The Current "Depression" Could be Worse and Last Longer Than The Mainstream Believes

[marmar]

from Minyanville:




Is the Depression Too Mainstream?
By Todd Harrison Aug 26, 2010 9:20 am


You know how we often say that debt destruction (revaluation) is "medicine that cures the disease vs. the drugs that mask the symptoms"? Morgan Stanley (MS) echoed that sentiment yesterday when they offered that government defaults are all but inevitable.

A lot of the things we said in the 'Ville seemed a bit far-fetched the first few times around; that Fannie and Freddie were toxic (as far back as 2003), the forthcoming “prolonged period of socioeconomic malaise” (2006), when we posited that financial institutions were technically insolvent (2007), as we pulled back the curtain on the invisible hand, when we exposed the death knell of derivatives, and so on and so on and so on.

We like to say Minyanville offers the financial news you need to know before you know you need it, which is why DEPRESSION! stories on CNBC and the sudden shift in newspaper headlines stands out relative to when we tossed it on ye radar. To quote the incomparable Kevin Depew from the summer of 2008:

"Welcome to the Depression. No, don't drop whatever it is you're doing. Don't get up. It's not going anywhere. It will wait. It's just going to sit over here in the corner and read a magazine while you do whatever it is you need to do.

A Depression doesn't run hot and fierce like some crazed meth burner. A Depression is methodical, purposeful, patient. It will build a shelter out of tree branches and newspaper, light a small, well-contained campfire and wait you out, brother. While you feed on the empty calories of denial and popcorn, it will quietly gather shards of broken dreams and fashion them into a terrible weapon of blunt force reality.

It's a hell of a thing to call this day and age the next Depression. It's dangerous tinfoil-hat territory inhabited mostly by screeching lunatics and volatile nut jobs. But by the time they get squeezed out by reputable folks the whole gig will be up, the circus will have left town."

Now to be clear, I believe we're traversing through a process of price discovery entirely more profound than The Great Depression; after all, FDR didn't know what a derivative was. There are many moving parts -- not the least of which is the government, but also the dollar as the world reserve currency and the global perception thereof -- and my sense is we've got five years of preservation and perseverance followed by profound generational opportunities for those who are properly prepared.

With that said, the path we take to get there is more important than the destination we arrive at and therein lies our task at hand -- not only to walk that walk, but to enjoy that journey. Yes, it can be done and it will be done as long as we look "up and out" rather than "down and back," remembering -- but not dwelling on -- our lessons learned.

I don't know if any of this is making any sense but don't worry, it will someday.


http://www.minyanville.com/businessmarkets/articles/todd-harrison-great-depression-bread-lines/8/26/2010/id/29816

[zipplewrath]

1. What a vague piece-o-crap

yeah, we all know this could last for years. No news there. The real question is how bad and how long?

[nebenaube]

3. answer

as bad as it gets and if nothing changes it is permanent.

[zipplewrath]

5. Change is constant

Everyone knows it will be bad, the question is whether it will get significantly worse, or will it just stay "bad". Ultimately it will "end". How and when of course is a difficult question. I'd rather not have to end this one the way we ended the last Great Depression.

[The Northerner]

2. No one really knows how bad it'll be

but without more job creation it could seem really painful.

[Democrats_win]

4. Interesting phrase: "we're traversing through a process of price discovery"

What it really means is lower wages for you and me so that the rich can continue to have higher profits. The danger of this attitude is that it prevents the real solution: reforming the economy so that more money goes to working Americans and less--much less--goes to Wall Street and the banks. We just gave the banks $800 billion dollars and trillions more in interest-free loans. This needs to change drastically or the Bush Depression will become even worse than the Hoover Depression.

[SoCalDem]

6. This time around, people will refuse to believe it, so it will linger

It will also be different, because WE are different, as is our society.

In the early 30's, we were mostly an agrarian society, with MANY citizens lacking in more than a rudimentary education. Millions had no phones, no reliable electricity, no transportation, and were used to hard manual labor.

Psychologically, it may be harder this time around, because people who "should" be employed cannot find work they are used to doing. Manual laboring will not support a modern lifestyle very well at all now.