Depression Diary

[Onkel Neal]

Ah, this is great reading, and a little scary too!

Benjamin Roth's chilling chronicle of hard times (http://www.thebigmoney.com/articles/history-lesson/2008/10/23/depression-diary)

For more, click on the first (http://www.thebigmoney.com/articles/history-lesson/2008/10/23/depression-diary), second (http://www.thebigmoney.com/articles/history-lesson/2008/10/28/depression-diary-part-2), third (http://www.thebigmoney.com/articles/history-lesson/2008/11/06/depression-diary-part-3), and fourth (http://www.thebigmoney.com/articles/history-lesson/2008/12/05/depression-diary-part-4) parts. This is the fifth installment (http://www.thebigmoney.com/articles/history-lesson/2009/02/05/depression-diary-part-5). Part six (http://www.thebigmoney.com/articles/history-lesson/2009/10/26/town-panic-stricken)(I think)

Benjamin Roth was born in New York City in 1894 and moved shortly thereafter to Youngstown, Ohio. He received a law degree and moved back to Youngstown after serving as an Army officer during World War I. When the stock market crashed in 1929, he had been practicing law for approximately 10 years, largely representing local businesses. After nearly two years, he began to grasp the magnitude of what had happened to American economic life, and in June 1931, he began writing down his impressions in a diary that he maintained intermittently until he died in 1978. His perceptions and experiences have a chilling similarity to our own era, and The Big Money believes that Roth's words—though they are 75 years old—have much to teach us today.

I'll be the first to say I really don't know if govt bailouts started by Bush and escalated by Obama are necessary or working. But one thing I know, we sure don't want this avalanche of financial destruction to rain down on us. :dead: The chain reaction effect of runs on the banks, can you imagine? Yikes!

Mookie, what are your thoughts?

[AVGWarhawk]

I can not say with any certainty that the bailout helped, hindered or was a complete waste of time. Did it help those that actually received money? Well sure. Did it help me directly? Not that I'm aware of. The markets have stablized it would seem. That is a good thing. Yes, it would be quite ugly if we went into an economic crisis as Roth did.

[Onkel Neal]

Yeah. This is a good follow up article on the diary. (http://www.nytimes.com/2009/10/17/business/17nocera.html?_r=1)


“The only way to break the economic deadlock brought on by the Depression was to shock it back to life,” said Mr. Brinkley, who then added that for all of Roosevelt’s willingness to experiment and spend, the reason the Depression lasted so long was that the president didn’t spend enough.

That, of course, is what most people believe today — and that dogma is the reason the government last year threw literally trillions of dollars at the banking system to keep it from collapsing.

[AVGWarhawk]

To a point Mr Brinkley is correct. Look at the movie, "It's a Wonderful Life", what happens when the deposit is lost? Collapse of the bank and the home owners. Jimmy telling Mr. Brown, why your money is tied up in Mr. Greens house and Mr. Green, your money is tied up in Mr. Smiths house. You get the picture. A run in the bank. Banks need to keep solvent. It was hard to do when loans are defaulting like they are.

[Jimbuna]

In the UK the banks were bailed out to the tune of approximately £150 billion.

The initial cost to the citizens of the UK over the next 24 months is estimated to be somewhere in the region 50,00 job losses and massive cuts in public services (dependant on which source you enquire of......this one being UNISON the largest public sector union in the UK).

It is believed the debt may not be repaid for at least 15 years.

Banks continue to pay out huge bonus sums to the highest paid employees :nope:

[August]

To a point Mr Brinkley is correct. Look at the movie, "It's a Wonderful Life", what happens when the deposit is lost? Collapse of the bank and the home owners. Jimmy telling Mr. Brown, why your money is tied up in Mr. Greens house and Mr. Green, your money is tied up in Mr. Smiths house. You get the picture. A run in the bank. Banks need to keep solvent. It was hard to do when loans are defaulting like they are.

I agree with your premise but you need to watch the movie again dood! :DL The run and the lost deposit are two separate events.

[mookiemookie]

Mookie, what are your thoughts?

My thoughts are this cold is absolutely kicking my ass. I do have some thoughts on this, i'll share them when my brain can actually function.

In the meantime, one of the best books on the bailouts is Bailout Nation by Barry Ritholtz. I can't think of a better place to start, whether you're big into economics or not, Ritholtz lays it out in easy to understand language exactly how we became a bailout nation:

http://www.amazon.com/Bailout-Nation-Corrupted-Street-Economy/dp/0470520388

[Onkel Neal]

:o Changing the subject slightly, has anyone watched the Frontline program about Brooksley Born and the CFTC? Caution, this may incite your passions. (http://www.pbs.org/wgbh/pages/frontline/warning/view/)

[AVGWarhawk]

I agree with your premise but you need to watch the movie again dood! :DL The run and the lost deposit are two separate events.

You are correct but it was just an example made easy to understand. :D My money is tied up here and there but here and there are defaulting. I'm feeling the pain.

[AVGWarhawk]

From Neal's posted link


"Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."


Alot in Washington think the entire system will "just take care of itself." More often it does. When it does'nt, time to look for a scape goat.

[Onkel Neal]

From Neal's posted link



Alot in Washington think the entire system will "just take care of itself." More often it does. When it does'nt, time to look for a scape goat.


Yeah, I'm a free market guy, and the fewer rules, the better. but that doesn't mean zero rules. People cheat and smart people will screw up the system if there is no oversight.

A lot in Washington no longer believe in the market will always fix itself, Greenspan and Gramm among them. (http://curiouscapitalist.blogs.time.com/2009/01/24/critiquing-phil-gramms-explanation-of-the-financial-crisis/)


There was clearly the implication that deep government involvement had screwed up the mortgage business, but a couple years ago Gramm (and Alan Greenspan) seemed to think that the magic of modern financial markets would compensate for all that government meddling. Now they don't.

[nikimcbee]

:o Changing the subject slightly, has anyone watched the Frontline program about Brooksley Born and the CFTC? Caution, this may incite your passions. (http://www.pbs.org/wgbh/pages/frontline/warning/view/)
I'm trying to watch it, but vista updated itself in the middle of the show:damn:. I love the ominous music they play...:haha:

[AVGWarhawk]

Yeah, I'm a free market guy, and the fewer rules, the better. but that doesn't mean zero rules. People cheat and smart people will screw up the system if there is no oversight.



Sure, few rules but certainly needs to have good strong oversight as you suggest. Just say, "Madoff." That is enough for me. Seeing the pictures of how he was living LARGE and now those that entrusted him have ZERO. Incredible.

[Onkel Neal]

:o Changing the subject slightly, has anyone watched the Frontline program about Brooksley Born and the CFTC? Caution, this may incite your passions. (http://www.pbs.org/wgbh/pages/frontline/warning/view/)

Hmmm... I was a bit surprised this thread and that program did not get a lot more responses here, seeing how long people here can discuss the bailouts, financial crisis, Wall Street bonuses, etc.... :hmmm: Stuff like Wal-Mart profits got more discussion here that some of the underlying causes of the global financial crisis.

Well, whatever. I listened to another interesting program this morning on NPR:


According to bankers and others involved, the Magnetar Trade worked this way: The hedge fund bought the riskiest portion of a kind of securities known as collateralized debt obligations -- CDOs. If housing prices kept rising, this would provide a solid return for many years. But that's not what hedge funds are after. They want outsized gains, the sooner the better, and Magnetar set itself up for a huge win: It placed bets that portions of its own deals would fail.



The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going (you can listen to it here). (http://www.thisamericanlife.org/radio-archives/episode/405/inside-job) If you have no idea what a Credit Default Swap or an equity tranch is, you may like this--it explains many of these "complex" financial things pretty well as it goes along. It helped me understand areas I was fuzzy on. :DL

Other links to the Magnetar story are at Propublica, (http://www.propublica.org/feature/all-the-magnetar-trade-how-one-hedge-fund-helped-keep-the-housing-bubble) the outlet that built the story.

If you haven't watched the Brooksley Born story on Frontline, I would be interested to know why. :yep:

[tater]

Spend more is nonsense, IMHO. Of course if they are truly going to be Keynesian, they should also cut spending and taxes during good times.

The current crop of keynesians are sort of like being half-bulimic—all binge, no purge.

The critical problem during the FDR years was the experimentation. Business decided to wait out the insanity. Also, they went crazy with idiotic regulation. Not surprising given key economic advisors thought the CCCP was peachy keen, and the wave of the future.

Read The Forgotten Man for a different take.

[STEED]

In the UK the banks were bailed out to the tune of approximately £150 billion.

The initial cost to the citizens of the UK over the next 24 months is estimated to be somewhere in the region 50,00 job losses and massive cuts in public services (dependant on which source you enquire of......this one being UNISON the largest public sector union in the UK).

It is believed the debt may not be repaid for at least 15 years.

Banks continue to pay out huge bonus sums to the highest paid employees :nope:

Nation’s debt equivalent to £26,100 for each British household.

http://www.debtbombshell.com/

The UK national debt is the total amount of money the British government owes to the private sector and other purchasers of UK gilts.
From figures published February 18th 2010, UK public sector net debt was £848.5 billion. (or 59.9% of National GDP) – Source: Office National Statistics
Excluding Financial sector intervention, public sector debt is £743 billion or (52.7% per cent of GDP)
The PBR (annual government borrowing) forecast for 2009/10 is for net borrowing of £178 billion or 12.6% of GDP.

[Onkel Neal]

Don't mind me (http://www.nytimes.com/2010/04/11/opinion/11rich.html), go back to reading about Britain suing the pope. :D