As I spend more and more time pondering the actions of our Treasury and Fed, along with the last Depression and the actual steps taken by various administrations (most specifically Hoover and FDR), I come to the conclusion that those who claim to know so much about it, and how to prevent it, are in fact either talking out their ass - or worse.
Yes, this means you Ben.
See, the common rhetoric is that we had a Depression because credit tightened and liquidity dried up - the government took a "you made a mess, you burn in it" attitude.
This, however, is simply not true, and worse, it ignores the fact that The Fed created the bubble in the 1920s that led to the Depression, just as The Fed created this bubble that is now bursting!
In fact, one wonders - if Ben was chosen for his expertise on The Depression, was (and is) his intent to cause the second one?
You could hardly pick a better matching set of conditions.
(..)
In short we are setting up for what looks like an even Greater Depression, perhaps something similar to the 1873 panic. While the causes would be very different in practice, in principle they seem to be the same - malinvestment caused by "easy money" that, when business conditions turn, becomes "protected" by government - leading to Depression instead of an ordinary business recession and bankruptcy of those who overextended themselves. Now, as then, we have companies that have spent incredible amounts of money to buy influence - it was recently disclosed that AIG, for example, continues to pay lobbyists in an attempt to loosen regulation even though they are now surviving on money borrowed from The Fed!
Be prepared, get out of debt and position yourself so you can survive without the use of consumer or business credit of any sort.
If you have liquid cash, you will be in a great position to pick off property and other goods that people are forced to abandon as the situation worsens. There are many people who became fabulously wealthy as a consequence of The Depression, and all of them had one thing in common - they had cash when things got really bad, and were able to pick off assets cheaply in forced sales.
The TARP has now been proven a failure; even Secretary Paulson has abandoned his original plan, but what he hasn't done is come back to Congress (or the American People) and apologized for the idiocy of his original proposal, nor has he taken responsibility for the equity market crash that this bout of insanity precipitated. Not that this is surprising in the least - expecting anyone in government to have the smallest bit of integrity and admit that they screwed the pooch and hosed Americans is asking too much, isn't it?
After all its not his retirement that got shredded - its yours.
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