Money – Depressions are monetary phenomena caused by central bank issuance of excessive credit.
Investment banks are the undoing of central banking. While all banks, central, commercial and investment, view credit as the opportunity to exploit society's growth and productivity, investment bank exploitation of growth and productivity exposes society to extreme risks - for investment banks use society's savings to make their volatile and speculative bets.
The speculative risks undertaken by investment banks is done by leveraging the savings of society; and, when investment bank bets are sufficiently large enough and the bets go bad - as they inevitably do as the luck of investment bankers is due more to their proximity to credit than to their ability to foresee the future - it is society that will bear the brunt of the pain in the loss of its savings.
We need the regulation back that was taken away from banks in 1981
The Glass-Steagal Banking Act, put in place by the Roosevelt Administration in 1933, prohibited commercial banks (like the one on the corner) from gambling on speculative stocks and securities with their depositor's funds. It survived (and worked well) right through the administrations of Ronald Reagan and George H. W. Bush, but was repealed during the first two years of the Clinton administration, when Democrats controlled the executive branch, the House, and the Senate.
The tremendous growth in the size and power of investment banks, which are subject to much less regulation, can be traced to the Banking Act of 1996, which also allowed mergers (or acquisitions) between banks and insurance companies, and resulted in unprecedented concentrations of wealth. This act was the product of a Democratic executive and a Republican House and Senate.
Let's be honest about who's screwing us. It's both parties.
Schoon's basic premise is clear enough, "Depressions are monetary phenomena caused by central bank issuance of excessive credit." But it has no basis in historical fact. The truth is that the United States has suffered through FOUR great economic depressions, beginning in 1837, 1876, 1893, and 1929--and that THERE WAS NO CENTRAL BANK TO "ISSUE EXCESSIVE CREDIT" in three of those four cases.
It's real easy to make an argument for a particular point of view if you are allowed to construct your own "facts" to support it.
The great depression was primarily a product of Smoot-Hawley and of the Fed foolishly tightening in response to the stock market crash and the then current economic conditions.
This year the Fed has so far responded wisely to the dangers posed by the bursting of the CDO bubble. The biggest danger now lies in the siren song of protectionism that is clear one of the candidates will use as a means to buy votes.
The two biggest dangers to the American and the world economy are 1) the hair trigger effect that the disruption of oil flow would cause, and 2) the slower, yet equally insidious, creep toward protectionism (reversal of globalization).
The Smoot-Hawley act was a protective tariff which went to far to the other extreme and had nothing to do with causing the depression. The Depression was due to Coolidge's policies of helping the wealthy while vetoing anything which helped the regular person -- just as the policies of the Bush administration. You should go back and study history
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Great depression reminds us the negative effects of the financial crisis, or it is a financial crisis itself that once struck America and the entire global economy.
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