Is This A Second Great Depression – Or Could It Become Something Worse?

By Simon Johnson

With the US and European economies having slowed markedly according to the latest data, and with global growth continuing to disappoint, a reasonable question increasingly arises: Are we in another Great Depression?

The easy answer is “no” – the main features of the Great Depression have not yet manifest themselves and still seem unlikely.  But it is increasingly likely that we will find ourselves in the midst of something nearly as traumatic, a long slump of the kind seen with some regularity in the nineteenth century, particularly if presidential election-year politics continue to head in dangerous direction.

The Great Depression had three main characteristics, seen in the United States and most other countries that were severely affected.  None of these have been part of our collective experience since 2007.

First, output dropped sharply after 1929, by over 25 percent in real terms in the US (using the Bureau of Economic Analysis data, from its website, for real GDP, using chained 1937 dollars).  In contrast, in the U.S. we had a relatively small decline in GDP after the boom peaked.  According to the BEA’s latest online data, GDP peaked in the 2nd quarter of 2008 at 14.4155 trillion and bottomed out in the 2nd quarter of 2009 at 13.8541 trillion; a decline of about 4 percent.

Second, unemployment rose above 20 percent in the US during the 1930s and stayed there.  We experienced record job losses for the post-war US, with around 8 million jobs lost.  But unemployment only briefly touched 10 percent (in the 4th quarter of 2009; see the Bureau of Labor Statistics website).  Even if we include the highest estimates – which include people discouraged from looking for a job, thus not registered as unemployed – the jobless rate reached around 16-17 percent.  It’s a jobs disaster, to be sure, but not the same scale as the Great Depression.

Third, in the 1930s the credit system shrank dramatically.  In large part this is because banks failed in an uncontrolled manner – largely as a part of panics that led to retail depositors running to take out their funds.  The creation of the Federal Deposit Insurance Corporation (FDIC) put an end to that kind of run and, despite everything, the FDIC has continues to play a calming role.  (Disclosure: I’m on the FDIC’s newly created systemic resolution advisory committee, but I don’t have anything to do with how they handle small and medium-sized banks.)

But experience at the end of the 19th century was also quite different from the 1930s – not as dramatic, yet very traumatic for many Americans.  The heavily leveraged sector more than 100 years ago was not housing but rather agriculture – a different play on real estate. 

There were booming new technologies in that day, including the stories we know well around the rapid development of transportation, telephones, electricity, and steel.  But falling agricultural prices kept getting in the way for many Americans.  With large debt burdens, farmers were vulnerable to deflation (a lower price level in general or just for their products).  And prior to the big migration into cities, farmers were a mainstay of consumption.

According to the NBER, falling from peak to trough in each cycle took 11 months in 1945-2009 but twice that amount of time during 1854-1919.  The longest decline on record, according to this methodology, was not during the 1930s but rather during October 1873 to March 1879 – more than 4 years of economic decline. 

In this context, it is quite striking – and deeply alarming – to hear a prominent Republican presidential candidate attack Ben Bernanke for his efforts to prevent deflation.  Specifically, Texas Governor Rick Perry said earlier this week, referring to Mr. Bernanke,

“If this guy prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous in my opinion.”

In the nineteenth century the agricultural sector, particularly in the west of the country, favored higher prices and effectively looser monetary policy.  This was the background for William Jennings Bryan’s famous “cross of gold” speech in 1896; the “gold” to which he referred was the gold standard, the bastion of hard money – and tendency towards deflation – favored by the east coast financial establishment.

Populism in the nineteenth century was, broadly speaking, from the left.  But now the rising populists are from the right of the political spectrum and they seem intent on intimidating monetary policy makers into inaction.  We see this push both on the campaign trail and on Capitol Hill – for example in interactions between the House Financial Services Committee, where Ron Paul chairs the monetary policy subcommittee, and the Federal Reserve.

The relative decline of agriculture and the rise of industry and services over a century ago was long believed to make the economy more stable – as we moved away from cycles based on the weather and global swings in supply and demand for commodities.  But financial development creates its own vulnerability as more people have access to credit for their personal and business decisions.  Add to that the rise of a financial sector that has proved brilliant at extracting subsidies that protect against downside risk – and hence encourage excessive risk-taking.  The result is an economy that is at least as prone to big boom-bust cycles as what existed at the end of the nineteenth century.

The rise of the tea party has taken fiscal policy off the table as a potential counter-cyclical instrument; the next fiscal moves will be contractionary (probably more spending cuts), irrespective of whether jobs start to come back or not.  In this situation, monetary policy matters a great deal – and Mr. Bernanke’s focus on avoiding deflation and hence limiting the problems for debtors does not seem inappropriate (for more on Mr. Bernanke, his motivations and actions, see David Wessel’s book, In Fed We Trust).

Mr. Bernanke has his flaws, to be sure.  Under his leadership, the Fed has been reluctant to take on regulatory issues – continuing to see the incentive distortions of “too big to fail” banks as somehow separate from monetary policy, its primary concern.  And his team has consistently pushed for capital requirements that are too low relative to the shocks we now face.

And the Federal Reserve itself is to blame for some of the damage to its reputation – although it did get a major assist from Treasury in 2008-09.  There were too many bailouts rushed over weekends, with terms that were too generous to incumbent management and not sufficiently advantageous to the public purse.

But to accuse Mr. Bernanke of treason for worrying about deflation is worse than dangerous politics.  It risks returning us to the long slump of the late 1870s.

An edited version of this post appeared this morning on the NYT.com’s Economix blog; it is used here with permission.  If you would like to reproduce the entire post, please contact the New York Times.

97 responses to “Is This A Second Great Depression – Or Could It Become Something Worse?

  1. “October 1873 to March 1879 – more than 4 years of economic decline.”

    A lot more than 4 years, by my calculation – more like 5 and a half.

  2. As far as I am concerned, Bernanke, Geithner, Summers, Obama, et al. have all engaged in treason, supporting the pillaging of “the small people” for the banksters, uber-rich, and their accomplices.

    From supporting bigCorpa to the TBTFs, the political leadership has turned its backs on “we, the people.”

    We must end the debt-as-money paradigm, and The Fed with it.

    We must dismantle the influence of wealth in politic and governmental decisions.

    We must restore a fundamental and critical aspect of Capitalism if we are to have a healthy and thriving economy: COMPETITION (monopolies and monopolistic markets must be restrained).

    We should get rid of the notion of “outside ownership” and rid ourselves of Las Vegas East (aka Wall St.)

    We must reinstall sound accounting practices.

    We must prosecute the deceivers and the corrupt.

    We must reward ethical transparent behaviors.

    We must stop engaging in moral hazards.

    We must embrace the idea that nobody asked to be born, and everyone deserves to have their basic needs met, along with opportunities to be educated and productive.

  3. Maybe Perry should have used the word “horrendous” or maybe “criminal” to describe what The Bernank, et al, has done the the US dollar. Either way it is bad and has not helped the economy.

    Everything is going so well, Let’s go a on bus ride, take vacation at Martha’s Vineyard and worry about our Economic plan next month…….

  4. The amusing thing is that most of these opportunistic populists from the right are prostitutes for the big money vested interests that brought on the financial crisis, and for the healthcare/insurance industry that is making American medical care increasingly expensive and less effective than that found in other wealthy nations.

    “Nobody ever lost money betting on the stupidity of the American people”.
    The truth of that adage has been amplified by Obama, and the Democrats in general, by not making an issue of how the largely Republican sponsored deregulation over recent decades set the US up for its current problems.

    Since there was substantial Democratic assistance (Rubens, Summers, Barney Franks, etc.) allowing the financial abuses to take place, they apparently felt they better not make an issue of the whole thing.

    Our politics are seeking their lowest level defined by a large swamp of stupidity in the form of American Protestant fundamentalist church “culture”. I guess, medium and longer-term, T. bonds and merging market stocks? ;-)

  5. It should surprise nobody that pushing the level of government spending and debt to a point where a consensus in favor of either can no longer be cobbled together makes financial management more difficult. Allowing this to happen has been a failure of our entire political class, and the populist response, which is in this sense entirely appropriate and consistent with our democratic system, inevitably reflects that.

    It’s OK to warn about the dangers, but less acceptable to look down with scorn on the many people without for example multiple degrees in economics or professorships who in the end will have to work hard to pay for sorting out this mess, simply because there are so many of them. In this country the ‘peasants’ are allowed to revolt and even, when necessary, to be revolting.

  6. Sorry, it is just right that someone shows Bernanke that he is not above the law and control!
    Bernanke is clearly on the wrong path with regards to monetary policy … nothing to show for so far.
    Raising rates to 1% would probably do more for confidence and stability in the financil system (UST, USD, CHF, JPY, Gold, Oil) than any of his constant market manipulations … they are highly disruptive and market participants know that they are temporary, thus ineffective.

  7. The US Main Street Depression continues its onslaught — more at:

    http://wjmc.blogspot.com/2010/07/main-street-depression-has-descended.html

    Our nation’s economy is collapsing right before our eyes…

  8. @ Neville – “….It’s OK to warn about the dangers, but less acceptable to look down with scorn on the many people without for example multiple degrees in economics or professorships who in the end will have to work hard to pay for sorting out this mess, simply because there are so many of them….”

    I’m sorry, but the *peasants* are not that stupid or without multiple degrees – the grifters, er, *economists*, are being SCORNED by *peasants* from the fields of engineering, physics, medical, etc. – you know, all those *peasants* that did not fail P-chem in college…

    What the field of *economics* needs is its own PROOF of self-managing expectations by having a group dedicated to retracting all theoretical accounting that has FAILED.

    Here’s the peasant site interested in stuff like bees dying and cancer thriving:

    http://retractionwatch.wordpress.com/

    so it’s all about *start ups*, right? can’t reference a paper that needs retraction because your building on something that is not REAL…

    how about “inwesting” in an exploding toothpaste that also kills head and neck cancer…? 2 mega-industries rolled into one product that is useful for both…?

    no lack of *ideas*, is there, when competition is released….?

  9. “…unemployment rose above 20 percent in the US during the 1930s and stayed there…Even if we include the highest estimates…the jobless rate reached around 16-17 percent…not the same scale as the Great Depression.”
    In the 1930s the U.S. population was 122,775,046 (http://en.wikipedia.org/wiki/1930_United_States_Census) while the 2010 census numbers put the U.S. population at 308,745,538.
    Of course total population does not equate to total work force numbers, but even still 20% of the 1930s work force population vs. (only) 10% of the 2010 work force population is an unemployment situation on a GREATER scale than the Great Depression. Do correct me if I’m wrong.
    Thanks

  10. Worse. Global economic collapse. Beware the stealth bank runs. Again, beware the stealth bank runs.

    http://sayanythingblog.com/entry/is-there-a-stealth-run-on-european-banks-going-on/

  11. @Simon:

    We may not be in another Great depression, which is an oxymoron; but we are living in times where:

    1. Economies that are globalized are not healthy.
    2. Most major governments are too grossly incompetent, too corrupt or too delusional to do the right things.
    3. Populations are willing to tolerate (or even support) extremists politicians.
    4. Populations are willing to tolerate (or even support), blatantly, being screwed out of their constitutional rights and wealth.

    Last time this happened a lot of countries partied with another Great war — that became something even worse.

  12. “The game is over. The global ponzi scheme ran its course. Papering over conditions only works so long before hitting a wall. Tunnel vision assures trouble. Wrecking economies to save banks is lunacy, and forced austerity when stimulus is needed guarantees disaster. It’s not a matter of if, just when, how deep and protracted.”

    “Despite a deepening global depression, establishment economists are in denial.”

    “In fact, a deepening global Depression just began. It’ll last years before ending, and cause grave harm to billions worldwide, not responsible for their leaders’ malfeasance, especially those domiciled on Wall Street, complicit with political puppets in Washington they own.”

    http://www.thepeoplesvoice.org/TPV3/Voices.php/2011/08/17/economic-end-times#more18542

  13. I think a traditional Keynesian stimulus would work, but the deficit spending to stay at par has removed the stimulative impact. Mr. Keynes assumed that states were balanced on average and spent on deficits in emergencies. For example, “saving” jobs has no stimulative impact as does not increase demand. Deficit spending on anything that would have been spent in the normal course of operation does not increase demand. That is why the 2009 stimulus had so little impact. That is the primary flaw of everyone’s thinking today.

    Add to that, once a sovereign debt gets large enough it becomes a drag on the economy. That also cancels out deficit spending as stimulus. By running permanent, huge deficits, the western welfare states have canceled out their ability to inject demand into an economy.

    The current trend to allow inflation to wear down the debt will be even worse. Inflation without commensurate gains in income will reduce demand by raising costs while wages fixed or are falling. Or wages will also inflate, but lead to fewer wage earners. (Cutting half a workforce is the same as keeping everyone and cutting wages in half).

  14. For nearly two-years Obama sat idly by, while Wall street and the Multi`National’s were bailed out, giving the Bush #43 Cronies – indeed these parasitic leftovers,… the complete continuum run of our broken piggy-bank called a Federal Reserve (the greatest schizophrenia abomination in usurious history) while continuing the war in Iraq, Afghanistan, and now Libya (and soon to be Syria – place your bets) while passing “Obama Care” (his pathetic unconstitutional legacy of a changling hubris) while the citizenry waited for “Shovel Ready Job’s”! Not one job was created (all except the guy that keeps his personal basketball inflated), nor were any homeowner’s helped with the blatant malfeasance created by the “Big Six”!
    What did he expect the republican far-right to do? I mean c’mon,… the guy pushed em in a corner and look what we got – a bunch of “Nut-Jobs” dictating to the majority their ransom? But wait,… we now have to hold our collective breath for “Helicopter Ben” to make his “Drugged-Drop”! Bernanke is a buffoon, as is Geithner, Summers, and the Fed’, Board of Governor’s!
    If we were to count the welfare families, the extended families, the title #8′s, food stamp recipients, our vet’s living under bridges ( that are offered schizophrenic drugs on their return home after 6 tours?/ because of a no-loss clause?), the under-employed, and the unemployed getting benefits for two years called (wait for it) extended benefits we would have 25% of the work force out of “Hope”! (JMHO)
    The best thing that could happen is for Obama to be defeated, period! Mitt Romney knows alittle about business (and don’t get fooled by CNN , and the “Bain” thing — remember it was CNN that got Obama elected over Hillary,… just ask the Wolfman?) an would be a good choice as long as the democrats hold the senate and a good percentage of the house.
    I guess I have to say out-loud my feelings on this one, Simon :-))

    Thankyou Simon, and James

    God Bless You, Julian Assange :-))

  15. “I dunno what y’all would do to him (Bernanke) in Iowa but we would treat him pretty ugly down in Texas.” -Rich Perry.
    Words, that if they mean anything other than I’m an ignorant brute just like y’all, are usually closely followed by the phrase ‘ let’s string him up.’ The right and the left are capable of generating hate rhetoric, my concern is just that it is the right in this country that is heavily armed and carries around some peculiar fantasies about, ‘watering the tree of liberty.’

    “But now the rising populists are from the right of the political spectrum.”
    Populism in America is not characterized only by the Tea Party, astro turf populism is fertilized by the likes of the Koch bros. There is a grass roots left, largely tapped out because typical funding sources have been significantly eliminated, unions that is.

    On the larger point, I suspect we are into something different than a ’30′s style great depression but the US and the Western developed nations may yet come to think of it as such. The context is different and therefore the character and outcome will be different. If a more robust safety net than existed in the ’30′s and corrective measures, inept and corrupt as they may have been, including interventionist philosophy involving government stimulus and monetary easing, (instead of Mellon’s “liquidate everything” cleansing, melt down advice) had not been implemented by Bush and Obama administrations the hole we find ourselves in may have been far deeper and reached more abruptly.

    Some of the contextual differences: The economies of China, India and Brazil continue to chug along and may be bleeding off stimulus attempts. A head long rush to globalization without proper regulation to balance roving capital investment against a largely stationary labor force and environmental generated externalities. Technological innovation including robotics and computerization may be increasing productivity but thinning labor from the plant floor. Bumping up against the limits to growth that can be supported by the resources of our little orb.

  16. Wait a minute, did we ever officially enter a recession? ;)

  17. 45,000,000 people receiving food assistance is one helluva long soup line.

  18. @woop

    only an insane person would suggest food STOP being distributed to 45,000,000 USA citizens…pure hatred-driven nihilism…

    okay – so how about this scam? 100,000,000 people, as an individual, *short* one penny (don’t pay the full amount by one penny) from any of Warren Buffet’s products per day for the next year…if someone stole from you, you’re not stealing it if you steal it back from them…

    what would happen to the math teacher’s salary if the teacher took 6th graders with her to the gas pump to teach math – notice, kids, how the money is added up as 0.00, and the gasoline is added up as 0.000…how quickly do the pennies add up for gasoline you aren’t getting at the one-thousand decimal point?

    Fun with numbers – anyone can play :-)

  19. @ Annie do I know that! You would like hearing this program on Progressive Radio, with a professor emeritus-book author, named John McMurtry. His thesis about what’s going on, is not unlike your own….
    or my own, for that matter. I was somewhat annoyed with him interrupting the radio host, and stepping on his statements, but I still say it’s worth it.

    http://www.progressiveradionetwork.com/the-progressive-news-hour/2011/8/9/the-progressive-radio-news-hour-081411.html

  20. @woop – someone called “Marty” was talking about Libya….?

    is that what you wanted me to listen to…? Only did a few minutes….

    The oil will run out.

    That MUST be the only focus in USA when getting our Energy policy put together…

  21. “Given America’s national awareness of the current economic crisis, let’s suppose the stock market fell by 1,000 points in one day, war broke out in the Middle East, or martial law was suddenly imposed on L.A.—could any one of those or scores of similar events be enough to trigger a massive, spontaneous withdrawal of bank funds over the internet? Yes. And we only need one such event to collapse the U.S. and global economy.”

    “As you’ll read, according to Congressman Kanjorski, the first electronic bank run came within a few hours of collapsing the whole world economy. Get that? If this first electronic bank run had continued for just a few more hours, the entire global economy would have collapsed.”

    http://adask.wordpress.com/2009/02/15/the-first-electronic-bank-run/

  22. “So what happens if there’s a second electronic bank run, the public gets wind of it, and just 10% of the American people start pulling money out of their bank accounts? See my point? The first (stealthy) electronic bank run was probably caused by just a few hundred thousand depositors. What happens if just ten million depositors participate in the next electronic bank run?”

    “A: The global economy dies—and it dies that day.”

    http://adask.wordpress.com/2009/02/15/the-first-electronic-bank-run/

  23. @ earle,

    Oh my goodness; I can’t believe the words I’m reading! With a few keystrokes, Simon has transformed you into (yeegads!) a Republican!!! Kwak would disown you as his pet, alcoholically unstable, mumbling serf.

    PS, your recent writings lack the ‘ole earle dramatic flourishes and ornamentation but the delicious malapropisms are still there :).

  24. Yes, the global economy dies, which is what the Republican/Dupont/Li’s want. But the worst hit will be the United States because it was the most powerfull, by a mile. This isn’t 1929 where the US was the most powerfull by a inch.

    Generally a decade ago Republicans would support slowing down spending and boosting monetary policy to replace it, as seen by the “leftovers” from that era, like Scott Sumner. However, the need for deflationary spiral is the key. They can then destroy the national government. Takeover the state governments and rule despotically.

    The housing bubble was no fluke. It was purposely made to do exactly what we are struggling from. Create enough leverage to where the US financial system crashes. It was why the S/P lied to continue the boom and its blowoff in 2005. They were paid handsomely. Once the deflationary spiral takes effect, the US and its states will be sold to foreign capital owners mostly with some big domestic capitalists leftover, for pennies. Then they will install a serfdom for us all to toil why they live the life of luxery for the survivers.

    Where are the Huey Long’s and Father Coughlin’s, for all their follies, would not have put up with this mess.

  25. It may be that you will be unable meaningfully to answer the “depression” question using only econometric terms. That is just too technical. It may be that when there are riots in, say, ten American cities, we will know that we are in a depression. There are better criteria than this conversation steeps itself in, and consequences to human lines and values that market values are unable to encompass.

    Personally, I don’t care at all about “the economy.” What will happen to people, individually and collectively? Perhaps we would be better off leaving the domain of politics masquerading as economics, and entering the domain of literature, where the feelings can be anticipated, shared, and reconciled.

    “Eat the rich” is not at home in the domain of economics, but it is in literature. It even makes more sense to regard the suggestions and descriptions in this thread as life choices than economic ones.

  26. “Something big is going on, and it can only be the financial panic that is sweeping Europe, as money flees a banking system that is loaded to the gills with PIIGS debt. In short, it looks like there is a run on the European banks….”

    http://scottgrannis.blogspot.com/2011/08/money-supply-growth-alert-cont.html

  27. I’m completely with earle on this one, and @if someone stole from you, you’re not stealing it if you steal it back from them…again, the interpration effect, ask OJ how well that worked out. @2. Most major governments are too grossly incompetent, too corrupt or too delusional to do the right things…And I would like to add that a great amount of risk would have to be introduced inorder to think about reverseing this course. The participants would certainly rather confiscate than give in to any demands or relinquish power, this much we do know. An audible call could reduce that hazard.

  28. A side effect of todays “runs on banks” is the flash system of transactions. You can transfer large amts of money in just milla seconds, not even giving the other guy a chance to react before the damage is done. And that is with mega trillions.

  29. Simon Johnson is inconsistent as he argues “it is quite striking – and deeply alarming – to hear a prominent Republican… attack Ben Bernanke for his efforts to prevent deflation” but then he writes “Mr. Bernanke has his flaws… his team has consistently pushed for capital requirements that are too low relative to the shocks we now face.”

    Does Simon Johnson not know that requiring the banks to behave and put up additional capital in the midst of an economic crisis is just like calling the government to behave and balance the budget in the midst of an economic crisis?

    If there is anything that should urgently be done that is dramatically REDUCING the capital requirements for banks when lending to those small businesses and entrepreneurs who are perceived by the regulators as “risky” even though lending to the “risky” has never ever caused a financial crisis.

    If there are is one capital requirement for banks that need to be increased that is that which applies to the lending to the government and which is currently ZERO!

    What is the difference between banks owned by a communist State and private banks which are required to have capital when lending to the citizens but not when lending to the state? Not much!

  30. Please note. There may be omission flaws in your assessment of unemployment in relation to our current conditions. If UE were calculated with the same methodology as was employed prior to the revisions instituted during the Clinton Administration UE would be 24%. Also understated is the demographic influence on current and future unwinding. The wealthiest segment of the population has lost more than $6 trillion in net worth (boomers). This largest demographic is exiting peak earning years and entering peak saving years (magnified by the $6T reductions in net worth), retiring at the rate of 10,000 per day. I would not expect much stimulus from this group. These issues compound the salient points presented in your assessments. If we are lucky, we will mirror Japan’s last twenty years. Could we be worse than Japan? have you been to Detroit? Camden, NJ? Other areas where the police are reluctant to enforce the law? If the UK thugs, the wards of the state equivalent to urbanized areas of the US take to the streets, this decade will make the sixties look like Sesame Street. As pessimistic as your view may be, it pales in comparison to the storm that I see on the horizon. I hope that you are correct. I fear that I am.

    Sincerely,
    Tom Kane

  31. @ even though lending to the “risky” has never ever caused a financial crisis.

    I think it may occuring right now, and of course denile is only a river in Egypt. Its either that, or London bridges falling down. And the difference is the approach to enforceing laws. With bad laws, you have bad law enforement, and all the bad side effects that can occur from that. Per, can you tow any other line, or are you just forever stuck with that one prerequisite of knowing the risk as it applies to proof and law. Its a flawed premise due to bad laws.

  32. Flash Crash = BlackRock Inc. doing the bidding for the Federal Reserve (Fed is nothing more than a private handful of Oligarchy Profiteers controlling the world’s finances) through the backdoor of America’s Treasury, and U.S. Mint!
    Note: The Federal Reserve holds about $500bn in Gold Bullion in today’s dollars but leases (this goes back to Greenspan and proportioned distribution allotment) it out to JPMC, GS, (Foreign Banks?) etc., etc., at the net cost of ~$38 U.S. Dollars! Why? This is how inflation/deflation is artificially manipulated.
    BlackRock Inc. does all the bidding on the most sophisticated mainframe servers in the world that could fill up Fort Knox with electrons competing for hard space?
    It basically runs our government1 (JMHO)

    Thankyou Simon and James

  33. Regarding unemployment rates:
    1) I thought statistics were not based on direct measurement prior to 1940, which would make direct comparisons somewhat specious.
    2) It is not obvious, or even likely, that existing sampling methods are adequate to obtain data from that segment of the population marked by unstable living arrangements, irregular phone access, and–wait for it!–chronic unemployment.

  34. We keep talking about the current crisis in terms of monetary policy–perhaps because with Congressional deadlock, the autocratic Fed seems to be the only relatively free actor–but what if this isn’t a monetary crisis? What if the monetary effects we’re observing are merely _symptoms_? (Are we mistaking the symptoms for the disease?) What if the real crisis is political (creation of a criminogenic regulatory environment, ubiquitous corruption and fraud, misrepresentation of risk, etc.)? What if the Fed’s monetary actions can’t make things better until the political causes are addressed? What if the Fed’s actions are only making things worse, because they allow the causes to persist?

  35. See, you hear a lot of people now asking how many bullets does Bank of America have left??? Well they have enough bullets left to come running to the American taxpayer for huge subsidies multiple times, get Bernanke to add more with “monetary policy” which only sits in their reserves for Executive board bonuses, and still have enough left to forward the money taxpayers gave them to finance Rick Perry. That’s what is called “kickbacks on your kickbacks on your kickbacks”. Notice Perry moves on, no conversation, no “What’s your name??” “What is your position at BAC?”, “What do you mean by ‘help’ ?” Just keep moving, the message was received. After all, it just takes a split-second of eye contact to communicate “That’s a big 10-4 bu.ttbuddy!!!!” The short 20 second video in this link explains it, just press the play button after the jump.

    http://www.zerohedge.com/news/bank-americas-dead-drop-rick-perry-we-will-help-you-out

  36. “A: The global economy dies—and it dies that day.”

    http://adask.wordpress.com/2009/02/15/the-first-electronic-bank-run/

    Okay, this is a retraction ala Retraction Watch :-)

    Colbert nailed it in the skit “Emergency Hobo Satchel” when he was smart enough to take along a chicken with the bars of gold….

    Let all the angry women earning less than $10 a day take over the mess – she was not DELUSIONAL.

    But we’re definitely not anywhere near clearing up the ILLUSIONS – and the reference to the holy book quote in our link , and it’s interpretation, is what happens when church and state aren’t functioning in their own domain.

    Example – if “church” (ANY religion of authority) had any moral power left, certainly love-one-another “christians” would not be in a lock and load mode as a cover up for being, themselves, too intellectually lazy and morally corrupt to address a math issue – stealing TRILLIONS it appears – one penny at a time from everyone’s bank account – and when enough people had enough of that extraction, they also extracted….

  37. I believe that we HAVE entered a depression, and the reporters/journalists are afraid to say this evil “d word”. I have heard that the unemployment rate has actually reached over 20%, and the only reason the stock market has not collapsed is because the government and others with a whole lot of money have been poring their money into the stock market to make everyone think it is ok, but it is not.

    Let’s face it, the banks are about a minute away from collapse. Oil is a finite resource which China now wants, and since we have not yet gone over to things like solar energy which is an infinite resource, the US and Europe is in a downward spiral. Plus the problems with the EU currency and the EU government in general is terrible. The EU government is less productive that or congress which is currently on vacation, and since this is a global economy, when one country with a large economy fails, the entire globe is affected. If the stock market had not been falsely supported by so many parties with a lot of money and had been allowed to adjust naturally, we would not be in the mess we are in right now.

    What mess are we in right now? Well, when the European countries had been declining as they are now, the US economy may not have been:

    1. loosing so much money now. It would be far more stable.

    2. These kind of ups and downs makes it far more likely that the stock market will, in the near future collapse.

    If you know your history and what led up to the 1930′s crash, you would know that we are following the same pattern, the only difference is people are falsely trying to support the Stock market. Unfortunately, this does not support the economy, merely the stock market… giving the CEO’s a ton of money which they can take and run away with if they want.

  38. Southerngent

    Everybody forgets America has had two Depressions already. Why do they forget the Depression of the late 1800′s. Unemployment stayed at 10% for a decade. Gold soared. Europe was in trouble. Treason is alitte harsh but Rich Perry maybe on to something. So is the forgotten one Herman Cain who advocates a return to the Gold Standard. Gold or Silver Standard? Depression? Let’s see a record deficit, massive printing of money, gold soaring, a 70% consumer driven faultering base with high unemployment, dollar falling, high export inbalance(Study the collapse of Rome), and a non-improving slow economy. Somebody better do something about this deepening stall. I think we are closer to a Depression and/or collapse.

  39. You people threw out the rules that were put in place to make sure another *depression* never happened!

  40. You people threw out the rules that were put in place to make sure another *Depression* never happened again!

    Honest to betsy – talk about chasing your own tail….

    The way those bogus derivative toxic wha’evers are morphing into real currency is through UNEMPLOYMENT – how sick is that?

  41. People should be blessing their awakening in the morning and conserving as best they can. Instead, we are now an entitled society that wakes with reckless abandon and sees others riches, and wants thiers too. Just like a volcano, youth now feel as if they are undestructable in great numbers and can take, [just as the life insurance man does], whenever the urge arises. No you should actually be looking around and wondering who in the crowd is among the 1% ers that will rise once our day arrives. We will be a troubled world from here on out until it ends.

  42. @ Southerngent

    The only thing Perry is onto, is making money for himself,… just as the TV Evangelist do every day, period! (Perry and Bachman remind me of that Baker couple in the 80′s?)

    Ref: “A Look at Gibson’s Paradox and Gold” @ Richter Report

    http://www.therichterreport.com/content.php?id=328&menu_id&menu_item_id=0

    Ref: “Washington’s Agreement on Gold” & “Official Gold Reserves”

    http://en.wikipedia.org/wiki/Washington_Agreement_on_Gold

    http://en.wikipedia.org/wiki/Official_gold_reserves

    PS. If links fail (per usual?) must Google,…Thanks :-)

  43. Sorry about link on “Richter Report”,…click Icon left-top corner, and proceed to top-bar navigating site and click “News and Views”,… scroll down “Gibson’s Paradox” – FYI * Blue Sky Laws* and Simon’s “Pecora Moment Revised”
    http://www.sec.gov/about/laws.shtml — “The Laws that Govern the Security Industry”

  44. @moses – here’s what I would pay nose-bleed yankee stadium tickets to see – the first ThunderDome battle of wits (such as either one has)

    between the two elite’s big mouth whores seeking dominion (sheikhdom?) over their states’ *real estate* – New Jersey and Texas.

    Heads up final table poker match all-in for Christy and Perry.

    At least we’d get a good idea, reading between the lines they hurl at each other – where they are going to line up their personal army of Orcs for continued extraction of wealth from their citizens…

    Should we hope pray and wish for a Lone Ranger to ambush them…? anything in the Bible about a Lone Ranger?

    I’m pretty sure the 1% “leaders” in wealthier and *public* business families have been systematically assassinated in USA – what with school records in the hands of commufascu babushka busybodies since kindergarten – could be a few 1%ers are tucked away in the REAL USA military and among the *traditionalists* in big city PEACE KEEPING (police, marshalls, rescue workers) forces…both men and women, of course….?

    keep thinking creatively :-)

  45. choking down a “big one” :)

  46. So we can see todays players of the Official Gold Reserves, interestingly enough, the bank of Greece is among the participants in the EU crisis. Since the USA does not reconize its unfunded liabilities as an expence, as does Greece, it was just learned that Greek debt costs $2 trillion/yr just to turn over. Thats interest folks, not principle, and the problem only grows as it is ignored. The only answer is a big fat haircut which no one will agree to. The same holds true for the publics participation in the US gold reserves, their is none, you can’t see ours, and we want yours is the policy since 1999. If we expose enough corruption, we might be able to call their bluff. But then again, who wants to chop a forest down with a sheet rock saw?

  47. The unemployment figures are misleading. I looked up a reference Paul Krugman gave at one point. I was able to follow a chain of references to a document still at the NBER website. [Stanley Lebergott, “Annual Estimates of Unemployment in the United States, 1900-1950,” in “The Measurement and Behavior of Unemployment”, NBER Special Committee Conference Series no. 8 (Princeton, 1957), pp. 213-239, available at http://www.nber.org/books/univ57-1. (It might not be available to everyone.) The relevant chapter is a separate pdf, http://www.nber.org/chapters/c2644.pdf.%5D That document and another in the chain pointed out two substantial changes between how those numbers were calculated and how we calculate them today.

    First, those figures included 14 and 15 year-olds. At the time, we apparently didn’t have the labor law that prohibited employment of people under 16. Table 1, page 215 is titled “Unemployment, Annual Average, 1900-1954 (number in thousands of persons 14 years old and over)”. It also shows a peak unemployment rate in 1933 of 24.9%, under “Per Cent of Civilian Labor Force”. But then as now, the younger people were facing the highest unemployment rates, and young people were a bigger proportion of the population in the 30s than they are now.

    Another document earlier in the chain, “Labor in the Twentieth Century” by John Thomas Dunlop and Walter Galenson, by the Academic Press, 1978, points out another problem with the comparison. They say, “In the United States, the unemployment rate is defined as the ratio of those who want and are seeking work, but are without any sort of job, to all those in the labor force” (p26). This is not the definition we use today. Today we only consider people who are ‘actively’ seeking work unemployed. Back then, if you were seeking work at all, even if not actively, you were counted. Today people who have “given up” are no longer counted. Back then, they were.

    I think if you put the two together, we’re probably much closer to the peak unemployment levels of the Great Depression than people think.

  48. Lower prices at the store are a good thing. Lower prices let consumers buy more for their dollars, and thus improve the standard of living for the majority. Lower prices encourage consumers to go shopping. Every merchant knows that sales bring customers into the stores.

    By contrast, printing too much credit leads to serial credit crises, and endless bank bailouts. The problem today is too much debt, caused by banks printing too much credit over the years. Printing too much credit is counter productive. Better to just let CPI prices go down a bit. That way the average person gains from productivity improvements, instead of just the financial sector. Excessive printing has led to the rich financial sector getting richer, while the majority lose an equal and opposite amount.

  49. There were many depressions before the one called “Great,” yet all had effect on a disproportionate cross section of society affecting lives whose time was no less precious than our own. There were many wars, too, before the one called “Great,” yet still an even greater followed. No sophistry can disguise the fact that, despite its mighty military the United States is far more vulnerable now than in 1929. Yet bravado takes pride in sophistry denying it, that murder of the greatest achievement of all — the Constitution of the United States — might be piled onto the dismantling of a once great creditor nation formerly fueled by a robust physical economy affording autonomy, self-determination, productivity, comfort, and a boat load of export revenue to boot, now turned into a debt-laden casino that, not even the most insane, lax, criminally complicit regulatory structure can support. It’s over. Yet some will waste their time pretending it isn’t, and this while lives — billions! — hang in the balance.

    What of those statistical parallels to the Great Depression held true in March 1930? At that time markets had recovered a good bit of their autumn 1929 losses. So, per the present parallel, could not all of the regulatory wizardry supposedly learned from that former experience have served only so much as to have postponed the inevitable (collapse)? Is not the point of regulators to insure extraordinary measures never reach the moment when they need be taken? And is not the point of a lender of last resort supposedly shielded by these regulators such that its resources never become fatally entangled with that supposedly being regulated? In other words, what good is a lender of last resort made hopelessly insolvent like the thing its extraordinary interventions wishfully venture to stabilize? That’s where we are. That’s why I wonder where things stood in March 1930. All the so-called “governance” has done nothing but postpone the inevitable. Take comfort in sophistry? Not this American.

  50. @ Tom, what is the validity of the wave analysis information on your blog predicting future market trends, and where does this come from, and how was this confirmed….by way of empirical data? In other words, are these reliable models, and if these are, where is the economy one year from now?

  51. Bruce E. Woych

    http://daviddegraw.org/2011/08/record-breaking-poverty-in-america-52-8-million-and-growing-46-million-on-food-stamps-34-million-in-need-of-work-over-1-million-deaths-annually-worlds-largest-prison-population/

    Record Breaking Poverty in America: 52.8 Million and Growing; 46 Million on Food Stamps; 34 Million in Need of Work; Over 1 Million Deaths Annually; World’s Largest Prison Population
    David DeGraw (excerpt)

    August 11th, 2011 · · Politics & Government
    “While the “official” unemployment rate hovers around 9%, 14 million people, the government’s numbers are deceptively low once again. The only reason unemployment has stayed below 10% for the past few months is because millions of long-term unemployed, and part-time workers who are looking for full-time work, are not included in the baseline government unemployment rate. John Williams, from ShadowStats.com, has a consistently proven method of tracking unemployment that provides a much more accurate view of the overall situation. As shocking as it may sound, when you apply his SGS method, counting the total number people in need of employment, you get a current unemployment rate of 22.5%, which is an all-time record total of 34 million people currently in need of work.”

  52. Bruce E. Woych

    Analysis of Financial Terrorism in America: Over 1 Million Deaths Annually, 62 Million People With Zero Net Worth, As the Economic Elite Make Off With $46 Trillion
    August 10th, 2011 by David DeGraw

    http://ampedstatus.org/exclusive-analysis-of-financial-terrorism-in-america-over-1-million-deaths-annually-62-million-people-with-zero-net-worth-as-the-economic-elite-make-off-with-46-trillion/

    Abstract :: Welcome to World War III
    Introduction

    Part One :: The Economic Devastation

    I :: Poverty
    II :: Food Insecurity
    III :: Unemployment
    IV :: Declining Income

    Part Two :: The Economic Elite

    V :: How Much Wealth Do The Economic Elite Have?
    VI :: Who Rules America? Revealing The Economic Top 0.1%
    VII :: Tax Breaks For The Rich, Budget Cuts For The Rest Of Us

    Part Three :: The Perfect Storm Overhead
    (Inequality = Debt = Austerity = Civil Unrest = Inflation + Deflation = Stagflation)

    VIII :: Debt Slavery
    IX :: Inflation
    X :: The Beaten Masses

    Part Four :: Fascism in America

    XI :: Modern Day Slavery
    XII :: The Death Toll
    XIII :: Deliberate Systemic Attacks

  53. @Woych

    It’s definitely all boils down to a head game, doesn’t it? A *religion* – faith in what you believe. “…in the beginning there was *MONEY* and then came life….”

    Keep asking – who gave them permission to do what they do?

    Attacking Greece is symbolic – they’re basically laying waste to 10,000 years of western civilization through an economic policy of nihilism.

    More misery for others = More money for ME ME ME

    Hatred does have an SOP – officially dismissed as a hoax – “The Protocols of the Learned Elders of Zion”…

    But one of the best advertisements for the power of the dark side on Baseline Scenario this week – akin to snuff porn….freeze the rational mind…tax $$$ bore great fruit when spent on psyche ops…

  54. The unfolding European banking crisis will be the last straw for the mythical economic recovery in the U.S. as it contaminates the entire international banking system, precipitates bank runs, and collapses the global economy. Investors are understandably leaving the markets and fiat currencies in droves.

    “Fear has gripped the markets: fear of another recession; fear of an unresolved crisis in the eurozone; fear of a further banking debacle – fear, in short, that the calamity that was staved off by concerted international action three years ago is about to hit at last. We have had the earthquake; now for the tsunami.”

    http://www.telegraph.co.uk/comment/telegraph-view/8711508/The-markets-fear-a-fresh-disaster.html

  55. Bruce E. Woych

    This “comparative history” can only be written from a privileged Ivy League bubble. As much as Simon Johnson has tweeked the system with sensitive perspectives for materials that question the “consequential” and contingent status quo, the text book comparison of the Great Depression from the 1920s is a distraction and close to disinformation for what is literally going on fire right or flooding out right now all over our country and the world.
    This bail-out machinery being primed and ready for action because it is getting edgy that they might be getting their feet wet here and there, but the “real” economy of experiences are diverging swiftly. If middle class sentiment is off-set right now it is because they are threatened directly by a brush fire they see coming their way, but in general the upper tiers have been refortifying and reinforcing every game-plan and power-play in the trajectories of what is to come (if they do not overestimate the power of monetary and corporate political-economic restraint).

    The question of the current Raw Deal is not what happened when the country (largely a manual labor world) imploded in the 20s. The question today is if this is not more of a condition of absolute capture and control fraud over an entire Global network. The globe is nothing more than a larger playing field for what has happened many times in the past. The sophisticated circumstances for today should not be looking to see “if” we are under a reverse bubble of deflationary desperation and counter-productive economic health; but as to whether the “reactionary” movements that have occurred so many times in history is mounting a systemic counter-control that threatens a potential global democratic future.

  56. The bank regulators brought down or almost brought down the Western World

    What the final title above will be will depend on how fast the Western World is capable to realize how incredible stupid their current bank regulators are.

    Markets and banks always price for the perceived risks of borrowers by means of the risk premiums included in the interest rates. More perceived risk higher interest rates, and vice-versa.

    But, when the regulators also decided to use risk perceptions to set the capital requirements for banks in the same vein, more perceived risk higher capital requirements and vice-versa, they incentivized-subsidized the mother of all risk-adverseness and penalized-taxed the bank borrowers perceived as risky, like the small businesses and entrepreneurs.

    As a consequence the Western World is now drowning in debt of what was perceived as not-risky, like some sovereigns and a lot of previously triple-A rated investments, while not letting their “risky” risk-taking job creators help out.

    Risk-taking is the oxygen of any development and movement forward… and if you don’t move forward you fall…and so what’s it going to be Western World?

  57. @Woych “….but as to whether the “reactionary” movements that have occurred so many times in history is mounting a systemic counter-control that threatens a potential global democratic future…..”

    Western Civilization, even after many stupid arrogant and hubris drenched moves in 10,000 years, continues to survive and thrive because of a VERY SIMPLE belief in HUMAN RIGHTS.

    Every human being on this planet has the RIGHT to make their LIFE less miserable through honest work.

    Honest work naturally encompasses unity of spirit and cooperation.- greatest good for the greatest number, lifts all boats etc etc etc

    Stop calling it *democracy* – it is MORE than that – the RIGHTS we hold dear in the USA….

    And that HUMAN RIGHT to make our lives less miserable through honest labor is RIDICULOUSLY under attack by psychopaths and sociopaths – round up that stinking 1% elite carcass and put them in an institution where they can spin numbers and theories all day long without actually making the whole planet their lab rats…ENOUGH already….

    that “god’s work” statement really was the moment their head game LOST *power*…

    Russia exited the stupid game ages ago….USA welcomed their self-proclaimed elite and educated exiled delusional ruthless criminals with open arms – don’t want to offend *immigrants*….

  58. Risk taking leads to an early grave, when extened it leads to greed and hypocrisy. Thats holds on to its self until the very end, which they can’t see through the arrogance and hypocrisy. So we volley until then, knowing we will both find a way to get by.

  59. “After Accurately Predicting the French Bank Run, I Now Predict US Bank CONTAGION!!!”

    “…a new instigator of the bank run has emerged. Make no mistake about it, the institutional counterparty is the new purveyor of the modern day bank run. For those who have not been following my European bank run rants, see my many warnings to date regarding the highly contagious European bank run below. For those who have been following, skip past the link list to the news excerpts directly below to see what is going on today and coincidentally what we have been working on for the last week – which is just starting to come out into the mainstream media and the sell side analysts water cooler chatter…”

    http://www.zerohedge.com/contributed/after-accurately-predicting-french-bank-run-i-now-predict-us-bank-contagion

  60. “Or Could It Become Something Worse?” Let’s just peel this onion before we pick it out of the dirt,… shall we?

    The Libertarian’s want “NO” regulation, just pure freedom without restraint – unadulterated hogwash and swill that they wish to bathe in – a cesspool of self destruction, period!

    The Republican’s also want less regulation, but with a caveat that makes corporate welfare a given, so that Uncle Sam has their backs in good times as well as bad times. Why not? They’ve succeeded since the Gramm-Leach-Biliey Act. (Rich man’s War, and a hopeless Poor Man’s Fight?)

    The Democrat’s are just a pathetic bunch of bohemians today,… wondering aimlessly, trying desperately to retrofit their lost backbone with some rich carbon-fiber (the bract green kind?) cartilage. Regulation means nothing to them other than filling the feed trough from the K-Street Feed Store. These cross-dressing haberdasher’s crowned in their whig-lined fedora’s change colors as a fast as a chameleon in a pansies hot-house.

    Summary: Simply amazing how the holier than thou trinity has become one in America’s Republic!
    IMPORTANT NOTE **** this only excludes “Senator Bernie Sanders” (I-Vt) ****

    Here’s a starting point that should be easy for the dirty-dozen presidium to conquer once back from their sabbatical: “Repeal the Gramm-Leach-Biliey Act” , and reinstate the original, “Glass-Steagall Act” – *53 pages* of no-nonsense, versus thousands of Swiss-Cheesecloth pages that are grossly and deliberately made “unlegible-legalism gibberish” in print! (you shouldn’t need a legion of lawyers to interpret the law, period) {JMHO}

    Ref: http://en.wikipedia.org/wiki/Glass-Steagall_Act

    http://www.slideshare.net/coryhelene/a-brief-history-of-the-glasssteagall-act-2898254

    ** The Original Text Document of the Glass-Steagall Act ** 53 pages!!!

    PS. Thanks for the great links @ KJMClark :-)

    Thankyou Simon and James

  61. “Is The Other Shoe Dropping in Europe?”

    “…the governments are only part of the problem. The other problem is in the banking systems.”

    “Normally, you stop a bank run with a sovereign guarantee. But of course, the problem is precisely that the sovereigns are not in any position to be making guarantees.”

    “I don’t know how this ends. But I don’t think the answer is “well”.

    http://www.theatlantic.com/business/archive/2011/08/is-the-other-shoe-dropping-in-europe/243097/

  62. Bruce E. Woych

    http://daviddegraw.org/2011/07/complete-list-of-david-degraws-reports-2/

    Some alternative research and a list of titles that are sure to stimulate some coordinated insights. And some interview video material with other reference links (sure to be an instant classic).

    http://daviddegraw.org/2010/07/ring-of-fire-flash-crash-interview-video/

    (says so much in such little space: is that “economic analysis”)?

    http://daviddegraw.org/2010/06/on-the-edge-with-max-keiser-interview-3-from-the-cia-allen-dulles-to-the-imf-economic-death-squad-leader-tim-geithner-video/

    (This one for Annie)

    http://daviddegraw.org/2010/06/the-greatest-theft-in-history-wall-street-economic-death-squad-video-2/

    OK Baseline consortium: Question of the hour…Why is Elizabeth Warren limiting herself to the Senate?

    Let’s start e-mailing and everything else possible…it starts right here …

    ELIZABETH WARREN FOR PRESIDENT!

    THAT HAS LEGS TO TRAVEL! PEOPLE CAN WORK WITH HER!

    LET’S HEAR IT…

    ELIZABETH WARREN FOR PRESIDENT !!!!!!!!!!!!!!!!!!!!!

  63. The article offers nothing but empty eclecticism. It makes no pretense to theoretical competence; the term “capitalism” does not even appear. Not a word concerning various theories, good and bad, concerning capitalist evolution and the evolution of its crises. Nothing concerning the class dynamics of policy or the class basis of the state. The article would merit the appellation “belletristic,” save that it doesn’t even appear in a newspaper, just an electronic shadow of one. Thus the confused reader is satisfied by becoming even more confused while believing he/she is gathering insight. I suppose there was similar nervous chatter on the deck of the doomed Titanic. No wonder Joan Robinson ridiculed most economic talk, learned and profane, as theology. I think of it as political onanism.

  64. @Woych – thanks for the links.

    Do you have any idea what went down in, oh let’s say, Las Vegas where 83% of the real estate is underwater…?

    You think PHYSICAL ORCS were not sent to kick in the doors and drag people out of houses that were NOT late with payments etc. In every instance that they did that – the rough treatment – it was for the group of people that had THE MOST TO LOSE in equity and savings – not the flippers and the sub primers! Sure they are fighting in court trying to retrieve what REALLY was stolen via physical brute force and the LAW is now on their side – that is the sickest part – they BOLDLY did what they did and re-wrote the law AFTER to say it was okay – claiming there was no law in place in the first place that said they couldn’t do what they were doing!!!!

    I can’t believe Barney is still all over the air waves…

    No one is even talking about the HOUSING crisis anymore, why?

    THIS is what is already in the history books – “USA’s historic contribution to modern sustainable architecture in 2011 was a city of 1.1 million razed by bankster orcs.”

    Too much housing, or too much of the WRONG kind of housing (don’t need imported oil?). Does anyone DARE to look at what budding industry was demolished – our entire future as concerns INFRASTRUCTURE.

    This is a whole other level of guns vs butter, I’ll grant you that…

    Pivoting – so what’s the plan here? No more manufacturing of medicine in USA? It has to be shipped via OIL dependent transport from 12 time zones away? Those 1.8 Billion dollar men gold dick MDs running for profit health insurance companies still saying it’s CHEAPER to do that than to do it 5 miles away from the hospital?

    Let’s SEE that freekin’ math formula – could be a 2 trillion $$$ oops there, no?

    http://www.msnbc.msn.com/id/44211316/ns/health-the_new_york_times/t/us-scrambles-ease-shortage-vital-medicine/

    No industry shed more manufacturing jobs than pharma….and that is certainly not due to robots and *technology*…

  65. “The Capitalism of a Natural World Cycle’s?”,… according to the economist, and baseline philosopher – “Soloduff the Great”!

    “as the crescent pendulum of a motionless hot summers… cold moon
    stills its presence to those of us all… creatures below
    where time stands alone
    forlorn and orphaned… where existence harbors only abandoned thought
    the freedom of loneliness hidden in its shadow
    my… oh my… how the nights darkness comes to cradle this dark side of life
    as if the worlds nocturnal creatures all
    rejoice in its ghoulish canopy of sullen quiet
    the graveyard scavengers scurry… making haste of daylights waste
    but… it is their excremental folly that feeds the sunrise summit
    offering up another triumph… another days delight”

    PS. If nothing good to say about Simon and James why endure the pain?
    Yours truly,…

  66. “World on the verge of an economic collapse,” according to George Soros around the end of June 2011.

  67. The banks, with the FED as conductor, have been granted the very important privilege to create money in the form of extending credit. Such a function requires great diligence and foresight combined with a global view of credit levels. In their objective to enrich themselves, the banks have been more than negligent in their behaviour. Today, most Western countries have total debt levels (private, government and business) in the range of 300-400% of gdp. To simply maintain those debt levels at a rate of interest of 2% burdens the economy with 6-8% of gdp. If some of that debt would become questionable, let’s assume a third of it, and the market would demand 8% interest on that portion, the economy would be saddled with a burden of 12-16% of gdp just to maintain the present debt levels.

    Does that sound sustainable?

    The interesting part in all of this is the fact that those who produced this mess continue to enjoy outstanding benefits instead of being made accountable for their actions.

  68. @Linus Huber “The interesting part in all of this is the fact that those who produced this mess continue to enjoy outstanding benefits instead of being made accountable for their actions.”

    Absolutely! Those responsible for Basel II which allowed banks to lend to governments against zero capital and to triple-A rated private borrowers against only 1.6 percent in capital and thereby fueled the current excessive bank exposures, are still regulating happily, now with their Basel III that does exactly the same thing.

  69. “Get the picture? The money-grubbing activities of the banks have put us all in harm’s way again. The whole worm-infested financial apparatus is beginning to shimmy and shake just like 2008. The banks are hoarding cash overnight at the ECB, investors are pulling their money out of the money markets, the gauges of market stress are blinking red, and interbank lending is starting to sputter. If liquidity freezes up; it’s Game Over. The EU financial system will grind to a halt and the global economy will go into freefall.”

    http://www.counterpunch.com/whitney08092011.html

  70. Bruce E. Woych

    http://therealnews.com/t2/index.php?option=com_content&task=view&id=33&Itemid=74&jumival=763

    Picking the Bones of US Public Economy

    August 17, 2011:

    http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=7103

    August 17, 2011
    Picking the Bones of US Public Economy
    Rob Johnson: Financial institutions planning to use crisis to privatize and monopolize

  71. @ Anony, I think Straus kawn already started it. Now where that ends, nobody knows.

  72. “The Great Collapse Has Officially Begun: I’ve been warning of this for well over two years. My primary warnings were:

    * 1) That 2008 was just a warm-up
    * 2) That the REAL Crisis had yet to unfold
    * 3) That the REAL Crisis would make 2008 look like a picnic”

    “Well, the period I’ve been warning of is now here. What’s happening right now is not just a market crash, bear market, deflation, or any other item related to just one asset class.”

    “Instead, this is a collapse of the entire US monetary and political system and the mentality of spending one’s way to wealth.”

    “For 80+ years, the US has operated under a crony capitalist system in which politicians dole out political and economic favors to the chosen few whose bribes/donations funded their campaigns.”

    http://www.zerohedge.com/contributed/great-collapse-has-officially-begun

  73. “The situation is more serious than it’s being portrayed in the media. This looks like the beginning of a full-blown credit freeze.”

    “So, the extreme volatility we’ve seen recently in the stock markets has more to do with deteriorating conditions in the credit markets than it does with the more generalized slowdown in economic activity.”

    “Get the picture? The markets are so interconnected that a meltdown in the EU will take down banks and financial institutions in the US simultaneously. And the EU doesn’t have an institution like the Fed that can breezily write a blank check covering the whole system. If there’s a large-scale bank run, the house of cards will fall and the economy will crumble.”

    “It’s deja vu all over again; the fear, the downgrades, the denials, and finally, the crash. Last Thursday, an unidentified European bank was unable to get funding the traditional way and had to turn to the ECB for $500 million of emergency funding. The news sent tremors through Wall Street where stocks went into an immediate 400 point nosedive. We’ve seen this movie before in 2008, and it doesn’t end well.”

    “It means the system is under great stress and beginning to slow down. It means investors have lost faith in the ability of policymakers to fix the system. It means there’s a panic underway and people are moving into cash. It means the eurozone is headed for a crackup. It means we are on the brink of another financial crisis.”

    “As the former European Commission chief Jacques Delors said on Thursday, “Open your eyes: the euro and Europe are on the edge of the precipice.”

    http://www.counterpunch.com/whitney08222011.html

  74. Ahh, a traveling book salesman I see, my fundage was sent up the river, to buy a van. Stop by again on your way through town, stay awhile next time.

  75. Bernanke is absolutely a traitor, along with 95% of the political class.

    They should all burn in Hell forever for what they have done to the common man.

  76. “If the wads of money you’ve stuffed into your mattress for safekeeping don’t keep you up at night, Simon Johnson and James Kwak’s 13 Bankers will–a disturbing and painstakingly researched account of how the banks wrenched control of government and society out of our hands–and what we can do to seize it back.” Bill Moyers

    http://13bankers.com/

  77. All the comments are not really about the structure and performance of government (both inside the Beltway and outside) but the fact that the corporate/business elite have infiltrated all the structures of government and especially over the last 4 decades “own lock stock and barrel” the corridors of power from state capitals to Washington to effect totally the agenda of the nation’s business. Just how different will a “fat cat ” Republican prez be in a country that has bastardized capitalism out of recognition with its fundamental precepts.

  78. Let us review some of the initial growing pains the 13 bankers book starts with, without having read the book. [As you will see, many behind the scenes deals were left out of the history books and skipped over for a different view/interpretation]. Here is a brief historical view of Jefferson and the first bank of the US.

    Jefferson strongly disagreed, both as a matter of financial policy and due to his interpretation of the tenth amendment. Jefferson pointed out that nowhere in the constitution was authority given to the federal government to charter a bank. This debate over reserved powers would be continued by others for more than a century.
    Washington adopted the arguments offered by Hamilton. The First Bank of the United States was given a 20-year charter in 1791. Its equity capital was $10 million, of which $2 million was contributed by the federal government and the balance by private shareholders. It was governed by a board of 25 directors, of whom five were chosen by the federal government. The bank’s headquarters were in Philadelphia. The original bank building was restored for the Bicentennial in 1976 and can be toured today.
    The bank had branches in other cities and played a valuable role in the commerce of the young nation. However, it was constantly under attack from the Jeffersonian Democrats who prevented its charter from being renewed in 1811. However, the financial stress of the War of 1812 showed the need for the bank, and the Second Bank of the United States was chartered after the end of the war.

    What is not told was the battle over settlements with the Indians. For many moons the state of Georga was printing money and using it to pay people to settle the land with the Indians. After a while the residents resented thier foreign gvts ability to simply print money, and demanded to be paid by the orignal agreement of $3 million of gold. Neither side obligated the other and now Jefferson was negoiating for the Louisana purchase @ 1801. The first bank of the US having 10 years behind it needed more money to facilitate the transaction, [ before you could settle the louisana territory you had to purchase and clear the land of Indians in GA, AL,MS first] in addition to the $3 million for the land west of SC they needed 15$ million more for the Louisana territories. Eventually France was paid $15 million for the purchase and $3 million was used to clear the land of GA, AL, MS of its Indians. [ it was determined that the natives would never be able to be "civilized" so they had to be removed.] This was the beginning of the trail of tears for the removal of Indians. Bonds were sold to the English and the Dutch and France was paid its money.
    Although Jefferson initially disagreed, he was in fact the president that spent the most money from the national bank he once so despised. We skip over all this and jump to the reasons the second bank of the US was needed to fulfill a duty the first bank was somehow unable to achieve. A habit the growing democracy never was able to overcome. Only able to add to its prior mismanagement, and hope that younger generation would finance its current debt problems. So if you missed this one little tid bit, you might have an entirely different view of what actually took place in our history books. Which so is easy to do.

  79. Tony Foresta

    Always enjoy your erudite commentary Mr. Johnson, but comparing the socalled “Great Depression”, with the economic catastrophe 90% of the American population are enduring today is deceptive. The Great Depression afflicted Americans in the late 30′s and early 40″. It was a much different time. Statistics to not tell the story of the horrorshow realities American face today. Home prices wildly depressed. Unemployment, (irregardless of the governmentspeak manipulation and distortion of the true math) – is rampant and damaging. Individuals, families, children – hardworking, decent families are devastated by prolonged unemployment.

    What most of us experience today (and the predatorclass is obdurate, drunk on supremist ideologies, devoured by greed, and ruthless) – is an unprecedented hardship and uncertainty. How will I house, cloth, feed, mend, entertain, and advance my child?

    The predatorclass perched in their oppulent towers, and seemingly safe behind the fortress walls of their luxurious mansions imagine they are safe, and in control.

    But a day of reckoning is coming. A balancing. And there will be accountabilty, and there will be blood.

    In a world where there are no laws, – there are no laws for anyone predatorclass biiiiiaaaatches!!!.

  80. Completely disagree with this entire post. First the slump in output and employment were a direct consequence of the bank failures in the early years of the 1930s, and therefore cannot be compared to the economic situation of today, where we do not have massive bank failures yet. Second, there is no deflation on the horizon as far as the eye can see. All the accomodaive measures taken by the Fed so far serve only one purpose to increase infaltion and inflation is what we will have for the next ten years. At this point more easing will only create more inflation. What we should be afraid of is policy failures of the Fed and their Krugmannesc advisers did cause to much harm already to rebalance global economies in due time.

  81. @ Tony

    “But a day of reckoning is coming. A balancing. And there will be accountabilty, and there will be blood.

    In a world where there are no laws, – there are no laws for anyone predatorclass biiiiiaaaatches!!!.”

    When many of us voted for Obama, we thought we’d have at least some reckoning. Instead, we got none:

    “Yves Smith, whose coverage of banking and mortgage fraud (and the administration’s protection of it) has long been indispensable, writes:

    It is high time to describe the Obama Administration by its proper name: corrupt.

    Admittedly, corruption among our elites generally and in Washington in particular has become so widespread and blatant as to fall into the “dog bites man” category. But the nauseating gap between the Administration’s propaganda and the many and varied ways it sells out average Americans on behalf of its favored backers, in this case the too big to fail banks, has become so noisome that it has become impossible to ignore the fetid smell.”

    http://www.salon.com/news/opinion/glenn_greenwald/2011/08/22/banks/index.html

  82. Professor Johnson,

    Could I suggest you see this linked article? “Job Creation in the Modern Information Age” http://savingtheworldeconomy.blogspot.com/2011/08/job-creation-in-modern-information-age.html?spref=fb

    I believe that this is one of the most viable and effective solutions for job creation and US consumer spending in the Modern Information Age – and for the current economic crisis.

    Sincerely,

    Luke

  83. I’m pretty skeptical that the course can be altered, we are too far down the path of no return. With environmental concerns on the horizon, crippling debt, and an unstable economy, I’m very fearful of a depression worse than the first one.

  84. Brenda Vinall-Mogel

    Simon,
    While the period known as the Long Depression did have large amounts of debt on the part of the sodbusters and other dirt farmers, it was also a period when free or reduced cost land was available to those who had fought in the Civil War opening up the frontier, but pulling the younger workers out of the East along with many of the new immigrants from Europe. These people tended to make as much as possible on their farm and did not add to the economy like those who lived in the established towns of the East. Thomas Jefferson opening the Ohio Valley created a similar economic void until towns were established, the population grew to create need for imported goods, and farmers were either experienced enough to make profits off of their farms or land conditions were improved for better farming methods to then export back East allowing larger cities. It also allowed for those who could not make it farming to move into the towns to try another trade or profession.

    Both cases are alike, in some ways, to the situation today in that a significant number of the population dropped out of the traditional economy of buying and selling. It was not, during the Long Depression, until the Slavs, Italians, and others immigrated settled in the towns that we see an increase in GDP and a real expansion in Factories. These people who populated the factories or created their own businesses needed to trade for goods and services that the Mid-west and High Plans farmers made mostly for themselves (butchers, bakers, dry goods, the new canned goods, furniture, etc.)

    Bringing us back to today, with older people who are saving or do not spend as much you have a similar situation – but in the form of an aging demographic. The more we talk about SSI and older people think SSI might get cut or their money in 401Ks is not enough the less they will spend in the economy today. If a younger work force does not get jobs then their ability to purchase and start families decreases and there is again less spending. And yes, we have individual debt, but that is another matter based on stagnant wages and cheap imports, which hid inflation and the stagnant wages. This stagnation is now moving up into the more educated areas.

    It is my belief, that while this is mostly a demographic issue, it is also a period where developing nations currencies are inflating to developed currencies and developed currencies are within reason of commodities being a scarce resource that are traded not for need are declining or deflating through wages. There really is too much here to honestly put in a blog reply as we have the convergence of many issues all hitting at the same time.

  85. @Brenda “Both cases are alike, in some ways, to the situation today in that a significant number of the population dropped out of the traditional economy of buying and selling. It was not, during the Long Depression, until the Slavs, Italians, and others immigrated settled in the towns that we see an increase in GDP and a real expansion in Factories. These people who populated the factories or created their own businesses needed to trade for goods and services that the Mid-west and High Plans farmers made mostly for themselves (butchers, bakers, dry goods, the new canned goods, furniture, etc.)”

    No matter how you slice it, USA has a history that is unique.

    How you can *analyze* it and not factor in what drove the 20th century’s “ploughshares into swords” and the “swords back into ploughshares” activity is beyond me…borders on the delusional, Brenda.

    The whole *factory* era was a circle of hell Dante did not imagine…

  86. “In large part this is because banks failed in an uncontrolled manner – largely as a part of panics that led to retail depositors running to take out their funds”

    I would say the FDIC is an EXTREMELY small part of avoiding this, seeing as “retail depositors” (assuming they’re the lower 80% of the population) hold only 15-20% of the wealth. We barely control enough of the money to have any effect on the system, even if we all worked together to TRY and crash it.

    The wealth gap has eliminated our ability to influence the situation in any way now. We are in the hands of the upper 20% of this country. They are our masters. I doubt they’ll be kind to us.

  87. Further, I simply wouldn’t be surprised if it takes a decade or two to shake the full effects of the bubble out of our system. As I understand it, usually bubbles take almost as long to correct as they do to build. Could somebody with a bit more knowledge of economics please enlighten me as to if what I’ve heard is true? Anyway, we spent 30 years building a MASSIVE unsustainable credit bubble. I honestly wouldn’t be shocked if true recovery is a 15-20 year process, provided what I’ve heard isn’t complete hooey.

    Considering cheap energy inputs to our economy won’t last that long with oil running out and our lack of a drop-in replacement for it, we could be in for very rough, very long ride down.

  88. Let’s call them what they are, “Banana Republicans!”

  89. @Gordo

    Since the richest man in the world is a Mexican, and Texas is funding his games (50,000 people died as that border war for a piece of CIA drug $$$$ rages on – self-feeding $$$$ loop of cash transactions – drugs and guns)

    I think “Fajita Republicans” is a more accurate sarcastic nickname for 2011 Texas presidential hopefuls….

  90. Very good assessment of the current problems of extremes which threaten to permanently destroy the middle class in the USA and widen the gap between the haves and have nots. What is scary is that the wealthiest centers of the USA are promoting economic and political policies based on the rule of the “LAST MAN STANDING”, which is domino effect caused by big money operating without rules or any constraints.

  91. The US industrial economy has moved in tremendously slow “socio-evolutionary cycles” since the dawn of our nations’ first nineteenth century industrial age.

    What I mean by slow movement is that while technology has constantly evolved, within the context of new inventions socially within the United States of America, the capacity of the entire and whole population to actually absorb the whole economic benefit of a wholly evolved technology moves at a snails pace. Thus, what may have been invented in the nineteenth century and was made obsolete by an invention from the twentieth century might very well be still in use in the twentyfirst century although it has virtually no social or industrial contribution that could be considered as good for our nation’s whole current economy and in fact, might even be considered as bad.

    As this slowness has perpetually caused economic downturns as well as economic upticks, many believe that the fundamental reason for such bizarre economic girations is the fact that within the framework of any singular industrial revolution, the government charged with managing the whole new growth of a whole new industrial era simply looses sight of its actual role of balancing the multi-facited elements of conflicting industrial eras. As that government is either hopelessly stuck in a previous industrial century or entirely too obsessed with a new industrial century that hasn’t quite emerged, the fundemental void in what should be a fluid or a seamless transition of industrial thought between one or more centuries is what actually causes economic hardship for the nation as a whole in its current industrial century.

    Simply put, our wrecked or rechid economy of 2011 is a direct result of a government that has lost sight of its actual role of seeing to it that virtually all technological advancements are kept within the realm of relatively common sense thought as that thought is a applied to a whole and current or conteporary common sense industrial marketplace.

    An example of this is as follows:

    http://bluecollarindustrialist.blogspot.com/2011/09/deciphering-our-nations-true-economic.html

  92. @Dahlke – “Simply put, our wrecked or rechid economy of 2011 is a direct result of a government that has lost sight of its actual role of seeing to it that virtually all technological advancements are kept within the realm of relatively common sense thought as that thought is a applied to a whole and current or conteporary common sense industrial marketplace.”

    I agree with needing to evaluate and coordinate technological advances.

    Of course, you do realize that all the *advances*, initially, were conjured up based on winning WARs?

    Latest count is 58% of working age USA citizens have no job.

  93. When the going gets risky, the risk-takers should get going, not taxed!

    While bank regulators insists with their silliness of layering on with their capital requirements for banks additional discrimination against what is perceived as risky on top of that already present in the interest rates, things can only get worse.

  94. Michael Hudson on where we are headed, and it’s really scary.

    http://michael-hudson.com/2011/09/hudson-in-russia-the-myth-of-neo-liberalism/