Originally Posted by Phil Hoskins
From the linked article (man that is a long one):
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Historians have identified the causes of the 1930 Depression as:
1) Too much savings in relation to consumer power due to income disparity;
2) Over capacity due to excessive investment from surplus capital;
3) Over stimulation through the growth of debt through new intricate system of inter linked debt obligations;
4) Legalized price fixing through mergers and acquisitions; big corporations maintain price and cut production instead of lowering prices, resulting in massive unemployment;
5) Economic growth too heavily dependent of big ticket durable goods that cannot sell in a depression thus slowing recovery;
6) Exhaustion of public confidence and optimism; and
7) The collapse of international trade (Smoot-Hawley Tariff Act).
8) Irresponsible foreign lending (the US was a creditor nation with a credit balance about twice the size of the total foreign investment in the US.)

All of these causes are still present today at a larger scale and faster reaction time, with the exception that the US is now the world’s biggest debtor nation.

Actually, Phil, the above is highly questionable.

There were many causes to the depression. The above list contains some of the issues, but certainly not all the issues. And not even all of the most important issues.

Even taking the details of the list... it is not true that today's situation maps well onto that list.

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1) Too much savings in relation to consumer power due to income disparity;
The American situation is largely the result of unsustainable excess consumption that (among other factors) drove excess production. If anything, our problems are driven by a lack of savings rather than excess savings.

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2) Over capacity due to excessive investment from surplus capital;
Over capacity was largely limited to real estate. And that was driven by excess credit, and not surplus capital.

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3) Over stimulation through the growth of debt through new intricate system of inter linked debt obligations;

This is true of our current situation but not necessarily something that historians have identified as a prime cause of the depression.

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4) Legalized price fixing through mergers and acquisitions; big corporations maintain price and cut production instead of lowering prices, resulting in massive unemployment;
It is not clear to me exactly how this maps on to our current situation... Massive unemployment? Hmm Legalized price fixing through mergers and acquisitions Hmm big corporations maintain price and cut production instead of lowering prices, Hmm..... Is someone seriously telling me that this is a parallel that is driving today's problems?

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5) Economic growth too heavily dependent of big ticket durable goods that cannot sell in a depression thus slowing recovery;
Again this is typical of today, but not something that historians would agree caused the depression.

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6) Exhaustion of public confidence and optimism; and
ROTFMOL Now there is a truely significant cause of the depression... and today's problems as well.... tonbricks

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7) The collapse of international trade (Smoot-Hawley Tariff Act).
Please provide a link that this has happened. Last time I checked, walmart and every other store was full of foreign goods.


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8) Irresponsible foreign lending
Surely the proximate cause of our current situation si irresponsible domestic lending--- what am I missing--- oh yes, I am missing the parallel.

..............

You know, it is sort of interesting that such apparently brilliant analysis could turn out to be rather flimsy when you really look more closely.

The main parallels I see with the depression are that

It is a very serious situation that imperils both the domestic and world economy

It involves lax regulation of wall street and the shenanigans that most often emerge when the folks on wall street are left to their own devices.

Last edited by Ardy; 09/21/08 10:31 PM.
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