http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x2753737This is a long read, but it's well-written, and while there are some things with which one might disagree, there are other things with which one might agree. I am truly surprised the lynx primitive hasn't been mausoleumed yet.
Zynx (1000+ posts) Wed Jan-23-08 09:22 PM
Original message
Why do so many here believe that the next Great Depression is always around the corner?
Even by the standards of the pre-New Deal economy, the Great Depression is a bit of an anomaly. Things like a more vibrant central bank, deposit insurance, and a whole bevy of financial regulations make another Great Depression quite unlikely. Economics, my field of study, is hardly a perfected field, but huge strides have been made. There are certain things we know now that we never used to.
For example, we used to think that above all else the government needed to run a budget surplus and the central bank had to keep money tight in a downturn to preserve the integrity of the dollar. We now know that is folly.
The Federal Reserve used to think that when interest rates went up due to inflation, it was wise to increase the money supply to reduce interest rates. Well, that was a horrid idea as it led to incidents like the 1970s inflationary outbreaks. We will never make that mistake again, at least intentionally.
Also, contrary to popular belief, stock market crashes do not cause recessions or Depressions. The stock market crash of 1929 did not cause the Great Depression. Anyone who has studied the Depression knows that the economy was already clearly deteriorating and that the stock market's October crash was merely an indication, not a cause, of the economy's malaise. Now it is true that unregulated banks did own stocks in their asset portfolios. We don't allow that anymore. However, it is important to point out that by April of 1930, the Dow Jones Industrial Average had nearly wiped out its losses from October. This did not either cause an economic recovery, nor did it indicate one. The stock market can move entirely on its own.
I honestly think people here have apocalyptic views of the American economy as if it is somehow pre-ordained that the whole economy will contract to 0 at some point. The truth is that this economy is very resilient. Even in severe recessionary years since WWII, the GDP has almost never contracted more than 2%, if it ever has. Will these be difficult times? Oh yes. Is this probably going to be worse than 2001? Maybe. Will the stock market decline more than 2000-2002? Most likely not. Will your bank go under? 99.95% likelihood that it won't and even if it does it will simply be bought up by another bank and your deposits will be safe.
The primitives won't have any of it; they want so badly for a depression to occur that it's a raging conflagration, this particular campfire.
Atman (1000+ posts) Wed Jan-23-08 09:50 PM
Response to Reply #7
32. I have absolutely NO faith that the government will be truthful about this
In fact, they've been lying for years re: unemployment, by using a different set of numbers than have been traditionally used. We're actually closer to a 9% unemployment rate, for starters. Robert Reich stated today that a drop in housing values of 20-50% is a very real possibility.
I firmly believe that Bush and the GOP leadership would poke their own eyes out with flaming sticks before they'd allow anyone to be able to say that the situation is worse than under Carter. With Bush, it's all about keeping up appearances and creating legacies. He/they would lie about anything, and I don't think we'll know the true story about how bad this economy is until it is much too late.
Hey, what do you have against beagles, anyway?
Atman (1000+ posts) Thu Jan-24-08 09:27 AM
Response to Reply #96
100. I'm not refuting that the correction wouldn't be "normal"...
...but that's not going to mean squat to the people that financed their lives on the equity in their homes, or bought at the peak. They were dumbasses, and should have/could have seen this coming like we brilliant DUers did (LOL!), but that doesn't mean it won't hurt and it doesn't mean it won't have an impact on the economy. When a house loses 50% of it's value, you're not making that back up again any time soon. Kiss it off. It's gone.
You're right...it'd suck to be one of them. I'm not, fortunately! My wife and I consciously and deliberately stayed out of this market because I kept saying "This is stupid...I'm not paying half a million dollars for a three bedroom ranch. That's not sustainable!" I've made plenty of stupid decisions in life, thankfully this wasn't one of them.
In this Bush economy, the worst economy since Stanley met Livingston, Pedro Picasso and his wife, one and a half incomes (one hers, half his) could even
consider a $500,000 house?
What's up with that?
Tyler Durden (1000+ posts) Thu Jan-24-08 10:11 PM
Response to Reply #56
161. Wait.
It'll happen.
Possibility (Strong this time) + Enough Time = CERTAINTY
And I lived through the big, bad 1978-1979 hit. And there WERE programs to keep you eating and housed if you ran out of cash or unemployment that are not here now.
If another 1978 happens, I'm headed for the HILLS.
The lynx primitive keeps begging to be mausoleumed:
Zynx (1000+ posts) Wed Jan-23-08 09:37 PM
Response to Reply #12
14. If you knew a damn thing about the Depression you would know it was accompanied by deflation, not inflation.
Second, inflation is not as bad as it was in the 1970s and none of those recessions compare to the Depression.
Third, I have seen the stock market MUCH more volatile than this. Remember 2002?
Fourth, the stock market does not cause economic downturns. Did you read my post?
Fifth, jobs are closer to an all time high than an all time low. Unemployment is one fifth the rate it was during the Depression.
Sixth, the dollar being devalued has virtually nothing to do with the business cycle.
One hopes Pedro Picasso, not only the media analyst on Skins's island, but also the economics analyst there, takes note of the final sentence, above.
It starts getting nasty about midway through:
onenote (1000+ posts) Wed Jan-23-08 11:44 PM
Response to Original message
59. because despite self congratulatory posts about how much smarter DUers are than everyone else there are people who post here who don't know history or economics.
Zynx (1000+ posts) Thu Jan-24-08 07:30 PM
Response to Reply #59
120. They don't even know the basic statistics or information at all.
I am simply astonished.
Name removed (0 posts) Wed Jan-23-08 11:45 PM
Response to Original message
61. Deleted message
Message removed by moderator. Click here to review the message board rules.
Name removed (0 posts) Wed Jan-23-08 11:47 PM
Response to Reply #61
62. Deleted message
Message removed by moderator. Click here to review the message board rules.
The sad news, the really sad news, is that the primitives who make sense are not prominent primitives, while the primitives who don't make sense are prominent and popular primitives.