdown. The second was to prime the economy by initiating public works spending like WPA.

The current depression occurred because Congress REPEALED the regulatory laws such as Glass-Steagall so that corporations could repeat the scams and frauds without legal consequences. (By the way, Glass-Steagall was repealed under Clinton. Many Democrats helped out with that activity.)

Unfortunately, the current stimulus package won't do as much good as FDR's stimulus package. In the 1930's, when workers got paychecks, they spent the money buying goods made by other Americans. Today, workers getting paid from stimulus money, because practically everything we buy is made in Asia, will just see the stimulus money fly to China.

As to your last paragraph concerning appendectomies, scientists have discovered mummified remains from ancient Egypt and Rome which showed that those people had survived some really advanced surgery including brain surgery. (To have been able to afford such medical care, it was surmised that the remains were those of wealthy Republicans or wealthy government officials.)

[BushSpeak]

39. People didn't own homes in the 20's

So this one should hit harder. People are also more in debt, homes and all which will only add to the misery.

[Art_from_Ark]

46. You mean the house my great-grandfather held title to in Kansas

from 1872 until 1920, when he sold it, wasn't his?

Or the house my grandfather bought in Chicago in 1927 wasn't his?

Wow. Learn something new every day.

[BushSpeak]

42. The "Great Depression I" was triggered by" Margin Loans"

In the mid 20's, Wall Street invented "Margin Loans". This was a great way for the banks to sucker people into the stock market. "You want to make money then all you only have to put up 10% and we'll put up the other 90% and together we'll make a killing".

These "margin loans" artificially made the stock market boom. The only drawback was that they had to be repaid on 24 hours notice. In the early fall of '29, all the big bankers quietly withdrew from the market. Then in late october the bankers demanded immediate repayment (24 hours) and the rest is history. Margin loans accounted for between 10 and 20% of the stock market, but were sufficient to be an effective trigger.

In all 9,000 banks failed during the Great Depression. As the saying goes "In times of crisis, money is never lost. It just changes hands". An so it was with the banks, the bigger ones gobbled up the smaller ones further concentrating the financial power in the hands of the elite.

It seems that this sort of crisis always serves the elite and helps it to concentrate power.

As to whether the present crisis is by fate or design, one event stands out.

In 2003, Elliot Spitzer, then Attorney General of NY began attacking "Predatory loans" for suckering people in to buying houses the could never repay. The answer from the Bush administration was to pull an unknown federal agency out of the the hat - the Office of the Comptroller of the Currency which used a law from the 1863 National Bank Act to preempt all state predatory lending laws and consumer protection laws against national banks, thereby rendering them inoperative.

"The federal government's actions were so egregious and so unprecedented that all 50 state attorneys generals, and all 50 state banking superintendents, actively fought the new rules.

But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation. "

Predatory Lenders' Partner in Crime
How the Bush Administration Stopped the States From Stepping In to Help Consumers By Eliot Spitzer
http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html">DCScripts

Why the need to stop investigations, if the crisis was so "innocent"?

Also look at Phil Gramm and the Commodity Futures Modernization Act of 2000, which effectively put Credit Default Swaps outside of any Federal or institutional control and allowed them to be a trigger for the present crisis.

Greenspan's lowering of the Federal Reserve Rate to between 1 and 2% for three years isn't innocent in this affair either. He also encouraged people to take out adjustable rate mortgages (ARMs).


My dear "Truth Talks", I live in France and have been doing research on what goes on behind the smoke and mirrors for the last five years. With the hard times coming, I believe the people have a right to know the truth about what got them into this mess and who the puppet masters really are. So maybe we'll cross each other again, since we're guided by the same stars.

For more information on financial history, Google the films - "The Money Masters" and "Zeitgeist" The 3rd part is about the financial manipulation at the beginning of the century.

[barb162]

43. You might want to go into the job loss that will increase

here as Asia gets the jobs that were or still are here. That will put this country into a depression alone from which it will not recover unless some sort of protectionism /favoritism is used by teh US government.

[Xenotime]

45. All thanks to the GOP