Is global depression on the horizon?

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The stock market collapse in 1929

led to start of global depression

Is history repeating itself?

The signs are becoming ominous, the great global depression began in 1931, two years after the stock market collapse of 1929. After the crash, the U.S. ratcheted up interest rates to “purge the system”. Other European countries were forced to follow, raising interest rates to force down wages and so maintain competitiveness. The entire Western world entered a downward spiral, as economies each contracted in turn under the pressure of vice like monetary policy.

That chain reaction since the financial crisis of 2008, so far, has been avoided by bailouts. But fundamentally – the spiral downwards caused by crisis in confidence – is exactly the same now as it was in 1931. And as Ireland, Portugal, Greece, Italy and Spain come under attack, we are reaching the limit of how much that band-aid can heal. Tensions between European countries unseen in decades are emerging.

Standard and Poor’s downgrading of U.S. credit rating, has sent shivers through the world financial markets, fear is taking over, just a few steps away from a fully-fledged panic. And nobody seems to know what to do.

This from the NEW REPUBLIC

There are two types of recessions: the short-term, cyclical wage-price recessions that prevailed after World War Two and that were manipulated by monetary policy, and the deeper recessions, or depressions, like those that occurred in the 1890s or 1930s. What is happening today is more similar to past depressions. It was brought about by a financial crash, which creates a backlog of private debt, coming on top of a slowdown in industrial production caused by global overcapacity. The result has been a paralyzed private sector.

Somebody should do something, and that somebody should be President of the United States. Politics as normal is no longer an option, this is no ordinary crisis. Obama should call back Congress from their month long vacation and bully them to come up an answer before the end of month, or sooner.

Taxes have to be raised, for everyone, loop-holes slammed shut, companies who do business in the United States will pay taxes, sorry off-shore business account holders. No more cuts, wind-down the wars, it’s time to fight at home. What happened in the 1930s should be a warning to all countries with a collective historical memory, but some nations who should know better are experiencing anarchy of their streets.

From a deeper historical perspective, America in 2011 could be Rome in 200AD or Britain on the eve of the first world war: an empire at the zenith of its power but with cracks beginning to show. Once rot takes over it is hard to stop, but not impossible.

First somebody has to do something. Congress has proved incapable of doing anything except cut spending. If Obama is not that somebody, then the next republican president will oversee an unimagined decline and anarchy on our streets.

global depression,great depression
 

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Holte Ender

Holte Ender will always try to see your point of view, but sometimes it is hard to stick his head that far up his @$$.
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11 years ago

Lyndon LaRouche forecast this economic collapse in the ’70s.

TAO
12 years ago

The reality is Obama is the captain of a ship without a rudder. Right now all of our economic policies are being developed by the same people (Wall Street) that created the mess we find ourselves in. The only ideas the right has are really ignorant ones and the left is drawing a blank.

Our solution resides in small business and small banks because the reality is our major corporations are globalized and incapable of creating any economic growth in the US. Just look at the split up of Kraft, they are dividing into a growth company and a dividend company, as they acknowledge that growth is in emerging markets and the US is a mature market.

The reality is the economic system is going to have to deal with the immense amount of personal debt of Americans, deal with foreclosures and homes under water, and find a way to create jobs that pay above current wage scales.

Might need to start off with a massive debt write off plan.

Bradley Scott
Reply to  Holte Ender
12 years ago

Didn’t FDR ramrod the New Deal through a less than enthusiastic Congress? And didn’t he also give himself unprecedented executive powers through the War Powers Act? And isn’t a significant portion of the Patriot Act which gave GWB unprecedented executive power merely the War Powers Act with ‘Germany, Japan,’and ‘Italy,’ changed to ‘Iraq, Iran,’ and ‘Korea?’ Seems to me if one President can reach into the history grab-bag and pull out an expedient remedy to their adminstrational challenges, another President can as well.

lazersedge
12 years ago

I think I have beat on him enough lately. If he hasn’t gotten the message yet I doubt he will. He missed his chance to be a hero during the debt ceiling fiasco.

BigHarryH
12 years ago

You’re in a cheerful mood today.

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