Our financial system is crumbling this week.

[Popeye_Card]

Still, you were calling for depression as an alternative to a moderate increase in debt. I think that's crazy.

Well, I also think it's important that the people of this generation realize the ramifications of their actions, rather than just getting bailed out again. Sometimes you have to learn the hard way. For the last 20+ years, we've all been having our cake and eating it too.

[TimeForGuinness]

Still, you were calling for depression as an alternative to a moderate increase in debt. I think that's crazy.

Well, I also think it's important that the people of this generation realize the ramifications of their actions, rather than just getting bailed out again. Sometimes you have to learn the hard way. For the last 20+ years, we've all been having our cake and eating it too.

I don't think depression means what you think it means.

[Popeye_Card]

Still, you were calling for depression as an alternative to a moderate increase in debt. I think that's crazy.

Well, I also think it's important that the people of this generation realize the ramifications of their actions, rather than just getting bailed out again. Sometimes you have to learn the hard way. For the last 20+ years, we've all been having our cake and eating it too.

I don't think depression means what you think it means.

OK, maybe I don't want a full-scale depression to the point where the US becomes an afterthought in world economics, but I sure as heck don't want this continuous cycle of bail-outs as soon as things look shaky. The system will eventually fail. I think it's selfish of us to keep putting it off to tomorrow's generation.

[jim]

Still, you were calling for depression as an alternative to a moderate increase in debt. I think that's crazy.

Well, I also think it's important that the people of this generation realize the ramifications of their actions, rather than just getting bailed out again. Sometimes you have to learn the hard way. For the last 20+ years, we've all been having our cake and eating it too.

Absolutely true, and just because I think people got suckered in to this without realizing it doesn't mean I don't believe that this is a serious problem. I am dumbfounded with the debt that people rack up.

[Freed Roger]

Americans have a child-like ignorance to economic matters. As long as we can get our stuff, we're fine. We assume there are wizards that magically make it all work. IMO this is very sad.

Most people think that understanding the economy involves knowing terms like collaterized debt obligation, short selling, or treasuries... We shouldn't allow so much detail to confuse US. The national economy is hardly different than the one in our own homes...but perhaps this explains some of our ignorance - a lot of US don't even understand our own checkbooks, but we do know how to charge and buy expensive things.

Ironically, the national economic problem mirrors what's going on in so many homes. (or vice versa). What the govt is doing again is using a big credit card check (from the bank of China) to pay for expensive things (like Iraq War and bank bailouts.) As long as we have those blank credit card checks, we'll be fine.

American economic ignorance is a huge problem, but it is not sufficient to think of the national economy as being like that of a household. There are huge and important differences. For one thing, the national income grows much faster than a family income, so the ability to take on debt is continually increasing. The current national budget is clearly unsustainable, and it was irresponsible to rely on large borrowing to finance government in normal economic times, but the current national debt is currently 38% of GDP. As recently as 1994, it was 50% of GDP. We can afford our current debt even if the money for this bailout has to be borrowed.

yes comparing of a household economy to national economy is not fully accurate. but is a common sense starting point for people to understand the grand scheme of things. So many people when they hear the problems today, just tune it all out, assuming the wizards can figure it all out for us. Then you have these wizards - and they turn out to not be so smart after all.

I'm far from an expert, but all those years of setting the interest rates at historically low rates didn't seem to make sense. But it did to Greenspan. The crazy prices of houses didn't make sense. But it did to people in the market. Giving loans to anyone with a pulse didn't seem to make sense - but it did to banks. My point is cliche'd -I think sometimes the experts can't see the forest, because of the trees.

regarding national debt versus GDP. I've heard the experts say we can afford this debt, because of stats like you mentioned. IMO the GDP is an overvalued and outdated stat. for example, doesn't GDP go up just because of inflation? So if everything else remains the same, GDP goes up when oil prices go up. GDP goes up because of rising population.

And here is the big thing I wonder about with historical GDP - how much of our GDP is attributable to people buying using credit. I'm willing to bet an exponentially greater percentage of GDP is attributable to goods purchased with consumer or busn debt. Doesn't GDP go up when govt spending goes up too? I just don't see it as a good measuring stick. Not that I offer any alternatives at this point.

[ghostrunner]

Ironically, what's hurt us the most has been property taxes. We did not have a down payment on our house, but we got a pretty low fixed rate, and we pay PMI. I probably wouldn't do it over again, but we can/could afford it with some breathing room. About two years ago, the city suddenly decided to re-evaluate the homes and property taxes after a long stretch of not doing so. We had taxes included in the mortgage payments when we bought the house. Long story short, we ended up having about $200 more a month added to our house payment when this took effect. It pretty much killed any extra saving we were doing. There was a huge stink about it here when it happened, and they've passed some reforms so we're now down to only about $100 more per month than we originally thought, and it should go lower next year.

[Popeye_Card]

A few more disturbing graphs.


















Probably the most troubling:

[Michael]

hey popeye, I registered DepressingCharts.com for you. I think it has potential.

[Popeye_Card]

hey popeye, I registered DepressingCharts.com for you. I think it has potential.

Good. That will give me a place to post this:

[sighyoung]

Still, you were calling for depression as an alternative to a moderate increase in debt. I think that's crazy.

Well, I also think it's important that the people of this generation realize the ramifications of their actions, rather than just getting bailed out again. Sometimes you have to learn the hard way. For the last 20+ years, we've all been having our cake and eating it too.

I don't think depression means what you think it means.

OK, maybe I don't want a full-scale depression to the point where the US becomes an afterthought in world economics, but I sure as heck don't want this continuous cycle of bail-outs as soon as things look shaky. The system will eventually fail. I think it's selfish of us to keep putting it off to tomorrow's generation.

I understand your point, but a depression would be a severe, long-term contraction of the economy. At its height, unemployment during the Great Depression was 25%, and for some groups, such as African Americans in urban areas, the unemployment rate hit 50-60%. Additionally, you had double-digit unemployment for a decade or so. The U.S. economy's production contracted by a third between 1929 and 1932.

It's not clear that a massive bailout will work. But I sincerely hope the financial markets can be steadied.