Your view is one sided and doesn’t take into account reality, Oil consumption in the United States increased less then 1% in the last two years, high oil prices effect behavior, people buy smaller cars, buy homes closer to work, do things that effect long term outlook of oil consumption. The effects of demand also effect supply. A 1929 style depression would greatly reduce our demand for oil, as it would for other countries. It would also reduce our imports; it’s a bit hard for China to wage a war against its number one customers when its number one customer isn’t buy its goods that it’s producing. Also if China wages a war against us, beside the loss of its best customers for its goods, the value of their investments in the u.s. (Treasury bonds that they hold) would value greatly, so in the need it hurts them more. A 1929 style depression would greatly reduce the need for food consumption as people would cut back, producers wouldn’t be able to pass price increases off to the consumer and the price of food would stay the same or fall.
I don't see a depression happening, not with the fed lowering interest rates and lending money like its going out of style, one of the major reasons behind the 1929 depression was lack of available credit for business to function party due to the gold standard and government policies that cut off trading with the rest of the world. As for the current mess were in, I think were about to reach bottom soon if not there yet, Easy lending stopped in 2007 for the subprime mortgage houses, so by 2009 all teaser rates would of have adjusted by then, which means foreclosures would peak soon there after, the falling of housing pricing should also peak with foreclosures. Once banks have an understanding of the value of their holdings, they could know how much capital they have to reserve for loss and start lending again, part of the problem right now is that no one knows who holds what and how much its worth and with falling home values no one wants to lend because they don't know what they have to write off and how much capital they need in reserve for those loses. The good news is that during the boom years corporations never really over extended themselves, corporations are sitting on records amounts of capital right now so they don't need banks to lend from to keep their business going, but companies that lived off of easy credit will have a harder time going forward.
I'm too old to agree with this. I read (and felt that the time) like we were selling everything to the Japanese, then to the Persians... They never invaded us.
Yeah I remember how in the 80s everyone talked about the Japaneses were going to take us over economically. Then came the 90s, 5 recessions and a period of deflation and only now is there economy starting to crawl back,
This is incorrect. This is a free PDF version of Murray Rothbard's America's Great Depression. http://www.mises.org/rothbard/agd.pdf You should read it. It dispels a lot of common myths, such as the gold standard was to blame, or that the government did not ease credit to fight the depression. On the contrary, credit was pumped in, and like you see today, temporarily stimulated the market in an upward trend. Anyways, please read it. Every Rothbard book I have read has been a gem. I'll give you that the sub-prime bottom is fast approaching, but what do you do about the dollar? We're headed for massive inflation due to all of the credit easing.... So while the financials may clean up a bit, the only way to restore the system to some sort of reasonable balance and bring the dollar back up to a sustainable level is to put interest rates in the 15+% range for several years. That's how I see it at least. The FED is literally running the presses at a burnout rate right now. The money supply in a period of losses and defaults is growing beyond imagination. And which corporations would this be?
I find it "very" hard to believe American can go under. This is due to the fact of our military strength, military intervention would take place long before any collaspe of the US economy, only question is what will be the out come of that.
So you're saying that we would threaten our creditors with our military if they called us on our debts?
http://en.wikipedia.org/wiki/Great_Depression#Causes 9000 banks don’t fail because there is ample liquidity in the system. This was from last year http://money.aol.com/news/articles/_a/new-sandp-record-cant-be-ruled-out/20070102073409990001 As long as the dollar falls in measured terms, and doesn’t look like a panic or the dollar drops more then 5% in a day or so then the Fed has no interest in bailing out the dollar. You complain that Americans over spend and that America doesn’t build/produce enough will then you should cheer a failing dollar because it fixes those two issues that you complain about, it makes our products more competitive on the global markets, and two it reduces the demand for foreign goods closing our trade gap, one of the reasons China owns a lot of our debt (which is another issue you complain about) is because we keep sending dollars there for their goods, they take those dollars and buy our debt. The less products we buy from them, the less dollars sent over there, the less debt they buy. As for inflation, often inflation falls after a economy enters a period of recession, this time should be no different, we don’t need 15% interest rates even though you may want them, because that would create a depression style environment.
This is a neophyte mistake. Confusing liquidity with solvency. Right now the FED is pumping liquidity into the system, and it's not making financial groups more solvent. What has to be recognized is that there is a point where you pump so much liquidity into the system, you stop diluting the bad investments and you begin to dilute and hinder the turnaround. Please read the PDF I linked. The problem is so much credit, that bad investments are made. You can't clean up bad investments by creating more over investment.