Bill, I agree with you that government actions going forward (and failures to take the proper actions) can prolong the economic depression we face. But where we differ is that I think that past government actions, not only here but also in many foreign countries, already guarantee a severe and prolonged depression. China’s stock market is already down 50%. The U.S. bear market is bad and getting worse. The Eurozone banks have had serious losses of capital, and major countries have had housing bubbles. Many countries have greatly overinflated. The U.S. banking system is a shambles, with bank stock indexes like KRE falling more and more as each day passes. That alone is telling us what we face, given that the two parties have nothing to offer in the way of remedies. Now, add in the soaring price of oil. That alone has to cause major adjustment problems in trade patterns and consumption. Add in the ongoing U.S. wars in Iraq, Afghanistan, and now the budding war in Iran. In other words, a severe depression is baked in the cake based on past government policies.
My expectation is that the new administration will be under Obama. I predict that he will be far, far worse on economic policy than is now generally expected. He has no economic sense and he believes in his faulty ideas. With a Congress held by his party, we are looking at some potentially devastating and far-reaching encumbrances like those of the New Deal. Then the scenario that you have painted, which is a prolongation of depression due to government policies, will add on to what is already there for us to see.
3:09 pm on June 30, 2008
