We repeat: there were only two examples of major depressions in the last century. Both came after a huge run-up in debt. And both were met with programs that economists should be ashamed of – bailouts, stimulus, loans, props, safety nets and hooks. In both cases – the ’30s in the United States and the ’90s in Japan – the depressions continued, on and off, for many years. WWII brought an end to the first one – 12 years after it began. The second one continues – nearly 20 years after the crash of the Tokyo stock market.
And now we have a third one…and this time the feds are determined to beat it. What’s their strategy? More firepower! What’s their secret weapon? QE, or quantitative easing, which is actual monetary inflation caused by buying debt directly from the government.
Will it work? Will Geithner/Bernanke succeed where others failed? Will economists finally master depressions…and find a way to get “creative” without the destruction?
Ah…we think we know the answer. But in the meantime, we’re enjoying the show.
~ Bill Bonner, "Get Set for a 15-Year Depression," LewRockwell.com, March 26, 2009