Is It 1929 All Over Again?

[marmar]

from OurFuture.org:



Is It 1929 All Over Again?
By Terrance Heath

October 24th, 2008 - 11:44am ET



It was 79 years ago today that the 1929 Wall Street Crash marked the beginning of America's slide into the Great Depression. As we find ourselves in the middle of an economic crisis — during which the Great Depression has been referenced by just about everyone — I decided to mark the anniversary by talking with economist and author Robert Kuttner about how we got from the Crash of 1929 to Meltdown 2008, and how we can avoid a repeat of what followed the 1929 crash.

TERRANCE HEATH: In his column about the 79th anniversary of the 1929 Wall Street Crash, Professor Maury Klein asked, "Is it 1929 all over again?" Is it?

ROBERT KUTTNER: Yes, this is 1929 all over again. For the same reasons. The crash of 1929 was caused by too much speculation, with too much borrowed money, with too many conflicts of interest and too little transparency. And in the 1930's the New Deal mostly repaired that by much tighter regulation of banks, much stricter supervision of conflict of interest, much greater controls on leverage and much grater disclosure for investors.

But it fixed the problem for the known universe of financial institutions, and after the '70s all kinds of new exotic financial instruments were invented. And because deregulation came back into fashion, and the right wing really took over the conversation as well as government regulators did not keep up with the new instruments that Wall Street invented. And so all the same kinds of uses crept back in, and it took about 20 years until the house of cards was so high and so rickety that you then had the same kind of crash. ......(more)

The complete piece is at: http://www.ourfuture.org/blog-entry/2008104324/it-1929-all-over-again

[HereSince1628]

1. Nope, it's worse.

Wish it weren't, but it is. This economic storm is gonna leave our little beach house in total ruin.

[bemildred]

2. Yep, we were not "policing the globe" back then, for one thing.

And a lot more people were still on the farm back then.

[HereSince1628]

3. And we weren't spending 12 billion a week on a stupid war.

The Cheney administration vampires have sucked us dry and we are nothing but an empty hull.

[Two Americas]

6. good points

Also -

- There was public transportation then.

- There were existing Labor and progressive political movements then.

- People still had many traditional skills that have been lost.

- Communities were stronger and more cohesive.

- Extended families were not dispersed.

[mckara]

4. After the Crash of 1929, Stock Markets Reached Their Lows in 1932

On July 8, 1932, the Dow bottomed at 41.22.

[Warpy]

5. It is and it isn't

So far, the stock market is just losing the hyperinflation of the 90s, propped up for almost 8 years by throwing money at rich people and pushing the treasury close to bankruptcy.

As for the rest of it, the parallels are spooky: real estate crashing, people's wages held down as wealth is concentrated, families taking on huge debt burdens to maintain the lifestyle their parents had when wages were good, and a GOP administration with its thumbs up its ass and no ideas except throwing more money at the rich to prop the stock market up.

What we are going to see are fewer stores in the malls starting in January, longer lines at shrinking charities, and fear all over. We might even see isolated bank runs as rumor fuels local panics. Things will get worse before they get better. We have 40 years of conservatism from both parties to overcome.

If you want to know where Depressions come from, follow the debt. When wealth concentrates and the economy is functioning on a combination of debt leveraged on illusory "bubble" profits and wishful thinking, it will collapse.

[Alcibiades]

7. It will not be as bad

Because it will be less global. I think the prospects for India, China and the rest of Asia look good. They might use this opportunity when exports slow to build their domestic markets and increase the size of their middle classes.

For us, it will be different. We will have to start making things here again, for one--back then, we still made things here. We came out of the Great depression a bigger economic power than we went in, and that won't happen this time. This time, too, the rich have farther to fall. Working folks in the US know how to economize, and are used to it. The well off will not handle it nearly so well.