Comments on: Great Depression? A Reality Check http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html like a friend telling you about money ... Thu, 19 Nov 2009 19:44:17 -0600 http://wordpress.org/?v=2.8 hourly 1 By: TFB http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html/comment-page-1#comment-1004 TFB Tue, 07 Oct 2008 03:48:23 +0000 http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html#comment-1004 Erik - Thank you for pointing to the NY Times article. It said explicitly "Almost no economist thinks that even a terrible downturn would look like the Depression. ... So a Depression-like contraction — a 30 percent drop in economic activity — is highly unlikely." Therefore even though the mechanics are similar to what caused the Great Depression, they won't cause another Great Depression. That does not contradict with what I wrote in this post. I'm not advocating we do nothing. We need to take care of insolvent banks. FDIC has got that one down. No customers are hurt. Banks remain open after they fail -- only the shareholders and sometimes the bond holders are wiped out. It's not a bailout when the shareholders are wiped out. But buying junk assets from banks is totally different. Erik – Thank you for pointing to the NY Times article. It said explicitly "Almost no economist thinks that even a terrible downturn would look like the Depression. … So a Depression-like contraction — a 30 percent drop in economic activity — is highly unlikely." Therefore even though the mechanics are similar to what caused the Great Depression, they won't cause another Great Depression. That does not contradict with what I wrote in this post. I'm not advocating we do nothing. We need to take care of insolvent banks. FDIC has got that one down. No customers are hurt. Banks remain open after they fail — only the shareholders and sometimes the bond holders are wiped out. It's not a bailout when the shareholders are wiped out. But buying junk assets from banks is totally different.

]]> By: erik http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html/comment-page-1#comment-998 erik Mon, 06 Oct 2008 14:56:52 +0000 http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html#comment-998 The NY Times had an interesting article (click on my user name to read it) on how the basic mechanics of today's credit crisis is similar to what caused the Great Depression. The lesson from the article is the current "bailout" is needed to limit the downside risk of an economic disaster that could affect everyone, which unfortunately requires us to provide a crutch to some of the banks that caused the mess in the first place by taking on too much risk. I don't like the idea of taxpayers funding a "bailout" of Wall Street, but also recognize the need for the credit market to function properly for everyone's sake. The NY Times had an interesting article (click on my user name to read it) on how the basic mechanics of today's credit crisis is similar to what caused the Great Depression.

The lesson from the article is the current "bailout" is needed to limit the downside risk of an economic disaster that could affect everyone, which unfortunately requires us to provide a crutch to some of the banks that caused the mess in the first place by taking on too much risk.

I don't like the idea of taxpayers funding a "bailout" of Wall Street, but also recognize the need for the credit market to function properly for everyone's sake.

]]> By: john http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html/comment-page-1#comment-992 john Thu, 02 Oct 2008 19:51:12 +0000 http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html#comment-992 i'm assuming it's a real possibility and so are very smart people. i think it's deeply irresponsible to criticize the bailout based on a look around your neighborhood today. nobody is saying the calamity is here. everyone is saying if/when it arrives, it will be too late. this is the bizarre stuff that separates bloggers from news reporters. IT WILL SNOW? HERE? I WAS JUST OUTSIDE AND IT'S SUNNY! you bet credit would evolve. you'd go to the cash machine and it would be empty. so you'd hit up your neighbor for cash. hope that works out for ya. you had many great posts but really i can't sit and read this crap. i'm assuming it's a real possibility and so are very smart people. i think it's deeply irresponsible to criticize the bailout based on a look around your neighborhood today. nobody is saying the calamity is here. everyone is saying if/when it arrives, it will be too late. this is the bizarre stuff that separates bloggers from news reporters. IT WILL SNOW? HERE? I WAS JUST OUTSIDE AND IT'S SUNNY!

you bet credit would evolve. you'd go to the cash machine and it would be empty. so you'd hit up your neighbor for cash. hope that works out for ya.

you had many great posts but really i can't sit and read this crap.

]]> By: TFB http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html/comment-page-1#comment-990 TFB Thu, 02 Oct 2008 17:06:03 +0000 http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html#comment-990 John - You are assuming the credit markets will evaporate. I don't make that assumption. The same for that asteroid coming discussion. I don't think it's a foregone conclusion that the asteroid is coming. You don't want to launch asteroid destruction missions at distant asteroids. The credit market will probably change from its current shape and form. But it hasn't been in its current shape and form forever. Our economy worked just fine before credit default swaps and collateralized debt obligations. As I mentioned in the other post, the FDIC process is working well. We know how to close down insolvent banks. We just have to use it more aggressively and more often. When the weak players are taken out of the market, we will have a healthy credit market again. John – You are assuming the credit markets will evaporate. I don't make that assumption. The same for that asteroid coming discussion. I don't think it's a foregone conclusion that the asteroid is coming. You don't want to launch asteroid destruction missions at distant asteroids. The credit market will probably change from its current shape and form. But it hasn't been in its current shape and form forever. Our economy worked just fine before credit default swaps and collateralized debt obligations. As I mentioned in the other post, the FDIC process is working well. We know how to close down insolvent banks. We just have to use it more aggressively and more often. When the weak players are taken out of the market, we will have a healthy credit market again.

]]> By: john http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html/comment-page-1#comment-989 john Thu, 02 Oct 2008 16:33:05 +0000 http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html#comment-989 you are freaking me out. the evaporation of credit markets has not fully occured. should it do so, then you will see massive social change. you didn't read the link i posted about the asteroid coming toward earth. IT HAS NOT HIT YET. i cannot accept that a finance blog is not going to look at the root cause of concern WHEN THAT CONCERN IS FINANCE ITSELF. forget this i'm gone enjoy the yes men. you are freaking me out. the evaporation of credit markets has not fully occured. should it do so, then you will see massive social change. you didn't read the link i posted about the asteroid coming toward earth. IT HAS NOT HIT YET. i cannot accept that a finance blog is not going to look at the root cause of concern WHEN THAT CONCERN IS FINANCE ITSELF. forget this i'm gone enjoy the yes men.

]]> By: Debt Relief http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html/comment-page-1#comment-982 Debt Relief Thu, 02 Oct 2008 00:26:53 +0000 http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html#comment-982 I think you are 100% right on on this. Thanks for taking the time to post I think you are 100% right on on this. Thanks for taking the time to post

]]> By: enonymous http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html/comment-page-1#comment-978 enonymous Wed, 01 Oct 2008 17:40:50 +0000 http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html#comment-978 kudos to you i couldn't agree more sadly my rep voted for the bailout too, despite my emails that i sent my senators will vote for it tonight too and the new plan is even worse (except raising FDIC limits which make sense) oh well, it's government as usual, and very much business as usual too kudos to you
i couldn't agree more

sadly my rep voted for the bailout too, despite my emails that i sent

my senators will vote for it tonight too

and the new plan is even worse (except raising FDIC limits which make sense)

oh well, it's government as usual, and very much business as usual too

]]> By: Ted http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html/comment-page-1#comment-975 Ted Wed, 01 Oct 2008 15:41:41 +0000 http://thefinancebuff.com/2008/10/great-depression-a-reality-check.html#comment-975 Well said. Well said.

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