Comments on: Give Thanks: This is NOT the Great Depression

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By: DLS

DLS — Sun, 30 Nov 2008 03:48:44 +0000

Just a quick note, by the way, that one of the threads on The Truth About Cars (which is highly critical of the Detroit Three, first, second, and third most of all about the Big Three's management) used this same poster in an earlier thread about possible conflicts to develop between the Big Three and the suppliers. In case readers have ignored (for whatever reasons) the link before, here it is again.

http://www.thetruthaboutcars.com/editorial-gene...

By: DLS

DLS — Sat, 29 Nov 2008 21:30:24 +0000

It's not the Great Depression. However, it's possible we'll get a deflationary spiral, and in any case we have an irresponsible media that is engaging in hype and sensationalism, which doesn't help. How will their tune change when Obama replaces Bush in the White House and will the media have short-sightedly done more damage than it realized between now and then, I wonder. Japan didn't have a Great Depression, but it, the default modern model for other developed nations for a deflationary period, illustrates what we may face, if not somewhat worse, if our economy really does fail. No, we don't need to make things worse by starting to enact trade restrictions. Paul Volcker was most credited with braking inflation in the 1980s. He's good to have with us now, and the big question now will be if he tries hard to forestall deflation and be stimulative or if he'll still fear inflation as many still do, and do as others would, not act as strongly as might be desired.

By: mikkel

mikkel — Thu, 27 Nov 2008 22:57:49 +0000

I wish people would stop saying "oh we don't have 25% unemployment and not many banks have failed" as evidence that things aren't bad....since the numbers and rate of acceleration are similar to what they were in 1929 and that sort of comparison is looking at the depths of the Depression.

There is one thing that is commonly overlooked and that is that the United States does not have the same role it had then. As Yves Smith mentions our primary problem then was running a gigantic trade surplus, and when our trading partners collapsed under their debt burden, we suffered enormously by trying to keep up exports.

The US was a massive creditor before the Depression and ran a very large trade surplus, to the point where the gold accumulation by the US was destabilzing to the world financial system. Sound familiar? That is the role China plays now, not the US.

What happened to the nations that were in the US's shoes at the onset of the Great Depression, the overconsuming, indebted European customers of the US? They devalued their currencies, defaulted (or partially defaulted and forced a renegotiation) on foreign debts, and suffered milder downturns than the US did.

In essence, if our policy makers forget this, then they are in great danger of creating the problems that Peter Schiff is so worried about. Already China is starting to position itself in a way depressingly similar to the role that the US did during the Depression.