That is exactly what a tightening leading market will bring. Which I am glad Bernanke is in control and not the people who want to let our financial institutions and housing markets crash.
—That is exactly what a tightening leading market will bring.—
Loans were virtually unaffordable in the late 1970s (20 percent fixed-term for good credit mortages!) and I don’t recall breadlines or 20 percent unemployment. Even in a worse-case scenario:
1. The modern US government would NEVER let things get that bad. It would lead to socialist revolution. You’d see public works spending like crazy to keep the employment rate up. It would be Keynes on steroids.
2. Depressions are always temporary. From the near 30 percent unemployment of 1932, by 1941 unemployment was down to 9 percent. The economy was on the verge of a boom that was interrupted by US entry into WW2. Germany was an even better example; 50 percent unemployment in 1930-32, virtually full employment by 1939. An economic depression is to an economy what burning thatch is to a lawn; it is a savage way of eliminating a lot of thatch (i.e. economic ineffeciency), and the economy that returns is much more vibrant than the pre-depression one.