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Also, government reaction in the Great Depression was very different. Rather than pump liquidity into the economy, they took it out and hiked interest rates as well. In the UK they compounded this error by going back onto the gold standard.
I would not overstate consumer spending. It is only really after WW2 that most people began to have disposable income.
While government have a lot of blame for allowing the credit bubble to get completely out of hand, their reaction to the near-failure of the banking system was probably right. There will, of course, be more bank failures, but the system is not going to fail.
That is where Bernake disagreed with Hoover. And in saving the banks I think Bernake was right.
Another bit I read about consumer spending is that during WWII many jobs were created but there was severe rationing so many people saved their money as the rationing pretty much curtailed spending. It does have some merit though as after WWII people had money.
I've been looking back farther then the 70's recessions. I took a look at 1929-1932 and we seem to be floating along that trend. 1929 was "a" crash but it took a few years of dragging and bouncing, up to 1934 before the depression was fully realized.
What data is "floating along that trend"? Also, GDP bottomed mid 1932 during the depression, by 1934 there was a strong recovery in place.
So, if you are going to use the same time line then GDP should bottom by the end of the year.
I don't really understand by people are so obsessed with Great Depression comparisons. Not only are the nature's of today's recession and Great Depression different, but the underlying economics and dramatically different. All of the stabilizers we have today (FDIC, unemployment, social security, etc etc) did not exist during the depression. A bunch better comparison is Japan's lost decade. But since most adults have heard about the depression from relatives, everyone talks about it despite the comparison being rather bad.
I know a lot of successful people and none are negative and lack hope. Ever. They know things are never perfect for one and that within each problem lies an opportunity. It's sort of game to out create the problems life throws at you. And, of course, if you're winning the game what's there to make you feel negative?
Just that info alone should make it easy to figure out who the winner's in life are whether out in the real world or on the internet.
That's why I preach to my kids to avoid negative people like the plague. Any idiot can see the reason why something can't work, but success is reserved for those to focused on achieving to notice all those reasons why they should fail.
As you follow the news, you may have a sense of optimism, or perhaps a sense of doom and gloom, or even a bit of both, or maybe you don't even follow the news, but I think we all agree that we live in very interesting times.
An ancient Chinese curse proclaims: May you live in interesting times.
Spend less time focusing on the bad and more time on what you can do to improve your own situation. To me it seems like the only way to live. I personally know many people who are constantly negative and it seems things just don't seem to improve in there life.
Also, government reaction in the Great Depression was very different. Rather than pump liquidity into the economy, they took it out and hiked interest rates as well. In the UK they compounded this error by going back onto the gold standard.
I would not overstate consumer spending. It is only really after WW2 that most people began to have disposable income.
While government have a lot of blame for allowing the credit bubble to get completely out of hand, their reaction to the near-failure of the banking system was probably right. There will, of course, be more bank failures, but the system is not going to fail.
Don't expect anyone to admit it, but the Great Depression is the model they were looking at when they set those policies. I think the fed will keep banks who fail from taking out peoples money, but what is this about resisting and audit? Can the fed run out? Can we just keep printing money forever and have it worth anything?
I don't think consumers are going to be willing to spend again for quite a while. Rebates and stimulus are one thing but it won't fix anything until spending happens without artifical means, and hopefully spending of something other than more debt bubbles.
The big picture is if we are on the right course or not. The comparisons of this recession to the great depression have nothing to do with the government response and everything to do with how we got here. Depressions happen when the fundamentals of the economy are bad. Governments and people cannot spend more than they earn, and it is necessary to save and invest in the future in order to prosper. The second factor is the distribution of wealth. When the distribution of wealth is as one sided as it is now and as it was during the great depression, it strangles the economy. We have not and are not doing the things necessary to build a strong economy, and all the smoke and mirrors will not change that in the long run. Optimism is a good thing, so long as it is backed up by positive actions, but without those actions it is fantasy. The people who are portrayed as doomers in this post are not necessarily pessimists by nature; they just see a broken system and the need to change it. The more deficit spending we indulge in, the deeper we dig ourselves into the hole we are in. There will always be those who benefit from the status quo who will tell you different, but only fools believe you can borrow your way to prosperity.
I don't really understand by people are so obsessed with Great Depression comparisons. Not only are the nature's of today's recession and Great Depression different, but the underlying economics and dramatically different. All of the stabilizers we have today (FDIC, unemployment, social security, etc etc) did not exist during the depression.
While we may have airbags and seatbelts, the crash has happened and the car is wrecked. Now comes walking and rebuilding. The silliest part is all the folks (still) trying to make-believe it is not happening -- like Happy Talk would keep the Titanic afloat.
Here is the real deal and why Happy Talk does not work in the end -- Hot Air only keeps balloons afloat, and only then if the balloon is not leaking. Ours is very leaky. And BS is only good as fertilizer for growing food and flowers. But we have turned our food production over to Corporations who use Chemical Fertilizers.
At this point over 10% of the US is on Food Stamps and the numbers are climbing. All sign posts ahead are pointing down. If you have seen or been through a Hurricane you know when it is coming and the full meaning. If that's a problem, it is best to be concerned. If not, just keep dancing and singing -- sort of the Cajun way.
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A bunch better comparison is Japan's lost decade. But since most adults have heard about the depression from relatives, everyone talks about it despite the comparison being rather bad.
We are not so lucky as Japan's model, because they had Savings and an Work Ethic. Instead we have Debt and Foolish Leaders who have been promoting Wealth Without Work for the Last 30 years.
This is not going to be over until our top end gets off it Lard Ass Fantasy of Wealth without Work via FIRE (Finance, Insurance and Real Estate) and we clean up the tremendous pile of Debt we have gathered since Reagan onward.
We have not and are not doing the things necessary to build a strong economy, and all the smoke and mirrors will not change that in the long run.
All the things that need to occur to create a more stable economy are occurring. The trade deficit is declining, the national savings rate is increasing, etc.
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