Some people say that any comparison of 2010 with 1930 is absurd; in a way I agree; the situation now is in some ways much graver than that in 1930 and the potential for irreversible consequences much greater. Here are a few reasons why.
1. Financial Crises: The thirties depression was to a large degree caused by a purely financial crisis that could have been mitigated if not averted completely. There were lots of factories ready to produce and lots of consumers ready to buy but somehow the country, absurdly, ran out of money. I realize that this is an oversimplification but I believe that it is essentially correct. Mr. Bernanke, as a student of the great depression, is like a general who is fighting the previous war. His solutions will not work over the long term because this time it is not just about the money. I suspect that his last statement about the uncertainty of the direction of the economy was somewhat of a confession of a recent epiphany along these lines. He has been a masterful juggler who has kept a lot of balls in the air but his act is not sustainable; it has been a circus performance, which, in the longer run, has only exacerbated the deep flaws in the structure of the US economy. This time the financial crisis was not the cause, but only a symptom of deeper problems, which I have written about in previous posts and which can be read on my blog page.
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http://seekingalpha.com/article/221992-why-the-next-depression-may-be-worse-than-the-thirties?source=feed
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