[Oe List ...] Another Perspective

[Sandra Rafos]

>> Bob asked me to share this with you all----He thought it was helpful!

>>
>> There is fear and loathing all over Main Street, Wall Street, and  
>> Capitol Hill but there are also those who are calling this tempest  
>> one of teapot-sized magnitude. Irwin Kellner at Marketwatch chimes  
>> in and tries to inject a dose of sobering caffeine into the drama  
>> that the media wasted no time in assigning scary superlatives to:
>> " We are nowhere near a depression, so let's stop talking ourselves  
>> into one.
>>
>> Spiro Agnew's words of the Nixon era ring true today. The  
>> politicians, pundits and, yes, the press, are nattering nabobs of  
>> negativism. For example, in recent weeks, the broadcast and the  
>> print media have filed stories replete with scare words. You don't  
>> even have to look at the tabloids to see what I mean.
>>
>> The front page of the New York Times recently described what it  
>> called "chaos" in the financial markets. Not to be outdone, most of  
>> the first section of The Wall Street Journal one day last week was  
>> devoted to articles describing the "spreading crisis" in our  
>> economy. And both newspapers have run stories using the word  
>> "depression" more times than I care to count.
>>
>> Now, don't get me wrong, I am not saying things aren't serious out  
>> there, but another Great Depression? I don't think so.
>>
>> If you look at the data, you will see more differences than  
>> similarities between the 1930s and today:
>>
>> In the crash of 1929 the Dow Jones industrials plunged 40% in two  
>> months; this time around it has taken a year to fall 22%.
>> The jobless rate jumped to 25% by 1933; it is little more than 6%  
>> today.
>> The gross domestic product shrank by 25% during the early 1930s; it  
>> is up over 3% during the past year.
>> Consumer prices fell by about 30% from 1929 to 1933; and the last  
>> time I looked they were still rising.
>> Home prices dropped more than 30% during the Depression vs. about  
>> 16% today.
>> Some 40% of all mortgages were delinquent by 1934 compared with 4%  
>> today.
>> In the 1930s, more than 9,000 banks failed compared with fewer than  
>> 20 over the past couple of years.
>> Remember also it was policy errors, not the stock market crash,  
>> that caused the Great Depression:
>>
>> Instead of increasing the money supply, the Federal Reserve of that  
>> era reduced it by one-third.
>> Instead of lowering taxes, Herbert Hoover raised them.
>> And to channel whatever demand was left into U.S.-made goods, the  
>> government enacted the Smoot-Hawley Tariff Act to keep out foreign  
>> products; this only provoked our trading partners to do the same.
>> Add to this today's automatic stabilizers such as unemployment  
>> insurance and Social Security, the FDIC to insure bank deposits and  
>> circuit breakers to keep stocks from falling too quickly, and you  
>> can see why this is not a depression in any way shape or form.
>>
>> While I am at it, I would like to take issue with the almost  
>> ubiquitous use of the word "bailout" to describe the government's  
>> rescue package.
>>
>> Folks, this is not a bailout of anyone, not Wall Street, not Main  
>> Street, and certainly not the so-called "fat cats." It's an  
>> infusion of liquidity, designed to unclog the financial markets. In  
>> doing so, it will benefit everyone, business and consumers alike.
>>
>> Also, the $700 billion bandied about will not be immediately handed  
>> over to the Treasury secretary; he will simply have a line of  
>> credit, similar to what the typical business might have.
>>
>> Finally, this package may not even cost $700 billion. For that  
>> matter, it may wind up costing nothing. It all depends on the price  
>> the government pays for these distressed assets and what it winds  
>> up selling them for."
>>
>>
>>
>>
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