I described the contraction in the U.S. economy that occurred late in the last decade as the “Great Recession” before I read any other writer using that term.
I had no patent on it, and it soon became apparent to others the scope and magnitude of the economic downturn being experienced.
From what I read today, a significant number of people didn’t get how serious that it was then and they don’t get it now.
It was the second Great Depression about to happen.
Given the size and complexity of the world market, had it been allowed to follow what is the natural course of a debt-inflated bubble bursting unmanaged by central bankers, it would have been worse than the Great Depression in terms of global economic fallout and damage to human development.
It would have become an unimaginable conflagration of economic suffering. Yet I hear comments like, “They didn’t have to bail out the banks” or “There was no need for Tarp” or “It was all to bail out Wall Street at Main Street’s expense.”
I have been told that if the Fed or Treasury had done nothing it would have worked out fine.
An intelligent woman told me that she believed that had they not done all the things they did “nothing bad would have happened anyway.” She is a teacher, but she doesn’t teach economics.
I find this mindset opinion to be jaw-droppingly incredible that people seriously believe that, but I understand where it comes from.
There is a huge amount of resentment that the ones who perpetrated the financial disaster not only got off scot-free, but were helped by the Treasury to keep the spoils.
No one argues over the injustice, but too many innocents would have severely suffered to get at those guilty.
What I note is that many of our political leaders on the campaign trail substitute economic ideology for economic policy or management.
They play into people’s emotions. They express the value judgment that the loss of confidence in the financial system and resulting devastation that would have caused the economy, was worth the blood lust satisfaction of hanging the villains even if the victims ended up hung too.
I think the Feds made the right decision. It is great to advise people not to play with matches when there is gas around, but when the flames explode in an apartment building, refusing to save the building by using all resources available to put the fire out just to teach the owner a lesson, will make a lot of people homeless and some who are innocent may not survive.
I believe that Hank Paulsen, Ben Bernanke and Tim Geithner did a competent job with the tools that they had to work with to save the economy from collapsing into rumble.
They solved some enormously complicated economic problems to diffuse the greatest threat the global economy ever faced.
They will admit to mistakes and it wasn’t pretty. People can shout about the moral hazards ignored or created, but they did what they had to do.
It wasn’t just those three men that saved the economy. Both George W. and Barack Obama knew what had to be done and fully supported what was proposed and implemented.
Congress was composed of its share of demagogues at the time, but still managed to muster slim majorities that conceded to reality when the heat from the fire was directed at their faces.
Most don’t understand how critical that was and will never get it because it was successful so they never got to see the consequences of it not succeeding.
They really can’t envision what the repercussions of doing nothing would have been.
I think that an economic Armageddon was avoided. This generation is too far removed from the experience of the Great Depression to appreciate the consequences of the threat posed.
They describe the current economic recovery as weak, bemoaning the slow recovery. To me that again proves the lack of perspective that exists.
This was not the garden variety recession that we just went through and the comparisons that are generally made to characterize the economic recovery that has followed are not relative to common recessions.
I often hear comparisons of the Great Recession to post-war recessions. The only economic downturn that this recovery has a relationship to is the Great Depression.
This economic recovery has been far stronger than what followed the crash in the 1930s. The only reason that the Great Recession was not as severe as the Great Depression was the skill and depth of knowledge of the Fed Reserve and Treasury not to repeat the mistakes of the 1930s.
This is a fantastic strong economic recovery compared to what became described as the Great Depression. Yet the impression has been ingrained into the general public that this recovery is weak and poor.
It is so ingrained that political leaders do not have the courage to say otherwise. When they talk about this recovery they always apologize for it.
Believe you me, Herbert Hoover would have traded for it.
David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.
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