The Recession spelled Depression

During the past 50 years, the United States and the Free World economy has survived several notable recessions.

This expansion/ contraction cycle is a normal factor in our economic system. The excesses during expansion times have resulted in economic bubbles, which inevitably burst when they become too excessive.

These expansion and contraction cycles have been analyzed , dissected, and  critiqued with the hindsight of 20/20 vision.

Each recession that has resulted from an economic bubble, has been mitigated and softened by the active manipulation of interest rates and money supply by the Fed.

Why isn’t it working now?

Why does it feel like this is different and much more serious?

The answer is sadly obvious. We have broken the system.The game was too rich and easy, and the Bulls and Bears became PIGS.

When the economy began entering a  recession in early 07, the government was in denial. The Fed slowly began to lower interest rates; however,  Wall Street continued to telegraph a strong economy and good resiliency, and most economists ignored, or totally missed the growing danger signs.

The Dow Jones hit its high in late Summer,08, then dropped dramatically as Summer turned into Fall.

First Bush and later Obama began throwing $Trillions at the banking system and other stimulus and bailout targets in a reactive attempt to stave off the recession which threatened to spiral out of control.

For the past almost 60 years, lowering interest rates and massive spending has cured our recessionary problems, with certain notable exceptions. i.e. the late 1970’s early 80’s, which was only cured by a painful dose of Reganomics.

This time the historical response is failing.

The Fed has lowered interest rats to almost 0%, and the Politicians have thrown unprecedented $trillions  in bailouts.

The TARP, AIG, Auto, Insurance, and huge spending appropriations, have been sucked down a deep bottomless hole, with very little visible effect on the economy. 

What Has Changed?

The housing bubble which burst has exposed the shaky house of cards which our banking system was built upon.

As house values dropped, and people lost their jobs, the banking system subprime lending fiasco began to come into sharper view.

Our greed for instant gratification and always expanding profit margins led to the creation of many lending assets which quickly became toxic.

With the largest number of Americans in history ,unemployed, and our major middle class asset proving to be a falling rock rather than a soaring balloon, Americans became frightened..and… stopped spending money they didn’t have.

MORE TO Come Later

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