I feel like I am waking up this week in September 1929, instead of 2008. Major financial institutions are failing and the government is going to unprecedented lengths and depths (into our pockets) to head off a financial meltdown that could be on the scale of October 1929. Most of the problems then, at least, couldn't be laid at the feet of our benevolent government.
The major underlying cause of the Great Depression is that we had grown faster in our ability to produce than to consume. Technology had made production grow faster than wage earners and farmers could buy. At the same time, the savings of the middle and upper class was being drawn into out of control speculation in the stock market and real estate. When the implosion of the stock market occurred it was the first of many triggers that would send the American economy into a spiral that would take 10 years to come out of.
The stock market crash sent the banking industry into the tank and resulted on a run on all banks. The first thing the government did was to close all banks and not allow them to reopen unless they were solvent. That was just after the election that resulted in F. D. Roosevelt becoming president, and that resulted in the New Deal and the start of the socialist movement in the Unites States as a permanent policy.
That was then. This is now. The thing that is similar between now and then is the fact that companies that have engaged in frantic speculation are getting hosed, again. The problem is, unlike last time when the government interceded on behalf of the common man, now the government is interceding on behalf of the very companies that have put us in danger with their greed ridden policies. If you haven't kept count we've had three different major bail outs. First was the Citi-bank bail out by Dubai. Then you had the government take over Indy Mac due to a run on the bank. Next was the take overs of Fanny Mae and Freddie Mac, the price tag of which is still in question. Now we have a bail out of AIG, which some say has merely postponed the depression-like fall that is still on the horizon. It was that big a deal.
The other thing that similar is that the government is not monitoring financial institutions. In the cases of Fanny Mae and Freddy Mac the lack of monitoring and regulation was more of an active blocking of the regulators from doing their jobs. At one point, there was even a filibuster to block it. Now our Federal government owns a new bank, two mortage brokers and a major insurance company. Starting to get closer and closer to the socialist model of the old USSR.
Is anyone, besides me, scared totally out of their minds?