Welcome to the Depression

Minyanville ^ | 26 Jan 2009 | Bennet Sedacca

[torquinus]

It might be helpful to define some current “economic” terms for clarity.

Toxic Asset == worthless debt note

credit crunch == I won't lend to you when your collateral is a “toxic asset” unless I am the Treasury, maybe, or maybe not

bank balance sheet == assets - liabilities, but uncounted toxic assets could be assets, or liabilities (see credit crunch)

economic stimulus package == partly a way to cure bank balance sheets, but mostly stimulating for congress, the executive branch, legions of state and local govs and their pals and cohorts.

Levity is OK, but God help us this is gonna get really bad. “A republic, madam. If you can keep it.”

[bronxboy]

Unemployment was not at 30 % right after the market crashed...it took a couple of years... I’ve looked at an interesting site that gives stats...I’ll see if I can find it, but it sure looks like 1930...Hoover through money at the banks also.

[bruinbirdman]

"I was there to see it, and can tell you it wasn’t fun) by raising short-term rates to near 20%, causing an ugly recession, double-digit unemployment, and pain for all asset classes. "

So, after writing an entire book on the subject, why doesn't he call that a depression?

yitbos

[Centurion2000]

It's a recession when people lose their jobs.
It's a Depression when economists lose their jobs.

[bruinbirdman]

"Everything was fine until the Democrats started running their election campaign against the Republican Administration of President Bush and John McCain."

Aaaand ..... it became obvious they were going to win. A year before the election, Americans began going to cash. Sell, sell, sell. Get out while you can.

Under the Democrats, cash under the mattress can't be taxed. Treasury bonds at zero interest, and therefore no taxes, were safer than Democrat economic prospects where equities would be nationalized.

As a parting gesture, GW made sure cash would be safe.

yitbos

[Gondring]

I am wondering how this generation will handle deaths from pharma shutdowns, if they occur.

[dennisw]

You post is a soup to nuts buffet of gloom and doom. Can’t say I disagree much. You even brought in terrorists who attack when we are down

[tbw2]

Or just from being unable to afford the high end lifestyle drugs.
If we go to socialized medicine, will statins, anti-dementia and viagra drop off the approved lists so we can still pay for anchor babies and gunshot victims?

[April Lexington]

Does this make me delusional?

Not at all. The Great Depression took a decade to play out and ended up with WW II!!! These things take time and are cumulative. It doesn't effect or affect you until you are unemployed and you lose your house, savings and wealth. Then, you become angry because you are the victim. Then, you will begin to blame the REPUBLICANS because this all happened on their watch (just like last time). Then, you realize... you have become a serf.

[April Lexington]

Things aren't good, but so long as you continue to see lines at the local "Applebee's" and a goodly number of cars on the road....we're not even close to a Depression.

This really bothers me. The restaurants were packed this weekend. I was there too. I asked the hostess how people were paying for their meals. 99% CREDIT CARDS!!!!! Americans don't have a clue how to be poor. How to save and live on cash. So... when this one blows, think currency collapse. It won't be 1935, it will be MUCH worse. Think Berlin 1921.

:(

[Peter Horry]

Post 69

You are making a lot of dad gum assumptions about me, you must be one of them there psychics.

[April Lexington]

Think about this. The masses of Americans have credit card borrowing power because these charges (loans) are bundled and sold to investors who believe people will repay their credit card debt. There has always been fresh money available to fund new credit card charges because credit card interest rates are roughly 18%.

So what happens when investors no longer believe people will pay back their credit card debt? Investors stop lending money to banks for the purpose of funding more credit card debt.

This means credit cards are turned off for all but the very credit worthy (kind of like 1965 when only wealthy people were trusted with credit). Then... how do the masses buy gasoline? How do they pay for restaurant meals? Buy cloths? Take vacations? buy groceries? Health care? Answer: With cash. But... if they don't have jobs, they don't have cash and they don't have credit cards to "bridge" themselves. If they don;t have savings (and, today, who does?) then they can't buy stuff.

Then... they get angry and start attacking rich people who still have jobs or money. In any event, Obama & Co. will be blaming the REPUBLICANS because the Republicans can't mount a serious challenge and can't defend themselves. It will be all leftist media all day blaming all of this on Republican candidates and "failed" policies...

[April Lexington]

Nothing personal. I just clicked on your post so I could make a point. Nothing about you personally. I’m just pontificating is a protestant sort of way!

[bronxboy]

I don’t think it will be handled well.

[Peter Horry]

Post 73

No problem, long as you’re not trying to probe my brain. I was searching for some aluminum foil.

[alrea]

Rising Unemployment - the Really Big Problem

Small business has been the creator of new jobs. What is the government doing for small companies?

[ken21]

remember how maestro alan greenspan looked like a genius

while folks who couldn’t afford houses were refiing,

the hubbie buying a new car, and the lady of the house,

new clothes and furnishings?

[Pelham]

“Our current Recession/Depression is the Fault of the Democrats. “

We need a little less koolaid and a lot more critical thinking.

This is a global event. Last time I checked the Democrats were able to screw up the US at most.

[Pelham]

Welcome to the dark side. Better late than never.

[Pelham]

Wartime rationing wasn’t really part of the Depression. Metal of all sorts became scarce during the war what with scrap drives sopping up all sorts of common items. Even pennies lost their copper and became zinc.

All the same our current state of affairs isn’t anywhere close to the desperate circumstances of the Depression, so my octogenarian father assures me. But the causes of this current downturn are eerily similar to what led to the Depression. Recessions don’t usually threaten the banking system the way this one has, but the Depression did.