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11-08-2008, 02:14 AM | #1 |
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Worse than the Great Depression
Worse than the Great Depression
by Dr. Krassimir Petrov The mainstream media and Wall Street have reached the consensus that the current credit crisis is the worst since the post-war period. George Soros’ statement that ”the world faces the worst finance crisis since WWII” epitomizes the collective wisdom. The crisis is currently the ultimate scapegoat for all the economic evils that currently plague the global financial system and the global economy – from collapsing stock markets of the world to food shortages in third world countries. We are repeatedly assured that the ultimate fault lies with the Credit Crisis itself; if there were no Credit Crisis, all of these terrible things would never have happened in the economy and the financial markets. The most extraordinary thing is that the mainstream media has never attempted to compare the current economic environment to that preceding the Great Depression. It is assumed outright that the Great Depression could never happen again, thus obviating the need for such a comparison. The macroeconomic fundamentals today are much worse. We are in for a protracted period of economic depression – a depression much worse than the Great Depression, a depression that would likely be remembered in history as “The Second Great Depression” or The Greater Depression, as Doug Casey has called it so aptly. Here is why I believe that this is the case. Duplicating Mistakes from the Great Depression At its core, the environment of the 1990s, and the response of the Fed to the tech-telecom bust has created an economic environment that has encouraged the repetition of the very same mistakes that led to the Great Depression. Here is a concise summary of widely recognized mistakes of the 1920s, with obvious parallels to the current environment:
So, why Worse Than The Great Depression? What makes me believe that the current depression will be worse than the Great Depression? I present six of the most important fundamentals that are “baked in the cake” and that suggest of a Greater Depression.
Since August of 2007 we have witnessed the relentless escalation of the credit crisis: a steady constriction of credit markets, starting with subprime mortgage-backed securities, spreading to commercial paper, then to interbank credit, and then to CDOs, CLOs, jumbo mortgages, home equity lines of credit, LBOs and private equity markets, and then generally to the bond and securities markets. While the media describes the problem as one of illiquidity and confidence, a more serious analysis indicates that boom-time credit has been employed unproductively and so losses must be incurred. In other words, scarce capital has been misallocated, poorly invested, and effectively wasted. No amount of monetary or fiscal policy can fix the errors of the past, just like no modern treatment can quickly restore to health a drug addict debilitated from a decade-long drug abuse. Based on indicators like (1) global real estate overvaluation, (2) indebtedness, (3) leverage, (4) outstanding derivatives, (5) global bubbles, and (6) the precariousness of the global monetary system, I would argue that the accumulated imbalances in the current period surpass significantly those preceding the Great Depression. I therefore conclude that the coming U.S. (and possibly) global depression will be of greater magnitude than the Great Depression of the 1930s. It likely suggests that we are entering a historic period that will likely be known as The Greater Depression. Investor beware! Only gold can protect you from the ravages of another Depression! Professor Krassimir Petrov Krassimir Petrov holds a Ph.D. degree from the Ohio State University in Economics (1999). During 2000-2004 he worked at Sterling Commerce, a subsidiary of SBC Communications. He is Assistant Professor, The American University in Bulgaria teaching Macroeconomics, Money and Banking, and International Finance. Since 2007 Dr. Petrov contributes a newsletter for Agora Financial. |
11-08-2008, 06:02 AM | #2 |
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Re: Worse than the Great Depression
the end of the world as we know it...
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11-08-2008, 06:04 AM | #3 |
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Re: Worse than the Great Depression
The economic downturn about to experienced by the citizens of the United States, well, has not been experienced by them in-country for about 70 years. My only hope is that citizens of the U.S., myself included, will learn the lessons they did, and some they didn't.
Peace to you all. |
11-08-2008, 06:11 AM | #4 |
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Re: Worse than the Great Depression
this is worse than the funky down trurn in 1982, and worse then that year all my christmas gifts broke on christmas morning. Once I found twenty bucks, that was a good day.
it's only a depression if you are out of work, if other people are out of work it is just a resession. I am working on being more bi-polar that way I can ask myself questions and know I will get an unbiased answer. |
11-08-2008, 06:17 AM | #5 |
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Re: Worse than the Great Depression
It's good to see scholars like Petrov highlighting the understatement that the media and public are frequently making in equating the current crisis with the Great Depression.
In reality, there _is_ a historical parallel to the crisis now being faced - it is the long bear market of 1720-1784. That bear market essentially consisted of two major depressions interrupted by two long recoveries in the 1730s-40s and again in the 1760s. The experience of the eighteenth century suggests a couple of things for those preparing to get through the bear market that is unfolding now: 1) The crash will not likely unfold as a straight collapse downward. Instead, it will be punctuated by numerous (sometimes sharp) periods of hopefulness, apparent recovery in quantitative economic indicators, etc. 2) The post-crash recovery is probably going to be a long, drawn-out process spanning decades. Even if the first major economic bottom is reached in or around 2012, survivors of the crash will have to undertake a prolonged and arduous rebuilding process. Society may well not really get back on its feet until the second half of the century. |
11-08-2008, 07:21 AM | #6 |
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Re: Worse than the Great Depression
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11-08-2008, 07:31 AM | #7 |
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Re: Worse than the Great Depression
Stuff you can barter with: food, water, smokes, coffee, seeds, beer, alcohol. Oh yeah, a manual can opener.
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11-08-2008, 04:29 PM | #8 |
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Re: Worse than the Great Depression
So you are all saying we are going to starve to death and die, etc, etc.
Why not just kill ourselves now and get it over with? |
11-08-2008, 07:09 PM | #9 | |
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Re: Worse than the Great Depression
Quote:
..and barter is the key-word: http://baconreport.blogspot.com/2007...st-during.html and start growing lots of marijuana...great barter! |
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11-08-2008, 09:19 PM | #10 |
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Re: Worse than the Great Depression
I think this is why it's going to be so important to get a GOOD MAP and create small communities and grow from the bottom up. getting out of the big cities. Also, I think it's important to keep working on our internal selves as well, because if we buy into the fear of it all, we might make a bunch of decisions based on fear and not creativity.
Maybe our ground crews will end up starting with our neighbors our our best friends or even our co-workers. Whoever we already have some sort of community with and let's say we lose power, internet, phones, we know where these people live and the only means of communicatiing with people if in person. No matter how bad the news is, we need to not feed into the negativity but create peace within and take the peoper measures. |
11-09-2008, 05:10 PM | #11 |
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Re: Worse than the Great Depression
You missed the sarcasm in my post.
I am not worried about a collapse where people starve to death because that wont happen, regardless of what people on this forum think. We do not live in a Vacuum. The world is not static. Like it or not, governments do have an impact and they will keep things like that from happening. Obviously, life may not be all roses and champaign, but it wont be death camps. |
11-10-2008, 03:55 PM | #12 |
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Re: Worse than the Great Depression
Does anyone know where to get the charts he uses to back up the data? I totally agree with his premise but I would like to have the data to back it up.
The thing that everyone assumes when they review what's happening in the current financial world is that there was a mistake made! That we are repeating the mistakes of the past. Mistake is a relative term. Just because something looks like it was unfortunately ignored until it was too late does not mean it was done by accident. Remember the only way you can cause the world to consolidate its finances is by forcing everyone's back against the wall. Countries would never agree to cooperate and bail each other out unless they were put in a position of being codependent. Greed was used as a weapon. It's kind of like the tactic a pool shark; He lays back and lets the greedy opponent get cocky and then ups the anti. The sucker takes the bate, and then is on the hook to be dangled any direct the shark wants him to go! The next steps you will see voluntarily happen is the formation of a European governmental body to oversee the financial crisis. This looks likely to happen in the 1st quarter of 2009. The bail out was the beginning of the end of the world infrastructure that has existed for hundreds of years. A structure which followed the golden rule: "the country with the gold made all of the rules". We officially took that role with Bretton Woods in 1945. The world has been sucked into a financial crisis not by accident but by strategic necessity. We have finally reached a point where the world will gladly accept being boiled down to regions. So why the bailout? The only way to facilitate the consolidation of the world finances is to clear the upside down balance sheets of the small (but still too large) group of banking corporations that exist today. In order to accomplish this, some of the banks must be given money to be used to pay off their debts and also so that that they can buy up the other institutions not deemed to be part of the final small group of institutions to be left. The public has been convinced that the $trillion (soon to be trillions) that the Fed and the European central bank have already printed and have started to hand out will be used to ease credit. By the way, just as a side note, the amount of interest that is owed the Federal Reserve to date for money borrowed by the US government since the creation of the Fed in 1913 is $700 billion dollars. Anybody recognize that number? So the first $200 billion that was handed out By Paulson was to the "good 9 banks" these are the ones that will now have the ability to eat up the susceptible competition and significantly reduce the ranks. So what is the next step in the play? The other bubble that must be removed from the international bank's balance sheets is the credit card debt. This will be the next feel good legislation to hit congress. The cry will "We must help the people pay off their credit card debt!" So now that we've established that we have an unlimited amount of dollars to solve any situation we set up another gigantic bailout to eliminate the credit card liability on the banks ledgers. Don't be surprised also if Barack repeats the history of FDR and calls for the confiscation of privately owned gold! Everyone honestly believes that at the highest levels of the world's financials that the no one saw this coming. We are in an electronic age where statistics are available to analyze and financial ratio or comparison that one wishes real time. The pool sharks of that world set the trap and the rest of the greedy fell for it making us the financial fodder and bringing us to the brink of a consolidated world! |
11-10-2008, 04:10 PM | #13 |
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Re: Worse than the Great Depression
It's becoming rather obvious that the "immediate crisis" that Obama may have to deal with is a force majeure of the US debt and movement to the Amero.
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11-10-2008, 04:29 PM | #14 |
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Re: Worse than the Great Depression
A quick note on the unemployment numbers:
Keep in mind that when the stock market crashed in October of 1929, it took years for the effects to manifest as a social low - the winter of 1932-33 was lovingly called the "Winter of Despair." That is when the zeinith of Depression was felt by most of the masses. As for unemployment, the official census numbers that are used today show a 25-30% national uneployment rate for the winter of 1932-33. This percentage only lasted a month or two, and steadily declined thereafter (after FDR's "Second New Deal"). Secondly, as that only represents the national average, there were regional pockets of unemployment that hovered around 50-60%, and a few that hit 80%. When the stock market crash, credit crunch, and banking failures hit in the early 1930s, the average citizen didn't feel much pain. Then one day, they got up, went to work, and found the place locked - and if their next stop was the bank, it was either closed or out of money. With that said, the numbers we see today associated with the current crisis are nowhere near what they were during the Great Depression. That is not to say, however, that they could not quickly approach them - which sadly, IS the statistical trend. I think unemployment is the key stat. Remember, two, three years ago, the mainstream media made a big deal about 1/10 of a percent increases and decreases in an unemployment rate that had been hovering around 5%. A few years later, and the national average is now rocketing toward 10% (and has passed it in regional pockets). My own guess - I can't see the future and have used no mystical powers, this is just a guestimation - is that over the next 4-6 months, if the national unemployment rate moves past 10%, and quickly, we will see a repeat of the Great Depression. We simply are not creating jobs in this nation, and we're losing, what, 200-300 thousand jobs a month now? If this number does not stabilize, the grandparents who saved every scrap of metal, every grocery bag, and every reciept will become a whole heckuva' lot more understandable by all of us. |
11-10-2008, 05:15 PM | #15 |
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Re: Worse than the Great Depression
Its funny the way he called it "the greater depression". Not the "more horrible depression" or anything like that. No, its "greater" because its an even bigger accomplishment for the NWO gang. They dont half make it obvious do they?
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11-10-2008, 06:07 PM | #16 | |
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Re: Worse than the Great Depression
hi everybody on this thread,
The depression is coming. That there is no doubt. It's just a case of when. The governments of the world are pumping extraordinary sums of limited public money into the financial system so that the banks can continue lending money, doing the very thing they did that got us into this mess in the first place. We can see the outsides begining to crumble with unemployment stats worse than expected, Ford laying off 10% of their workforce in the US, drastic fall in sales of cars, one of the principal sources of income of the US government. Today Circuit City, one of the largest electronics retailers filed under chapter 11, DHL pulled their operations from Ohio, AIG is to get another 150billion dollars of public money http://news.yahoo.com/s/ap/20081110/...ge/aig_bailout as they still haven't managed to sort their problems out, in spite of the 7billion dollar bonuses they will give their execs for Christmas this year. Over the weekend G20 countries met in São Paulo to discuss possible proposals and conclusions at the G20 meeting to be held in the Washington, I believe this week. Reading between the lines, the developing countries are begining to understand that they will have an important part to play in the global economic recovery and are starting to bite back. For years the IMF has been lending money to these countries with a lot of strings attached. Many strings including exploiting these countries for their natural resources. It could very well occur that the wild wolf is about to get bitten back, as the developed countries have a lot more to lose than their developing counterparts. As Brazilian economics secretary Mantega said, "First we will see inflation, followed by deflation during 2009". The already teetering economy of the US which produces very little in terms of national products anyway, I think is going to suffer a pounding. I don't think any of us really know what the great depression was like in 29, but I think we are going to find out. Best regards, Steve Quote:
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11-10-2008, 10:12 PM | #17 |
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Re: Worse than the Great Depression
Hi everybody on this thread,
Just to add a little fuel on the fire, GM posted record losses and is considered a 'bankrupt' company by German banks. When the going gets tough.... http://news.yahoo.com/s/afp/20081110...sautocompanygm Best regards, Steve |
11-10-2008, 10:27 PM | #18 | |
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Re: Worse than the Great Depression
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Note the bit at the bottom?- "President-elect Barack Obama responded to the plea by saying in his first post-election news conference that he is placing "a high priority" on helping the auto industry during his preparations to assume office on January 20." I see quite a few news articles pointing to a financial crisis around the time of Obama's kick off. |
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11-11-2008, 05:20 AM | #19 |
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Re: Worse than the Great Depression
The consumer is strapped and has no more to spend, business can't obtain loans to spend, and the government is giving away billions of tax dollars to any company with their hand out. Yep, we're screwed.
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11-11-2008, 08:38 AM | #20 |
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Re: Worse than the Great Depression
Hey all,
Steve A, Seems to me a big bunch of Autoworkers are going to lose their jobs irregardless of the amount of moola the Feds decide to give or loan Ford, GM and/or Chrysler. When we're not buying new cars then their not building them too. It's a sh___ situation and it'll get worse just before getting better. But peoples of the USA should consider the same sort of thing happening -- across the labor board, I'd suggest. RSF |
11-11-2008, 09:49 AM | #21 |
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Re: Worse than the Great Depression
Faustian Bargian people.blame big business.Outsourcing jobs overseas to double profit margins.Now it's time for everyone to pay.a few 100 billion dollar band-aids cant undo years of screwing up.
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11-11-2008, 06:42 PM | #22 |
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Re: Worse than the Great Depression
Check out this brief interview with Gerald Celente. I can't believe it actually made it on Fox news. He openly says things are going to be worse then the great depression.
http://www.youtube.com/watch?v=46MEqEgdLTg |
11-11-2008, 07:25 PM | #23 | |
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Re: Worse than the Great Depression
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I can feel it... I can feel coming... |
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11-11-2008, 07:27 PM | #24 | |
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Re: Worse than the Great Depression
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11-11-2008, 08:54 PM | #25 |
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Re: Worse than the Great Depression
Hi Everyone,
WASHINGTON (AP) -- House Speaker Nancy Pelosi called for "emergency and limited financial assistance" for the battered auto industry on Tuesday, to be completed within days in a postelection session of Congress. Five days after dismal financial reports from General Motors Corp. and Ford Motor Co., Pelosi backed legislation to make the automakers eligible for help under the $700 billion bailout measure that cleared Congress in October. http://hosted.ap.org/dynamic/stories...MPLATE=DEFAULT Best regards, Steve |
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