The Economist has an excellent article on different classifications of recessions and depressions. The conclusion, in short, is that the United States is unlikely to slip into the same kind of depression as the 1930’s because economic policy makers have learned from mistakes of the past (allowing banks to fail and the money supply to quickly shrink).
2 thoughts on “A Recessionary Depression?”
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You/they are most likely correct… it won’t be the same as the 30s. But the current systematic devaluation of the currency, the lack of oversight on banking in general, and the outright greed and corruption on the part of banks will force the government to continue to take a larger and larger role in banking. Paulson’s TARP lie has placed the federal government in partial ownership of almost 100 publicly traded financial entities who mis-managed their responsibilities and fundamentally weakened the US economy and has set the stage for a natinalization of the banking industry and a creation of a new financial order that is more aligned with the Chinese economic model than anything we’ve come to know as free market economics.
IMO… the fiduciaries have way too much influence in government; take the BASEL-II initiative, the fact that most of the leadership roles in the Treasury, FDIC, and SEC are regularly filled by banking-executives in a revolving-door fashion, and the outright deceit that is regularly ignored by regulators as examples of the kind of power they truly wield in our government and you can see that the federal government, in this case, is not operating in the public interest, and is covering for the mistakes both they and the banks have made as well as the real agenda here. The truth about pre-booking revenues from loans to shore-up balance-sheets, the CDO/CDS debacles and $150-Trillion dollar credit derivative market that is maintained by the top-25 banks that most Americans are totally ignorant about, Bernie Madoff (and other Ponzi-like schemes such as the emerging mess with Comex gold bullion contracts that is just beginning to emerge) and other cracks in the system are just coming to light now and the idea that we’re somehow going to move out of the current recession by the end of 2009 becomes laughable. The powers-that-be issued a statement yesterday that the recession is already expected to be deeper and longer than first anticipated… they’re spoon-feeding America the lie a bite at a time to ease us into the idea of direct government management of the banking system and a nationalized economy.
All hail the departing Chairman Bush and all hail the incoming Chairman Obama.
Krycheq, while your views are good-hearted, I think you’re overreacting just a hair. The reason such steps are being taken to “de-value” currency is because deflation in the United States is actually a serious threat. With demand of just about everything decreasing, prices have nowhere to go but down. When people notice this, they will further resist buying in order to see just how low the price goes; thus, prices must be raised to provide market stability and an increase in demand. Since the Federal Reserve can’t do this directly, the only way to do it is to spark some inflation. And while temporary government control of banks may be regrettable, now is hardly the first time this has happened. In fact, in just about every recessionary period in U.S. history, similar actions have been taken. Each time, the government has relinquished control of the banks and corporations which recover in better economic times. Rather than call it a move towards socialism, then, I would call it an unfortunate hiccup in the free-market system. The recent charges of corruption are also regrettable, but even if the government was in complete control of industry, stuff like that is inevitable. We just have to hope the perpetrators are brought to justice. And as for a timetable of moving out of the current recession, many economists agree with you; they see 1st Q 2010 as a more likely starting point for more expansion.