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October 10, 2008


I think 'recession' will become 'depression' in a short time. There are just too many calamities coming down the line.

From 1929-1932, over 5,000 banks failed, we are at 12. Homebuilding the same period dropped 80%, we are a fraction of that. In 1929 our crop prices dropped 80%, we have had growth through the last quarter. Our corporate profits (even at these reduced numbers) are 30% higher than we were in 2002. Our unemployment is now 6%, in the depression it was 30%. My point is, that we are nowhere near what we were in 1929-1932 (The Depression). In fact, we haven't even fallen into the "recession" category until now. In 1929 we were in a recession, and the Government and it's insistence on regulation, actually chose to contract liquidity and offered no support to the banking system. Economists from Friedman back then, to Bernanke now, all agree that our over-regulation and policy of contraction was what made a recession into a depression. We have not made that same mistake this time. The one thing we had this time, that we didn't have before, is that the individual consumers back then didn't all have 12 credit cards, homes twice the size they should have, and a propensity to spend 125% of what they made a year back then. We live in a country of mostly free choices. You can eat what you want (even if it's bad for you), you can drink what you want, and you can borrow what you want.You can even choose to do any of these to excess. Just because it is available, doesn't mean you have to take it! The day people start making wiser choices for their personal consumption, is when we will be in control once again. The markets will bottom out, and we will turn around soon. Hopefully the next time, consumers exhibit some control and personal responsibility. Many places may offer you credit, you remain in control of your destiny , when you take responsibility for your own life.

Hmmm. Deregulation has caused more harm than good, to any number of entities. Is what I think.

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