Asbytec

Great Depression Not Imminent, But Inevitable

Guys, guys, guys! Chris nailed it.

"There is a casino and a factory, only one produces wealth." The other produces a wealth affect...LOL

Someone said earlier, "this will be contained." And implied shortly, I think. Imagine, a simple housing market down turn has brought the world to it's knees. This goes way beyond the sub prime mess, that was simply a catalyst to tumble the financial markets.

It goes to the core of our financial system, so much so folks are screaming, "abolish the Fed!" for crying out loud. It would take pages and pages (already written) to explain to someone who believes "this will be contained" why it is proving extremely difficult to do so.

Great Depression Not Imminent, But Inevitable

Does it seem to you the wealthy have had their noses in the trough and have finally eaten it dry? Then, we tossed in our tax money...

Great Depression Not Imminent, But Inevitable

With write downs and payouts dragging on the banking system, I just don't see any way it can begin functioning normally anytime soon. Banks were not allowed to be in the insurance business for a reason. Want to hedge, go to an insurance company.

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.

Can Central Bankers Prevent a Great Depression?

Anyone seen Adam Smith's invisible hand?

I suspect it's been chopped off at the elbow and held captive in a damp wall street cellar. It's been replaced with a robotic hand that does as it's told.

Some brandy sniffing Harvard types are sitting around their exclusive lounge while immersing their cardigan sweaters with cigar smoke and hitting the "chop the little guy" button.

Oh, what a laugh that's gotta be...

Can Central Bankers Prevent a Great Depression?

Axel, on the money (pun intended.)

Can Central Bankers Prevent a Great Depression?

Well, can they? It depends on the remaining asset Price to Earnings values. If those go, no way to stop a depression. "Abandon all hope, those who enter here."

And the potential is real. A simple housing market downturn has already caused a global recession, and we are just entering the resulting recessionary period. Recessions can lower other asset values. That'll be the key.

I have been calling for a 'new deal' style bail out for some months now. But, of course, what hubris of me to think we'll ever surf the wave instead of watching it pass and crash on the shore.

China has already taken 'new deal' style steps and they are still around 9% growth. And they're a command economy, for crying out loud. What are we? Chopped liver?

Look, we need some fresh infrastructure. Instead we're giving our tax dollars to wall street so they can free up the credit markets...and loan our own tax money back to us! With interest!

Now, if we can employ some folks to build some infrastructure, and let the financials fail, the banks that survive can then compete to hold our money and pay us interest. DUH!

But, I guess we'll be paying migrant workers, not out of work SUV owners who wouldn't be caught dead with a shovel. And, we are fighting hard to get back to business as usual, a credit driven global economy.

So, yes, a depression is very likely. The revival of credit markets can prevent it, and so can main street, if given the chance...with it's own money.