jepittman

What If the Great Depression Analogy Is Wrong?

Your opinion that fed policy is assuming a 'great depression' is in my opinion flawed. That catastrophe was caused by inappropriate policy responses by the Federal Reserve and Congress. They turned a financial panic into a depression lasting years. Today's policy responses are polar opposites. Money supply is exploding, international trade is open, bank deposits are protected, capital is being injected into the banks, the discount window is wide open, credit markets are being backstopped, the fed's balance sheet has expanded enormously, and a massive multi year fiscal stimulus package is only a few weeks away. At some point investors will 'look over the valley' and buy risk assets. It may be slow at first but they always have. There is no Great Depression 2 on the horizon. A stiff recession yes. A multi year depression, no. If you compare the policy responses to the two periods it is a stretch to conclude otherwise.