I have always understood history will repeat itself.

If that is true, then during the early to mid-20's, there must have been a few Enron & WorldCom scandals; trials, some people in the hoosegow, CONgressional investigations, buying on margin (watered down stock), etc, just like we've been seeing.

There must have been major attempts by gov't's to stem the flow of financial bloodletting. All during the Hoover Administration.

Then FDR came into office. I seem to recall the first thing that he did, was a "3 week Bank Holiday". It lasted 3 weeks for auditors to check every bank's books and give them a passing/ok to reopen grade or a failing/shutdown for good grade.

I'm sure there are some "financial history buffs" out there. Does that sound like the way that history has it recorded?

I "wonder" what steps the Fed might take next, to stop the downward spiral????

Can we keep the politics and sidetracks out of this post????


Edited for punctuation/wm8

Yes, History does repeat itself because it's the same critter making history - us.

I've often pointed out that the critter that stood in the Roman Coliseum screaming for blood is the same critter standing in Tiger Stadium screaming for blood.

However, I don't think we will have a repeat of the Great Depression. There have been some safe guards put in place since then (FDIC, etc).

One of the nice things about redundant-history, if one is observant and kept awake during history class, one can anticipate what is coming and make adjustments accordingly.

Who was it that said that the problem with the younger generation was that they haven't read the minutes from the last meeting...

Watched this, this evening.

http://www.bbc.co.uk/iplayer/episode/b00dygkw

There could even be a future environmental disaster within the US in a similar way to the dust bowl, along with the financial crash, just as in the 1930s.

Part of what made the Great Depression so bad was the wide spread criminal actions of those on Wall Street. Companies pooling together to "trade" stocks at artificially high prices so as to drive the prices even higher. Then average Joes were able to see all the "fortunes" being made on Wall Street, at which point they would invest all of their money in stocks. Once the actual price of the stock became known huge sell offs would occur. Banks were doing the same thing with money they didn't have so when they lost it, they didn't have any to give to their customers when they showed up to make a withdrawl.

When the panic set in President Hoover was advised that the market is fluid, it had dipped before and recovered, why shouldn't it this time? Hoover said what the public wanted to hear, that everything was okay and would be better by morning. By the time he agreed to try anything to help it was too late.

I agree with the average history minded American that FDR was a great president (even if he was a PHRASECENSOREDPOSTERSHOULDKNOWBETTER....j/k), his technique of try everything to fix the problem until you find something that works is all he was left with once he was elected. Let's not forget however that a HUGE part of what brought the U.S. out of the Depression was World War II. The massive wartime production of goods the U.S. put out into the world economy was the biggest single fix of the Great Depression, but at a horrible cost. An economic boom on that scale is highly unlikely at this point in history.

samhain,
I hate to disagree with you especially since I have been away for long but, The FDIC idea won't really hold water. FDIC has a few billion dollars in it's coffers and there are several trillion dollars in accounts in this country. There is even more now that they have increased the amount they cover.

All of this has happened before; all of this will happen again.

I'm sorry, I wasn't paying attention. What was the question again?

-Blast, joking!

I disagree with this, but my disagreement will reveal another risk.

The Great Depression involved similar circumstances upon the entrance to it. In both cases, people were allowed to borrow money to buy things that were beyong their means to afford. When the bubble burst, peolpe did not have the money to pay what they owed. The assets were valued upon a false pretense, and that created a bubble.

How this happened to us now would invovle a political discussion and me railing on lots of people. No matter, it is here.

The reaction to this crash is very different. In the Great Depression, monetary policy and government spending dried up. In this case, the government is pumping money into the system.

When money dries up, people hoard it. Right now, this is happening with banks and people to some extent. Banks of all kinds are hoarding money and not loaning it.

The entities spending like a crew of drunken sailors are the governments. the dnager here is the the currencies are just getting poured out to buy any and everything. The FDIC may in theory have limited resources, but the limit is going to be supplmented by the U.S. Dept of the Treasury. Treasury will simply just print any money it needs.

This is going to lead to inflation. The whole plan is to force people to spend moeny, because if they don't, then the money becomes worthless. It is not happenign now, but when this begins to turn, it is time to stop hoarding cash and start spending it. But spend the cash on real assets, things that will have value always. Because such thigns are more likely to rise with the rate of inflation.

Inflation is not here now, it may not be here this year, but it is coming. You should not think about timing it perfectly, but watch for the signals that says it is about to arrive.

With Treasury and the Fed trying every trick in the book now, the lack of cash is not a problem. If we can "print" $700 billion to buy up these toxic debts, as Dan mentioned, the gov't will provide the FDIC with as much cash as is necessary to prevent a full-scale bank run. In the best case, just the fact that people know that the gov't will guarantee everyone's bank deposits may be enough to keep everyone from trying to get their money, and in that case, Uncle Sam won't have to actually pony up all that extra cash.

No problem with disagreement ray. That's how we learn. I don't think that the FDIC by itself is the safety net that is going to solve the problem.

However, it is one of the mechanisms that we've put in place based on lessons learned from the past.

It is serving a valuable purpose by existing in that it provides some level of reassurance to the public to avoid runs on banks which just aggravates problems.

Consumer confidence goes a long way in a crisis like this. People acting out of fear will turn any crisis into a full blown disaster. Anything that calms fears with some realistic actions, is what will turn this around.

History has taught us that times like this are time-limited and things do turn around, and they will occur again in the future.

That makes sense. The new rates will get translated into higher banking fees for us.

Unpleasant, but not unanticipated.