Interesting Read
I just found this link and thought it was very interesting, especially considering it was written in 2000:
http://www.crown.org/Library/ViewArticl ... icleId=587
"If we compare the financial headlines of precrash 1929 to today's financial headlines, the parallels are remarkable. As the Dow continues to climb, economic analysts assure us that "the fundamentals are sound" and refuse to acknowledge that another crash is even possible, much less probable. So, although the previously mentioned four basic reasons brought us a temporary reprieve from financial decline, they are not permanent solutions. We still are faced with huge trade deficits; the federal government still borrows millions from the various trusts, which they then claim as income rather than debt; the government still spends more than it brings in; and consumers still are indebted on an average of $11,000 per family. These have prompted the chairman of the Federal Reserve Board, Dr. Alan Greenspan, to caution several times over the past three years that he sees a coming economic crisis on our horizon. Yet, the majority of economists and financial planners have announced that our economy can continue to expand indefinitely and that there are no serious, potential problems."
http://www.crown.org/Library/ViewArticl ... icleId=587
"If we compare the financial headlines of precrash 1929 to today's financial headlines, the parallels are remarkable. As the Dow continues to climb, economic analysts assure us that "the fundamentals are sound" and refuse to acknowledge that another crash is even possible, much less probable. So, although the previously mentioned four basic reasons brought us a temporary reprieve from financial decline, they are not permanent solutions. We still are faced with huge trade deficits; the federal government still borrows millions from the various trusts, which they then claim as income rather than debt; the government still spends more than it brings in; and consumers still are indebted on an average of $11,000 per family. These have prompted the chairman of the Federal Reserve Board, Dr. Alan Greenspan, to caution several times over the past three years that he sees a coming economic crisis on our horizon. Yet, the majority of economists and financial planners have announced that our economy can continue to expand indefinitely and that there are no serious, potential problems."
Comments
What is scary is that the tech-dot com crash of 2001 was "rescued" by lowering interest rates dramatically and leading to an era of incredibly easy credit.
That led us to the worst of the housing bubble.
Are we going to take our medicine now (increased saving, reduced consumption, investment etc.) or are we going to take another short cut (print money?) to try and buy our way out of this leading to a bigger bubble down the road?
Yes
And yes - in that order. You can only avoid bubble implosions by expanding a larger bubble. We did it 8 years ago, and there now appears to be no larger bubble available to expand. We'll learn that lesson soon enough.