Death Spiral Could Lead to a Depression
An article published in Asia Times takes a look at the similarities between the current U.S. economy and the pre-Depression economy
- National policy is currently reasonably neutral, so far avoiding the twin dangers of protectionism and tax increases which caused the medium-sized downturn of 1929-30 to turn into the Great Depression. The problem is concentrated in the property sector. However there are already worrying signs that the magic alchemy of modern finance, through such mechanisms as securitization vehicles whose funding falls apart and complex derivative securities that prove to be unsalable in a crisis, is causing the problem to metastasize.
- The US survived the Great Depression, eventually. However the market recovered only after it had plumbed depths previously thought impossible, at which even the soundest investments were trading far below their true value. After normality returned, the financial services landscape was very different, with many large and apparently solid houses having disappeared, a generation of participants reduced to driving taxis or selling apples and a generation of investors scarred by their losses and unwilling to return to the market. Emergency infusions of money, from the Fed or the taxpayers, generally do no good, only postponing the denouement and delaying the arrival of truly bargain price levels.
Are we in store for another depression? The answer is frightening: it depends. The right combination of wrong decisions can sink the economy into a devastating hole. Or we could luck out, only having to survive a recession. Many in Utah are attempting to do so by use of a Utah Home Equity Loan usage. It’s like waiting for a storm to come. All you can do is watch the forecast and prepare yourself, just in case. It’s interesting to see how Asia consides the nation’s situation.
November 29, 2007 | Filed Under Utah Home Equity Loan
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