Jason Rines (iThinkBig)

What Does Bernanke Really Know about the Great Depression?

Well put Axelrod. I always enjoy your comments.


On Nov 04 09:29 AM axelrod608 wrote:

> Excelent article and long overdue. The current reigning economic
> theory has more holes than fine swiss cheese, yet the talking heads
> believe it as a matter of faith. A couple observations -
>
> First, on the wage issue income has gotten so skewed to the top 1%
> that much of the nation's income never makes it to the "main street"
> economy. And that economy is what keeps the national economy - the
> one in the streets of America - humming. The wealthy are pouring
> money into "investments"... mostly PAPER not manufacturing. That
> money never makes it to the source of the "trickle-down&...
> that, in theory only, is supposed to flow down to the proles. <br/>
>
> Second, what the infusions of government funds does to a business
> depends largely on sentiment. In good times, that money would be
> quickly reinvested. Currently, where exactly is the money to be reinvested
> ? The opportunities aren't out there and fear is holding back investment.
> One place the new money is going is to buy up other failing businesses
> which ALWAYS ends up swelling the ranks of the unmployed. Every merger
> results in job cuts. See #1 for the result to the "main street" economy.
>
>
> Third, historically rich companies and industries get fat. The salaries
> and wages grow and when hard times arrive, the personnel costs are
> unsustainable. That is precisely the condition of the American auto
> industry. If all salaries and wages were cut by, say, 50%, EVERY
> employee would keep their job and the companies would make money.
> Before pouring a bunch of federal money into an unsustainable sector,
> it would be interesting to see just how profitable the auto industry
> could be at half the personnel cost. Ultimately, it is a choce between
> earning unsustainably high wages or not working. So far, the white
> and blue collar auto workers are choosing "not work".
>
> Finally, for Bernanke to believe in parallels between the 1920's
> and 1930's with today is just plain silly. With a few strokes of
> a computer, today one can "create" a trillion dollars or change interest
> rates to any number one chooses. But unlike former times, individuals,
> companies and governments are drowning in a tsunami of debt. They
> need more credit and debt like a fish needs a bicycle.
>
> All Bernanke and his buddy Paulson are doing is replacing money lost
> by inept, greedy, incompetent corporate gamblers with tax revenues.
> We have an enormous, overgrown, overpaid financial sector. It is
> unsustainable. The efforts to reinflate the credit bubble with yet
> more cheap credit will fail. Or worse, they will succeed and when
> the bubble pops the second time, all will be lost.
>