"Farewell to the mother of all depressions" - BBC article
Discussion
The National Debt is, the National Debt, inflation will shrink it quicker than any austerity will - that wasn't the cause of the depression, just a major handicap in weathering it.
The big problem remains bloated consumer debt and inevitable house market correction when interest rates go up - the next big problem for the BOE is managing inflation - leave rates too low and inflation will get out of hand again, raise them too high and all the millions of people who serf-certed into massive mortgages they can't comfortably afford - who STILL after five years or more of historic low rates haven't put their house in order - will either dump their property on the market to get out of them, or more than likely default into repossession - if that happens the banks will again lose their ability to lend and will once again force another credit crunch.
I suspect they'll continue to save the arse of Mr and Mrs self-cert to the cost of all others, inflation will be managed at the just barely acceptable of high and any promise to re-balance the economy by upping exports and production will go right out of the window.
The big problem remains bloated consumer debt and inevitable house market correction when interest rates go up - the next big problem for the BOE is managing inflation - leave rates too low and inflation will get out of hand again, raise them too high and all the millions of people who serf-certed into massive mortgages they can't comfortably afford - who STILL after five years or more of historic low rates haven't put their house in order - will either dump their property on the market to get out of them, or more than likely default into repossession - if that happens the banks will again lose their ability to lend and will once again force another credit crunch.
I suspect they'll continue to save the arse of Mr and Mrs self-cert to the cost of all others, inflation will be managed at the just barely acceptable of high and any promise to re-balance the economy by upping exports and production will go right out of the window.
croyde said:
Can someone explain to me why this 'past' recession is worse than the one that hit the US in the 1930's. I certainly have not seen the scenes of poverty and misery that pictures of that terrible time show.
I realise that poverty in the UK these days is not being able to buy a Plasma TV or an X-Box.
I can't see that this recession was worse than the great depression. There may be some economic indicators that were worse but I can't find them.I realise that poverty in the UK these days is not being able to buy a Plasma TV or an X-Box.
Wikipedia has some of the economic indicators from that period (UK):
Industrial Production down 23%
Wholesale Prices down 33%
Foreign Trade down 60%
Unemployment up 129% (up 607% in the US)
I think that there are a few reasons that this recession did not produce the same level of suffering.
1. Back in the 1930s production was far more manual so falling production and failing businesses resulted in much higher job losses.
2. In the US the depression coincided with drought which caused massive problems in the agricultural heartlands.
3. Runs on the banks at the start of the depression resulted in them calling in loans on homes and businesses which just left businesses bankrupt and people homeless. This time round it was easier for governments to bail out the banks rather than to allow this to happen.
ralphrj said:
3. Runs on the banks at the start of the depression resulted in them calling in loans on homes and businesses which just left businesses bankrupt and people homeless. This time round it was easier for governments to bail out the banks rather than to allow this to happen.
The FED hiked rates to protect the dollar, banks failed and the money supply collapsed, something Bernanke knew only too well, hence ZIRP, TARP (and the UK APS) and QE... and still there are some people who think the worlds central banks should have replayed Great Depression policies! fblm said:
The FED hiked rates to protect the dollar, banks failed and the money supply collapsed, something Bernanke knew only too well, hence ZIRP, TARP (and the UK APS) and QE... and still there are some people who think the worlds central banks should have replayed Great Depression policies!
Reading articles on the Great Depression you do have to wonder WTF they were thinking.I have never understood the ever constant complaint during this financial crisis that "the banks should have been allowed to fail". I don't think people understand in any way what the consequences of that would have been.
ralphrj said:
Reading articles on the Great Depression you do have to wonder WTF they were thinking.
I guess they were kind of stuck in a weird limbo between gold and fiat currency where they had less than half the gold to cover the outstanding notes leaving them with the rate hikes we now view as obviously absurd. (Pity Lawson didn't remember how defending a currency with interest rates works out in the early 90's!)
croyde said:
Can someone explain to me why this 'past' recession is worse than the one that hit the US in the 1930's. I certainly have not seen the scenes of poverty and misery that pictures of that terrible time show.
I realise that poverty in the UK these days is not being able to buy a Plasma TV or an X-Box.
It isn't, but probably about the same as the impact of the "great depression" on the UK back in the 1930s. After a few bad years, growth resumed, and there was a boom in house building. I realise that poverty in the UK these days is not being able to buy a Plasma TV or an X-Box.
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff