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Surviving the “Contained Depression”

Written by: Paul Kedrosky

Article Overview: Interesting David Levy piece in the current issue of Institutional Investor. Here is the money ‘graf(s):

Surviving the “Contained Depression”

Interesting David Levy piece in the current issue of Institutional Investor. Here is the money ‘graf(s):

Without the government’s containment the economy would indeed ace another Great Depression, but fortunately, nothing so dire will occur. The government will prevent a collapse of the financial system and partially buffer the damage to the economy, containing the depression. The government will succeed not because it is wise about economic affairs or because it won’t make mistakes. Rather, it will have no choice but to keep patching holes in the financial sector, and its sheer size and presence guarantee a sizable fiscal stabilization. The government has virtually unlimited power to intervene to protect the basic functioning of the financial system, and in an emergency can spend whatever is necessary. Although government solutions will not fix the fundamental problems that will cause the depression, they will limit the financial fallout. By the end of the contained depression, the government will likely have committed trillions between rescue operations and running huge deficits. And although some may complain about the price tag, it will be a bargain for enabling us to avoid another Great Depression.

Levy thinks we will be out the other side in late 2009 or early 2010, albeit out in a tepid way.

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Article Tags: ace, bargain, collapse, containment, current issue, david levy, economic affairs, financial fallout, financial sector, fundamental problems, government solutions, governments, great depression, holes, institutional investor, price tag, rescue operations, sheer size, trillions, unlimited power



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Re: Obama Wants Social Security for Illegals - [quote="Alan Mater":2puakyzo][quote="Lucy Wu":2puakyzo]I think America's biggest problem right now is clearly the recession, and that should be the main focus as of now.[/quote:2puakyzo] I agree. Do you think President Elect Obama is doing or will do what is best in terms of beating this recession?[/quote:2puakyzo] Unfortunately, I think Obama is going to pull another "Roosevelt." According to economists, Roosevelt's plans for the New Deal extended the Depression by 7 yeasrs... We can already see today that nothing has "changed." Incompetent bankers, lenders, and businessmen get into trouble, the politicains vote to give them billions of dollars of *our* money to bail them out...and yet there is no oversight of how the politicians are going to spend that money! They can do anything they want with it including bailing out the auto companies. Frankly, I sure do wish I worked for Chrysler right now. They've shut down all their plants... and yet every worker will continue to be paid their full salary...for sitting around the house doing absolutely nothing. (I wonder if they'll get Christmas Eve and Christmas Day triple time pay, too.)
Re: Obama Wants Social Security for Illegals - [quote:21pbp7ux]Unfortunately, I think Obama is going to pull another "Roosevelt." According to economists, Roosevelt's plans for the New Deal extended the Depression by 7 yeasrs... We can already see today that nothing has "changed." Incompetent bankers, lenders, and businessmen get into trouble, the politicains vote to give them billions of dollars of *our* money to bail them out...and yet there is no oversight of how the politicians are going to spend that money! They can do anything they want with it including bailing out the auto companies. Frankly, I sure do wish I worked for Chrysler right now. They've shut down all their plants... and yet every worker will continue to be paid their full salary...for sitting around the house doing absolutely nothing. (I wonder if they'll get Christmas Eve and Christmas Day triple time pay, too.)[/quote:21pbp7ux] This is what happens when the Government gets involved and puts its nose where it shouldn't. Let the market correct itself. There is no reason for the Government to bail everyone out. If the businesses, mainly banks, weren't corrupted with greed, this wouldn't have happened. They are and it did, so let them dwindle away and pay for their mistakes. That's what any small business has to do. Why should they be any different. They have gotten away with it for over 10 years! Surely they should have seen this coming. [quote:21pbp7ux]Sad but this is exactly how I feel about it. Change is coming - but unless I'm really wrong, it is not a change this country needs. Amazing how much a good speaker with a good speech writer can do. If you paid attention to the things he said "off script" - much of it is frightening. Chris[/quote:21pbp7ux] It IS sad. What's more sad is the fact that Obama had the media wrapped around his finger, and still does. The media is just as corrupt as the banks.


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