the threat of a depression

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Dean Baker's look at the 'second Great Depression' myth bursts a few bubbles, observing that "if we allowed the magic of the market to do its work, we would have seen an end to Wall Street as we know it:"

The major banks would be in receivership. Instead of proferring economic advice to the president, the top executives of these banks would be left walking the streets and dodging indictments and lawsuits.

This was when they turned socialist on us. We got the TARP and infinite money and guarantees from the Fed, FDIC, and Treasury to keep the Wall Street crew in their expensive suits. All the politicians told us how painful it was for them to hand out this money to the wealthy, but the alternative was a Second Great Depression.

"But suppose," he wonders, "we hadn't opened the government's wallet and instead let the banks drown in their own greed. Would we have faced a decade of double digit unemployment?"

From an economic standpoint there would be no reason for concern. We know from the last Great Depression, the key to recovery from a period of weak demand is to have the government spend lots of money. We eventually got of the Great Depression by spending huge amounts of money on World War II. To get the economy jump-started this time we could have had massive spending on education, child care, rebuilding the infrastructure and making the economy more energy efficient.

"The prospect of a second Great Depression was not a warning," he concludes, "it was a threat."

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This page contains a single entry by cognitivedissident published on September 9, 2013 11:41 AM.

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