Thursday, March 20, 2008

The Coming Depression?

From the The Los Angeles Times :

"Dysfunctional capital markets, frantic central banks, stressed-out consumers, fear and uncertainty -- all are alarming echoes of the global economic cataclysm of the 1930s."

"Which raises the inevitable question: Could another Great Depression be lurking over the horizon?"

"TV news programs show grainy footage of Depression-era bankers as reporters tick off grim economic statistics. The Federal Reserve invokes powers it hasn't used since the 1930s. Critics of President Bush's economic policies are emboldened to use the H-word: "Hoover." '

Comment: This article points out that the reason a depression is unlikely is due to a Fed that takes an active role when a crisis hits like the Bear Stearns incident. The article doesn’t really outline that when the Fed does bail out failing firms, the taxpayer is the one who is usually on the hook. And some of those taxpayers (some of them struggling to make ends meet) may never benefit from government bailing out a large investment bank. The fed holds a 30 billion dollar liability from Bear Stearns. That's me and YOU.


The Blogmaster said...

That's what we get for electing corporate puppets.

VulcanHammer said...

I have to agree with you on that one. It amazes me that the Fed has basically saved an investment bank that made some terrible decisions. They should have let Bear Stearns crash.