"Partying Like It's 1929"

[n2nh]

If Ben Bernanke manages to save the financial system from collapse, he will — rightly — be praised for his heroic efforts.

But what we should be asking is: How did we get here?

Why does the financial system need salvation?

Why do mild-mannered economists have to become superheroes?

The answer, at a fundamental level, is that we’re paying the price for willful amnesia. We chose to forget what happened in the 1930s — and having refused to learn from history, we’re repeating it.

Contrary to popular belief, the stock market crash of 1929 wasn’t the defining moment of the Great Depression. What turned an ordinary recession into a civilization-threatening slump was the wave of bank runs that swept across America in 1930 and 1931.

This banking crisis of the 1930s showed that unregulated, unsupervised financial markets can all too easily suffer catastrophic failure.

As the decades passed, however, that lesson was forgotten — and now we’re relearning it, the hard way.

"Partying Like It's 1929" (http://www.nytimes.com/2008/03/21/opinion/21krugman.html?ei=5087&em=&en=2f99b2271771220c&ex=1206331200&pagewanted=print)

[ae4fa]

Yup.

When the culprits weren't bailed out by the govt, many simply bailed out the window.

[WA8FOZ]

<<This banking crisis of the 1930s showed that unregulated, unsupervised financial markets can all too easily suffer catastrophic failure.>>

Yep. Fortunately, the regulatory components of the New Deal saved the plutocrats from themselves. If we are equally fortunate, Obama or Hillary will be allowed to turn the trick again. If not, start learning Mandarin or Hindi....

[G0GQK]

The people who caused this global problem didn't forget about 1929 they didn't know about 1929 ! Remember how it began, it was panic and rumours and the problem began in 1927 and everyone, which means all the people in America, were involved, not just Wall St.

This occured seventy nine years ago, some people can't even remember what they ate at their last dinner meal ! I seem to recall when people in the US were paying ridiculous money for shares in dotcom companies, they lost vast amounts of money and that was recently.

The driving force in insurance and banking is GREED, people want MONEY and every company management team in the financial world is responsible, and that means many thousands of people.

G0GQK

[KU0DM]

This is similar to the Hoover situation, the Hoover now? GWB

NPR had something on this, they compared the current situation to the economic situation during Hoovers term, also the actions taken. You'd be shocked at how similar it all is! Deja Vu!

Yes, I have been listening to NPR a lot, very interesting. Their Marketplace is traveling around the world, they had a very interesting section on the economic growth in Dubai.

[KA8NCR]

This isn't going to be like 1929. For some people, it's going to be far worse,
while others will do comparatively well.

The real problem is that the market is going to crap just as baby boomers are setting up for retirement. If things do crash, these people are going to be unable to wait around long enough for the equities to come back around. That means, they're not going to retire and this nation is going to be faced with a real employment crisis. This will accelerate middle-class wage deflation as they are no longer competing against the gray-hairs, but overseas as well. It could also set off a chain of public outcry that turns the table on Reagan-era deregulation of the financial sector. Really, the sub-prime mess is a sector problem, but the current administration was willing to let the bubble ride.

Another change this will produce is more and more people will come to realize the absurdity of a "service economy". Those who don't produce are going to become the servants of those who do. And with the trillions of dollar reserves in Japan, China and Britain, we are, in current vernacular, "owned". China is engaging in classic mercantilism, and it's all fine and well when everyone has money to buy the goods coming in. But when their money barely covers rent, food and heat, things are going to get ugly in this country. People who have nothing to lose and everything to gain can cause a lot of problems; just look at the French Reign of Terror.

People who have sat on rental property will do well, because a lot of people
are no longer capable of owning homes -- as it was twenty years ago.


One of the best articles on the Bear-Sterns debacle. It's editorial, but it makes a lot of sense.


After the Fed rescued Bear to head off a firesale of mortgage securities, it encouraged JPMorgan to make such a low bid that almost all deferred compensation was wiped out. It wanted to avoid moral hazard or, in plain language, to teach bankers a lesson they would not forget.



http://www.ft.com/cms/s/0/f3dc5088-f7b2-11dc-ac40-000077b07658.html (http://www.ft.com/cms/s/0/f3dc5088-f7b2-11dc-ac40-000077b07658.html)

[wa8rti]

Getting the financial system back under control would mean regulation (probably by the Feds). But KG4JYD (in a post over on the political junkie) has stated that there is still excess regulation and that industry/trade associations are all that are needed to bring business into line. Oh yes and the power of the consumer to not patronize bad actors in the business world. He has made assurances that he is familar with the 19th and early 20th century struggle to rein in and control corporate greed and wants us to believe that there is nothing to be learned from that history. Who are we to doubt.:rolleyes:

[KA8NCR]

Another good article this morning that talks about Pimco's Bill Gross and his taken on the current situation.


"says the current crisis feels different — in both size and significance."


But here's the kicker of the article, and the reason we're in the mess we're in now:


"In the past decade, there has been an explosion in complex derivative instruments, such as collateralized debt obligations and credit default swaps, which were intended primarily to transfer risk."


Sometimes the biggest threat to the free market is the free market itself. Here is a shadowy part of Wall Street that isn't interested in creating wealth by taking money, finding potential energy in a business and using it to create more wealth. This is a system that's designed to push the hottest potato off on someone else. We're seeing that the last person holding the bag, pays. And in this case, it's the taxpayer.


http://www.nytimes.com/2008/03/23/business/23how.html?ref=business