Skip to comments.US bailouts prevented 1930s-style Great Depression
Posted on 07/28/2010 11:38:42 AM PDT by Oldeconomybuyer
An in-depth modelling exercise by Moody's chief economist, Mark Zandi, and a Princeton University expert, Alan Blinder, paints a bleak scenario of a 1930s-style Great Depression if the US government had enacted none of its $1.7 trillion programmes to avert a financial meltdown.
Using historical statistical relationships and a focus on the government's impact on narrowing credit spreads, the pair found that the downturn would have continued into 2011, with unemployment peaking at 16.5% rather than last year's actual high of 10.1%.
They believe US gross domestic product would have slumped by 7.4% in 2009 and by 3.7% in 2010, producing a "peak to trough" decline of 12%, rather than the anticipated 4%. Starved of demand, shops and employers would be cutting prices and wages.
"With outright deflation in prices and wages in 2009 to 2011, this dark scenario constitutes a 1930s-like depression," says the study, entitled How the great recession was brought to an end".
Zandi and Blinder say that although economic activity and job creation remain extremely sluggish, the US economy has made "enormous progress" since its nadir last year: "Maybe the country and the world were just lucky. But we take another view: the great recession gave way to recovery as quickly as it did largely because of the unprecedented responses by monetary and fiscal policymakers."
(Excerpt) Read more at guardian.co.uk ...
HaHa ... most of the world did not participate in FDR’s depression ... Odd that. And I wonder where all the Obama wealth transfer comes in? Yes you can lie to Kenyans, but not Americans.
Just imagine if the liberals with their CRA 1977 and their pursuit of the mythical redlining unicorn never happened. Seems like all we have proved is people who can’t afford homes still can’t afford homes.
Prevented, or just delayed?
But they acted quickly and the economy responded as intended. Whew!
We are in a depression and this author is a ****ing LIAR!
Does this clown REALLY think that you can borrow and spend your way into wealth?
Anyhting coming from academia with even a remotely possible connection to politics is suspect. You can’t accept anything from a U.S. college campus on its face without thoroughly vetting the authors. Unfortunately, political activism has decimated the credibility of many once reliable institutions.
Now we are getting economic advise from a Commie newspaper? Shoosh, how come these commies were never able to make their system work, but are smart enough to know what a running dog capitalist system should do? Inquiring minds and all.
Blinder, Alan S.
08540 Princeton University/professor $500 10/20/2008 G JUDY FEDER FOR CONGRESS - Democrat
Blinder, Alan S.
08540 Princeton University/Professor $1,000 05/07/2008 P JUDY FEDER FOR CONGRESS - Democrat
19355 Moody’s/Economist $2,300 06/23/2008 G BOB ROGGIO FOR CONGRESS COMMITTEE, THE - Democrat
ZANDI, MARK M. MR.
19355 MOODY’S ECONOMY.COM $2,300 04/18/2008 G MCCAIN-PALIN COMPLIANCE FUND INC. - Republican
ZANDI, MARK M. MR.
19355 MOODY’S ECONOMY.COM/ECONOMIST $2,300 04/18/2008 P JOHN MCCAIN 2008 INC. - Republican
ZANDI, MARK M. MR.
19355 MOODY’S ECONOMY.COM/ECONOMIST $-2,300 04/18/2008 P JOHN MCCAIN 2008 INC. - Republican
19355 $-2,300 03/31/2008 G JOHN MCCAIN 2008 INC. - Republican
ZANDI, MARK MR.
19355 MOODY’S ECONOMY.COM/ECONOMIST $-2,300 07/27/2007 P JOHN MCCAIN 2008 INC. - Republican
ZANDI, MARK MR.
19355 MOODY’S ECONOMY.COM/ECONOMIST $2,300 07/27/2007 G JOHN MCCAIN 2008 INC. - Republican
Zandi, Mark M
19355 Moody’s Economy.com/Chief Economist $2,300 06/26/2007 G SESTAK FOR CONGRESS - Democrat
Zandi, Mark M
19355 Moody’s Economy.com/Chief Economist $2,300 06/24/2007 P SESTAK FOR CONGRESS - Democrat
ZANDI, MARK MR.
19355 MOODY’S ECONOMY.COM/ECONOMIST $4,600 05/29/2007 P JOHN MCCAIN 2008 INC. - Republican
Prevented, or just delayed?
Another unbiased academic. /sarcasm
Yep. Destroying the economy saved the economy.
I estimate that unemployment would currently be at, or under, 6% if the Government had cut taxes on business $787 billion instead of passing the "Stimulus" spending package and there is MORE empirical data to support my estimate then there is to support THEIR assumptions
“With outright deflation in prices and wages in 2009 to 2011, this dark scenario constitutes a 1930s-like depression,”
That right there tells us which camp these meatheads are in. They’re making the same mistake Hoover made, believing that high prices and wages are a cause of prosperity, rather than an effect.
It is becoming more widely understood that TARP, indeed, DID stop a depression as it was used to bolster the supply-side. And TARP has mostly been paid back by the banks.
Because TARP is being understood as averting a depression, the liars are trying to claim the same for the Porkulus (that went to the demand side).
These people have zero shame. But we knew that.
The study’s authors are likely to have their findings hotly disputed by Republicans, who maintain that an unemployment rate stubbornly close to 10% means the government's interventions were a failure, fuelling an out-of-control budget deficit.....”Simply borrowing money from our grandchildren to send down to state governments is not going to jump start the economy,” McConnell told a newspaper in his home state of Kentucky. “The biggest way for the economy to recover is for the private sector to grow”
Well let's all party. How does all that debt get reduced with high unemployment, expanded government benefits and entitlements, more and bigger federal government? Reminds me of the $44,000 GM government motors electric car and those 300K green jobs in Detroit funded by taxpayers.
I love the searchable database at FEC.gov
Fixed it for you
Oops! Wait, I guess it's getting worse.
The $786B TARP Bailout is now being called, "A MASTERFUL DECEIT." Paulson, et al, may not have pulled a fast one when he testified in favor of the TARP before Congress----but Congress' phony outrage is a puzzlement. If HR 1424 was a 'MASTERFUL DECEIT' then CONGRESS didn't do its job.
TITLE ITROUBLED ASSETS RELIEF PROGRAM (required 'Congressional Oversight' sections listed)
Sec. 101. Purchases of troubled assets.
Sec. 102. Insurance of troubled assets.
Sec. 103. Considerations.
Sec. 104. Financial Stability Oversight Board.
Sec. 105. Reports.
Sec. 107. Contracting procedures.
Sec. 108. Conflicts of interest.
Sec. 111. Executive compensation and corporate governance.
Sec. 116. Oversight and audits.
Sec. 118. Funding.
Sec. 119. Judicial review and related matters.
Sec. 121. Special Inspector General for the Troubled Asset Relief Program.
Sec. 125. Congressional Oversight Panel.
Sec. 127. Cooperation with the FBI.
Sec. 129. Disclosures on exercise of loan authority.
ANALYSIS In HR 1424, there are enough rules, regs and CONGRESSIONAL OVERSIGHT REQUIRED that not one Thin Dime should have been 'misspent.' So if anything crooked did go on Congress should look in a mirror. They dropped the ball -- again. And the same Gangster Government will run our healthcare.
DID YOU KNOW? TARP was not designed to be a pool of money available for bailout of just anything that didn't move, like a couple of bankrupt unionized companies in the automobile industry? TARP was very specific in its purpose to provide liquidity to frozen banking and financial system and stave off the run on the banks (attack on the financial system, by proxy) and allow the 'netting' of the [frozen] assets on the books of financial institutions, in the aftermath of the fall of Lehman Bros and the run on trillions of dollars in money market funds in the consequent "breaking the buck" by private Reserve Primary Fund managed by Bruce Bent.
Keep in mind, some 85% of Obama's stimulus is still in Washington. Ohaha's hoarding it among his several slush funds, doling it out to imperiled Dems' 2010-12 campaigns.
ABC NEWS, Nov 18, 2009----Stimulus grants: Why Was The White House Website Riddled With Errors?
Officials tell ABC News so far, they found 700 mistaken Congressional districts out of more than 130,000 stimulus grants. On Monday night, ABC reported on errors found on the website set up by the White House to track the number of jobs created or saved by the economic stimulus program. The website was riddled with reports of jobs in places that didn't even exist. That report prompted anger on Capitol Hill, and defensiveness at the White House. On Tuesday night's broadcast, ABC's Chief Congressional Correspondent Jon Karl took another look at the stimulus confusion (link) http://blogs.abcnews.com/theworldnewser/2009/11/why-was-white-house-website-riddled-with-errors.html
LINK---Jon Karl: White House Vows to Correct Stimulus Reports Officials Tell ABC News So Far, They Found 700 Mistaken Congressional Districts Out of More Than 130,000 Stimulus Grants
ABC NEWS' JONATHAN KARL, Chief Congressional Correspondent, REPORTS, Nov. 17, 2009
When it comes to stimulus spending, could the wheels of government bureaucracy be grinding too quickly for once? Responding to more inaccuracies discovered in the reporting of spending and job creation from the administration's economic stimulus plan, the top White House official charged with overseeing the program vowed today to go through the reports with a fine-toothed comb and to correct the mistakes.
The promise came after ABC News found that Recovery.gov, the government Web site created to track the expenditures, had many job creation and stimulus spending figures that were attributed to congressional districts that do not exist, or that were incorrectly identified.
"The first time out, we knew there were going to be problems," said Edward DeSeve, special advisor to the president on the stimulus bill. "We don't think there are a lot of them. There are less than 1 percent in terms of the recent concern about congressional districts of the overall reports. And we've got a good commitment from the recovery board to work with us to fix them."
Officials tell ABC News, so far, they have found 700 mistakenly credited congressional districts out of more than 130,000 stimulus grants. The White House's Web site claims that more than 640,000 jobs have already been saved and created by the " $787 billion stimulus program. The reports used to come up with that number are riddled with errors.
In addition to the jobs in non-existent congressional districts reported Monday by ABC News, in real congressional districts, there are also problems, lots of them.
Moore's Shoes in Campbellsville, Ky., claims nine jobs were created from an $890 grant for nine pairs of work boots for the Army Corps of Engineers. Head Start of Augusta, Ga., claimed 317 jobs with a $790,000 grant, but it was really just a one-time raise to its 317 employees.
Chris Whitley is a fiscal officer for Central Savannah River Area Economic Opportunity Authority, which administers the Head Start program in Augusta. He says it was the administration's stimulus help line that advised them to claim 317 jobs. "It wasn't illegal, immoral or unethical. And they told me to do it, so I did it," said Whitley.
The mistakes have prompted anger on Capitol Hill. Rep. David Obey, D-Wis., the powerful chairman of the House Appropriations Committee, was outraged that one sewer project in his district was listed as creating 100 jobs. The real number is five. When asked what he thought when he saw the mistakes in his district, Obey said, "I wanted to strangle somebody."
Obey is demanding the administration fix the mistakes. "Fix the problem, the blessed problem, so that we're getting accurate information. I don't care what people's bureaucratic niceties are, or how hard it is to do it. I mean, they've got to fix the problem, so the American people can understand what the realities are.
The lack of a Dust Bowl prevented a 30’s style Depression.
This BS is ALL based on some computer model with, I am sure, hundreds of built in assumptions. This is as believable as the models that are the foundation of the Man-made Globull Warming HOAX.
George Bush's invasion of Iraq prevented a nuclear bombing of Manhattan.
I've got as much proof as Mark Zandi and Alan Blinder.
There is no way to measure “Number of Jobs saved”.
Considering the deficit was $1.4 Trillion out of $15 Trillion GDP, there was a slump of around 9%
yes, right after he counts the angels on the head of his pinhead.
goodness gracious, pretty stupid #$%^ from two very high iq guys.
Isn’t Blinder a “JournOlist” member?
Oooops, he’s not on the list...yet
TARP averted a Great Depression style PANIC, I’ll admit to that.
(even though Chuck Schumer tried his best to cause a bank run. Remember Indy Mac? Anyone? Buehler? Buehler?...)
The current situation is definitely the fault of government intervention. Producers have no confidence.
We’ve had many instances in this country of severe debt crisis. IMHO, this is a crisis that the “Progressives” won’t let got to waste.
Panic is what caused the Great Depression. Bank runs caused banks to collapse which, in turn, collapsed thoussands and thousands of small businesses. And Gov't did NOTHING to shore up the banks. This time the Fed & Treasury did (which is what stopped the panice IMO).
Yes, Schumer actually is the one who lit the match to the kindling. His comments started the downward slide which ended up collapsing Bear Stearns, Wamu, etc. The TARP halted the slide.
The current situation is definitely the fault of government intervention
This is true of the Gov't intervention feeding the demand-side (Porkulus, Obamacare, etc.). There's not much hope of getting a return for those expenses. TARP, though, is almost paid back already.
“TARP, though, is almost paid back already.”
With a tidy profit. AIG was loaned over $130B at 18% interest!?!? When the government enters into profit making deals, it is not good, my friend.
There is STILL a crap storm coming, all they did was defer it.............................
To the benefit of the taxpayer.
However, the billions of dollars in interest have not gone to the deficit as written in the legislation. Now, it has become a slush fund for Treasury. Once they get used to having this revenue stream, the picking of ‘winners and losers’ commences.
However, that doesn't mean TARP was initially a mistake. TARP was was and is demogogued by the political class who use it for their own gain; unfortunately most people on both right and left believe the lies.
TARP has only stemmed the panic. It hasn’t actually solved the debt crisis we are still facing.
Doesn’t it seem bizarre to you that if we had a crisis, we could solve the problem with $498.3B*?
(page 10,paragraph 3 http://sigtarp.gov/reports/congress/2010/July2010_Quarterly_Report_to_Congress.pdf)
Consider the Government Balance Sheet
Consolidated Statement Federal, State and Local Government
Present Value of current US tax system: $3.74 trillion/4% = $93.5 trillion
Government Land and Structures: $10 trillion
Private Sector Financial Assets: $3.6 trillion
Social Security Trust Fund: $2.5 trillion
Market Value of Federal Reserve System: $45 billion(’09 profit)/.04= $1.1 trillion
US Military’s overseas bases, military hardware equipment, and Federal patents: $5 trillion
Total US Government Assets: $115.7 trillion
Current Federal, State, and Local obligations: $11.9 trillion
Social Security Trust Fund: $2.5 trillion
Total Liabilities: $14.4 trillion
Net worth: $101.3 trillion
Liabilities/Total Assets = 12.4%
The government can of course increase taxes at will to boost its tax revenues and assets...
Other liabilities including medicare , medicaid etc it has no Constitutional obligation to pay, and the government makes its own law so they have no legal obligation either. As such they would not appear on any corporate balance sheet, and in all likelihood will never be paid..
Off balance sheet assets: US Private Sector Assets, non-government assets available for taxation: $67.8 trillion...
No new revelation there.
The Great Depression didn’t START until FDR (and Hoover to a lesser degree) started screwing with the economy. Before that it was just a stock Market crash.
Good information. Thanks!
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