That is only because in your view, any Govt action is "worse". I view the collapse of the banking system, auto manufacturing and other segments of the economy dragging us into a depression as "worse".
The Great Depression - why did it end?
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That is only because in your view, any Govt action is "worse". I view the collapse of the banking system, auto manufacturing and other segments of the economy dragging us into a depression as "worse".
Of course it would have been worse.
But Kevin doesn't believe that that's what would have happened.
He believes that we'd have had some hard times, then the market would have slowly evolved without intervention by the government.
I think he's wrong.
I think has they done nothing, then tens-of-thousands of banks, probably the entire banking system would have collapsed, and the government would have been on the hooks for lord only know how much money thanks to FDIC.
I wish somebody who actually understood economic better than any of us would give us the step by step scenario of how that collapse might have happened.
That might do much to help us determine if the course of action taken by Bush II and Obama was overreacting or not.
Because we have two choices in this matter:
1. We can believe that this is a gigantic conspiracy involving economists and pols from both side of the aisle who are lying to us, or
2. We can believe that they are telling us the truth and had the government done nothing our economic banking system would have melted down and every bank in American would have gone insolvent.
Those are really the only choices we have about what happened, as far as I understand this event.
Kevin_Kennedy
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Those segments are dragging us into a depression regardless, the only difference is we're now trying to prop up these zombie-businesses and its causing our downturn to last longer and effect more people than it needs to.
I draw a distinction between a business that fails because it is in a noncompetitive business versus one that is failing because of a correctable error, or because of unusual market conditions.
If an otherwise sound, profitable company that relies on working capital loans is failing only because its access to capital was cut off because of the financial crises, I personally do not see the benefit of letting companies like that fail simply because of unforseeable conditions associate with the credit seizure.
In that situation, letting these companies go out of business does nothing more that destroy wealth and economic capacity. It create more unemployment, decreases demand, and continues the spiral of creating even more "zombie" businesses simply because of the negative cycle. IMO that is not good for the country, and letting such companies die unnaturally prolongs the recession or creates a depression.
You can argue that some companies were not sustainable anyway. But the undisputable fact is that many companies, including the automakers, and in bad trouble now solely because of the severe recession we are facing. But for this recession no one would be talking about GM and Chysler going bankrupt, not to mention all the other businesses.
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Kevin_Kennedy
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The unusual market conditions you speak of, or should be speaking of rather, is the boom period. That's when all these companies seem to be sustainable and they expand and hire and everything appears to be great. However, once the bust period, which is where we're at now, it becomes apparent very quickly that what they're doing is not sustainable and they have to go out of business. Yes, they're going out of business because of the recession, but that's exactly what the recession is. It's the period where the market attempts to reallocate resources from insolvent businesses to more viable ones. The recession is painful, but it serves as a cleansing process to weed out wealth destroyers. By propping up these black-hole businesses you're simply allowing more resources and wealth to be destroyed. If the market is attempting to liquidate a business then it wasn't sustainable, period.
The auto-companies were having problems long before this crisis hit. I worked at a Chevrolet dealership a few years ago that went out of business, and I can assure you that their problems were not just these past few months in the making.
Bfgrn
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The recession is painful, but it serves as a cleansing process...
So did Hitler's eugenics programs...
The problem Kevin is the economy was NOT sound for most American citizens. The middle class has been sinking for many years...that why the average credit card debt is $8,000 per household...
The government intervention over the last decade has been to rig the market FOR corporations and against the individual citizens...we ARE a corporatocracy...
Obama has the right approach...
"Harry Truman once said, 'There are 14 or 15 million Americans who have the resources to have representatives in Washington to protect their interests, and that the interests of the great mass of the other people - the 150 or 160 million - is the responsibility of the president of the United States, and I propose to fulfill it.'"
President John F. Kennedy
So did Hitler's eugenics programs...
The problem Kevin is the economy was NOT sound for most American citizens. The middle class has been sinking for many years...that why the average credit card debt is $8,000 per household...
The government intervention over the last decade has been to rig the market FOR corporations and against the individual citizens...we ARE a corporatocracy...
Obama has the right approach...
"Harry Truman once said, 'There are 14 or 15 million Americans who have the resources to have representatives in Washington to protect their interests, and that the interests of the great mass of the other people - the 150 or 160 million - is the responsibility of the president of the United States, and I propose to fulfill it.'"
President John F. Kennedy
Kevin_Kennedy
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The difference between Hitler and I is that I'm not advocating for genocide, I'm advocating that the government not waste our money on trying to keep failed businesses viable because it makes the problem worse.
I never said the economy was sound.
Obama does not have the right approach. He's rigging the market for the corporations by taking from the citizens to keep them in business when they failed.
Old Rocks
Diamond Member
I see. Then all the companies that we have seen going down the tube are just an illusion? I work in the steel industry, and the line for steel production for the fourth quarter of 2008 looks like a cliff.
No, we have a very analogous situation to the First Great Republican Depression. Even down to it's causes.
Old Rocks
Diamond Member
I really hate to see us spending money to bail out the people that got us into this situation. But even more, I hate to think of what it would be like were we not making a concerted effort to prevent the Second Great Republican Depression.
As for your ideologically based economic theory goes, we did little in the First Great Republican Depression, and we suffered for it. Better proactive.
Kevin_Kennedy
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Incorrect.
We were inactive during the first depression of the 20th century in 1921, and it lasted two years.
We were extremely proactive during the second depression, and it lasted 15. Hoover enacted wage and price controls, causing skyrocketing unemployment. I posted this quote elsewhere, but Hoover even said, "we might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action. . . . No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times. . . . For the first time in the history of depression, dividends, profits, and the cost of living, have been reduced before wages have suffered. . . . They were maintained until the cost of living had decreased and the profits had practically vanished. They are now the highest real wages in the world." Hoover was as interventionist as FDR. End of story. Revisionist history can't change that.
Are you telling me you'd rather have people suffer for 15 years rather than 2?
It keeps them ALIVE, Kevin.
That's the propaganda that the elite want you to believe, editec. But in reality, It keeps them poor and dependent. Welfare is cruel beyond words.
And that's propaganda the likes of Rush Limbaugh and Anne Coulter want you to believe. People starving and living on the streets is cruel beyond words.
The economic reality is most definitely not that government interventions prolongs economic downturns. The only thing that has been keeping this economy afloat is the government. Otherwise, the collapse would have been far more severe.
Old Rocks
Diamond Member
But the wingnuts are still in an alternative reality. They continue to deny that this crisis is affecting even those that did everything right. In fact, some of those are worse affected. A man I work with, a legal immigrant, from the time he entered this country, worked hard, saved, put the maximum in his 401-K, and owned only the home he could afford, took few vacations, generally did all that the economic gurus claim is correct. His total loss to this point is over 70%. He is now working 32 hrs a week, and will probably be laid off for two months after June.
Had he spent, cash, some of that money on luxeries that he saved, at least he would have had the enjoyment of those things, rather than giving his money to the people that effectively stole it from him for their luxeries.
It is not lazy people, people that overbought, or foolish people that are suffering now. Right across the board, it is small business owners, blue collar middle class, working poor, and people that work on commission. Businesses, big and small are crumbling, the only source of capital, right now, is the government. Without the programs that Obama, and, yes, Bush, put into effect to keep the economy afloat, we would now be in a full fledged Depression. A world wide Depression.
Kevin_Kennedy
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It prolongs the agony, which means the people have to suffer longer.
And to Old Rocks, none of us said it was these peoples fault or that they did something wrong. It's the Federal Reserves fault with their easy money policies, these people are just victims. But the fact is that prolonging the agony doesn't help these people whatsoever.
When it is because of government they are starving and living on the streets, then I agree that is cruel. You claim to be an empiricist, and yet you don't look at the situation North Korea and Cuba are in and compare that with States that have less welfare, and draw the obvious conclusion. I don't care what Rush or Ann say, because they too were waving the Statist flag when Bush was in power. However, empiricism proves welfare impoverishes a certain group of people, while feeding another group of people.
For your dose of economic reality, let's again turn to empiricism. You would think after open market operations started in 1922 by the Federal Reserve that our recessions after interventions would be starkly less severe than those suffered prior to 1922. The worst recession prior to 1922 was encountered just two years before, with a deflationary spiral and all was resolved within a year or so, without government "intervention". However, the many recessions faced since have been drastically longer in duration and more severe in reduction of economic activity, not to mention occurring with increased frequency. Empiricism, once again, sides against intervention.
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Comparing Cuba and Korea with America is like comparing Haiti with Sweden and concluding that capitalism doesn't work and social democracy does.
This is incorrect. The economy was in recession for 363 months from December 1854 through July 1921. That means the economy was in recession 44% of the time. The average recession lasted 21 months. There were 17 recessions during that time, or one every 4 years. Up until 2002, the economy had been in recession 202 months since 1922, or 21% of the time. The average recession lasted 13 months. Since WWII, the average duration has been 10.4 months. Recessions were also deeper before 1945, at least up until this one. There were 15 recessions between 1922 and 2002, or one every 5.4 years.
Business Cycle Expansions and Contractions
Generally, crises are more frequent without central banks.
http://www.usmessageboard.com/economy/68521-why-we-have-the-fed-and-other-central-banks.html
The worst depression before the Great Depression was the depression that began in 1873. Up until the 1930s, the term "Great Depression" was used for the depression that began in 1873.
Long Depression - Wikipedia, the free encyclopedia
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As was discussed earlierin the thread, 1920 wasn't a depression, but a mild post war retooling recession. Altogether difference than 1929; or 2008.
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