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Is 2009 The New 1929? Current Crisis Shows Uncanny Parallels To Great Depression

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IS 2009 THE NEW 1929?

Current Crisis Shows Uncanny Parallels to Great Depression

Is history repeating itself? The current global downturn has many parallels to the Great Depression. And if the current massive bailout packages fail, the effect on the world's economies could be similarly drastic.

The Germans have always had a penchant for looking to America to gain a glimpse into the future.

They marveled at the Apollo 11 mission to the moon. They admired the gray but affordable Commodore personal computer. And they succumbed to the spell of an Internet company with the odd name of Google.

Will the current crisis be as bad as the Great Depression?

Now the Germans are looking across the Atlantic once again, but this time they see images that remind them of their own past, images of sad-looking people standing in long lines, hoping for work.

One of them is Michael Sheehan, who worked as an engineer with a large company until February. Not too long ago, Sheehan was the one doing the hiring. Today he is only one of 900 other job-seekers attending a job fair in a depressing hotel ballroom in Philadelphia.

One of the flyers arranged on the tables exhorts the attendees to "Stay Positive." But Sheehan feels more outraged than positive. Someone at the fair asks him for his resume. "I don't have a resume," he says. "I worked at one company for more than 30 years."

Natalie Ingelido, 21, is standing nearby, trying to calm down her bawling two-year-old son, who clearly doesn't like it here. "I'm looking for a job, any job, in a restaurant, a bar, cleaning, whatever," she says.

In the past, says Ingelido, "Help Wanted" signs were plastered on the doors of shops and bars. The past she refers to is last summer, when Natalie and her husband still lived in their own apartment. Now they live with his parents.

Across America, people like Sheehan and Ingelido are standing in lines, waiting and hoping. At one job fair in New York, the line stretched for several city blocks. Many would turn away, embarrassed to be seen there, whenever TV reporters attempted to document their fates.

More than 5 million people in the United States have lost their jobs since the crisis began. As if the country were undergoing fever convulsions, more than 650,000 were catapulted into the streets in the last month alone.

Most experts are now convinced that Germany will follow the United States along this downward trajectory. And those who, like many a politician, had refused to believe it until now were disabused of that notion last week.

Wednesday was a dark day for the leaders of Berlin's grand coalition government, which comprises the center-left Social Democratic Party (SPD) and the conservative Christian Democratic Union (CDU). All their hopes that the skies over Germany could quickly brighten -- just in time for September's national election -- were suddenly dashed when leading economic institutes released their annual forecasts, which turned out to be even gloomier than expected: a 6 percent shrinkage in the German economy this year, followed by another year with no economic growth.

Unemployment will rise sharply. It is expected to exceed 4 million by this fall and hit 5 million by next year. By then, at the latest, the crisis will have become reality for millions of people, as it reaches private households, forces more companies into bankruptcy and pushes countless loans into default, only making things worse for the country's already ailing banks.

Politicians around the world are forced to look on as the economic crisis jumps from one industrial sector to the next and spreads to more and more social groups. They are the witnesses of a reality that repeatedly debunks their worst prognoses as being all too optimistic.

They are approving billions in government spending for economic stimulus programs and bank bailout packages, and pumping more and more money into the economy to rejuvenate the economic cycle. But no one knows whether this medicine actually works -- and if it does, when it will take effect.

Graphic: Parallels between current crisis and Great Depression

Politicians, in their desperation, are clinging to even the tiniest glimmer of hope. At the opening ceremony of the Hanover Trade Fair early last week, where the number of exhibitors had just about remained stable, Chancellor Angela Merkel announced that the worst appeared to be over.

At an economic summit at the Chancellery a few days later, none of the 31 invited representatives of industry was willing to share this optimism. Instead, the meeting was marked by pessimism and a deep sense of helplessness. The mood reminded one of the attendees of a "funeral wake."

It appears that the German federal government, labor unions and employers have exhausted their options. As a result, the course of the meeting was predictable. The assembled representatives of industry groups used the opportunity to present the government with their familiar demands. The invited economists argued over terminology and forecasts, and the members of the government snubbed those officials who had expressed their opinions somewhat too loudly of late.

The mood at the Chancellery only worsened in response to the grim forecast for growth presented by Hans-Werner Sinn, the president of the Munich-based Ifo Institute for Economic Research, who predicted that the worst is yet to come. According to Sinn, German banks will have to make write-downs equivalent to up to 90 percent of their capital, while most businesses hold a pessimistic view of the future. Sinn even believes that deflation is possible, a situation in which demand would continue to decline despite falling prices.

But not all of the economics professors in attendance agreed with the Munich economist's theories. Wolfgang Franz, an economist from the southwestern German city of Mannheim, said that he believed that the economy could fall back into step more quickly than others predicted. Axel Weber, the head of Germany's central bank, the Bundesbank, made it clear that he sees possible inflation as a much greater threat. By the end of the economists' presentations, the attendees were no longer sure which danger they were supposed to combat.

Deflation, inflation, mass unemployment -- these are words reminiscent of the darkest chapter in economic history. Thus, it comes as no surprise that experts are mentioning with growing frequency a term that was believed to have been relegated to the history books: Great Depression.

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They would know wouldn't they :huh:

IMPO a huge stock market crash is coming in the next 12 months, probably this year, which will plunge us all down into despair.

Apart from Sibleh, of course.

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Sounds very depressing. I guess if everything goes in cycles let's hope this isn't the cycle that leads to World Wars, like 1929 did.

I still think, with the UK being so reliant on service jobs and with our massive personal borrowing plus the huge sums being paid in mortgages, due to that bubble, that we are very weakly placed if things get any worse. People say it won't happen here but they can't provide any decent arguments why not.

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Nearly there already in Ireland.... 70% off the ISEQ, real unemployment may be 25% next year, mass immigration. Then there's Iceland, Spain, Greece, Eastern Europe, etc, etc. Actually, I think we are well and truly fucked. I pray I'm wrong. Seriously, anyone who thinks we are going to just walk away from this car wreck with minor cuts and bruises needs their head examined.

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Seriously, anyone who thinks we are going to just walk away from this car wreck with minor cuts and bruises needs their head examined.

Rather than a car crash this is getting like a car full of poison gas, an attempt is being made to squeeze as many people inside as possible hoping that in doing so it will displace the all the noxious substance inside, even if that works suffocation quickly follows.

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"The Germans have always had a penchant for looking to America to gain a glimpse into the future.

They marveled at the Apollo 11 mission to the moon. They admired the gray but affordable Commodore personal computer."

Perhaps we could remind the Germans that this would this be the Commodore company founded by a "Herr" Tramiel who was rescued from a German concentration camp by the US Army and whose father died in that camp and mother died at Auschwitz. That was a political result of the last depression and worth bearing in mind for this one.

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The debt levels are so large, that the numbers no longer represent reality. Someone is going to end up out of pocket. Depending on who that is we will end up with depression or war. Possibly both.

Fantasy land la la economics and money printing are not a sound basis to predict a sustainable recovery despite what most economists would have you believe. They didn't see this crash coming, and they won't see the big bang either when the financial system implodes. At some point China is going to walk away from buying the West's debt. When that happens money printing will increase until it becomes obvious that all those bits of paper mean very little, at which point all hell with break out. 1-4 years is the time frame.

This is my guestimate, but I know its shared with some former bank chiefs too. The bailouts haven't fixed anything. They've just pushed back the date of the avalanche.

Edited by sikejsudjek

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did they talk about the amount of debt

or is that the elephant in the room that no one mentions

No mentions debt it's only wealth, even when that wealth is debt your still rich.

Too many people have built wealth on debt and increasing asset prices, fatally flawed economic thinking.

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Most experts are now convinced that Germany will follow the United States along this downward trajectory. And those who, like many a politician, had refused to believe it until now were disabused of that notion last week.

superb. puts bulls in the same camp as politicians.

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"The Germans have always had a penchant for looking to America to gain a glimpse into the future.

They marveled at the Apollo 11 mission to the moon. They admired the gray but affordable Commodore personal computer."

Perhaps we could remind the Germans that this would this be the Commodore company founded by a "Herr" Tramiel who was rescued from a German concentration camp by the US Army and whose father died in that camp and mother died at Auschwitz. That was a political result of the last depression and worth bearing in mind for this one.

Tbh i've worked in germany for a year, i'd find it 1000 times more likely for Mr. Brown to grow a stubby little moustache and start walking funny than it ever could be that anyone in germany with that sort of disturbed mental state is given the power to lead the country.

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The debt levels are so large, that the numbers no longer represent reality. Someone is going to end up out of pocket. Depending on who that is we will end up with depression or war. Possibly both.

Fantasy land la la economics and money printing are not a sound basis to predict a sustainable recovery despite what most economists would have you believe. They didn't see this crash coming, and they won't see the big bang either when the financial system implodes. At some point China is going to walk away from buying the West's debt. When that happens money printing will increase until it becomes obvious that all those bits of paper mean very little, at which point all hell with break out. 1-4 years is the time frame.

This is my guestimate, but I know its shared with some former bank chiefs too. The bailouts haven't fixed anything. They've just pushed back the date of the avalanche.

I always like you posts.... another nail-head hitterr from you here.

Hugz

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Sounds very depressing. I guess if everything goes in cycles let's hope this isn't the cycle that leads to World Wars, like 1929 did.

This may sound like an odd question, but why? Flattening entire cities and killing off a massive chunk of the population may be the only way out of this, and I say this as someone who would certainly be conscripted as cannon fodder. The alternative is far worse.

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This may sound like an odd question, but why? Flattening entire cities and killing off a massive chunk of the population may be the only way out of this, and I say this as someone who would certainly be conscripted as cannon fodder. The alternative is far worse.

This is the opposite end of that process, a eturn to the pre banker control.

Central banks are a requirement for war - and they are going to collapse and fail.

No inflationary mechanism = no war.

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Anyone think the Euro will survive the convulsions that are coming?

Because I don't.

And if we get a Conservative government next year and they slash government spending and taxes on jobs, we could very well come out of this far quicker than the Euro Zone.

But if we continue to tax and spend and persue 'Keynsian' policies we will be stuffed for 10-20 years IMO.

:blink:

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"The Germans have always had a penchant for looking to America to gain a glimpse into the future.

They marveled at the Apollo 11 mission to the moon. They admired the gray but affordable Commodore personal computer."

Perhaps we could remind the Germans that this would this be the Commodore company founded by a "Herr" Tramiel who was rescued from a German concentration camp by the US Army and whose father died in that camp and mother died at Auschwitz. That was a political result of the last depression and worth bearing in mind for this one.

Actually, the Germans are fully cognizant of this aspect of the Great Depression and warn of the dangers of extremist politics arising in part 6 of the article:

In the wake of the economic crisis, Germany fell into the hands of the Nazis. The slogan, "Hitler - Our Last Hope," was plastered on campaign posters in the 1930s. Many agreed with the sentiment at the time.

A bizarre political group that had formed around Adolf Hitler, a former vagrant and veteran of World War I, was suddenly catapulted to the center of the public eye. On May 2, 1930, Hitler, a man who had been ridiculed until then, was suddenly speaking to a packed house at Berlin's Sportpalast hall. Now the people, or at least a significant portion of the people, were eager to hear Hitler speak.

After the Reichstag election in the late summer of 1930, a splinter group had suddenly become a force to be reckoned with. The Nazi Party won 18.3 percent of the vote and 107 seats in the Reichstag, making it the country's second-most powerful party. The economic crisis had catapulted the party to power within just a short space of time.

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