Asbytec

Can Central Bankers Prevent a Great Depression?

As for the Chinese stimulus, we should be doing the same thing. We could use some bridge repair and jobs.

As for falling home prices, I guess the solution to that is full employment and flowing credit markets. But, we wont see flowing credit markets until home prices settle. I don't see an end to this catch 22 anytime soon.

It's semantics, but the financial system, in my view, is not so much broken as it is abused. When times were good and American were feeling richer through rising home values, well, regulators just turned the other cheek. But, who can blame them, really. We can wish they had tempered the bubble, in retrospect.

And, as the author stated, it should be not only telling, but a warning, when a simple US housing market down turn brings the global economy to it's knees. It really is almost criminal.

China has been hit by a couple of whammies. First, as noted, reduced trade resulting from the crisis. But, also, from lost confidence in it's exports, tainted milk being only the most recent. Furthermore, despite the decoupling arguments, China does not have sufficient domestic demand to ride out a global recession. I believe they will falter along with the rest of us. They have just ended a period of tightening and, as mentioned in the article, appear to be poised to ease as needed. That's interesting.

While we're on the subject, apparently Obama is next in line to persuade China to let it's currency float. I hope he's successful, but am pessimistic. China is a command economy with a free trade interface. I do not believe they will play by free market rules, regardless. They accumulated around $2trn, I believe is the latest figure, in reserves and have become a major player in the lending game. I am sure that suites them just fine.

The US consumer is certainly in trouble, but some deleveraging is a good thing for us...in the end, anyway. If the big 3 go belly up, well, does anyone see a recovery by June? I suspect unemployment will increase through most of 2009.

As for Greenspan, right on. He knew this crisis was approaching, too. He bailed (pun intended) at the peak of his popularity. I hear a lot of folks blaming the Fed and, by extension, Ben and crew. Well, forgive Ben while he opened his proverbial bag of .... left to him. He's been very aggressive and creative since. He's had to be, until recently he's been the lone dog in this fight.

Anyway, it's a very informative article, thank you. I find I'm simply repeating myself and the author without adding much. So time to call it a night and check the dollar index.