Originally Posted By Jim in Merced CA I read this article from Business Week online. Excellent. - - - - - - - - - - - - - - Welcome to the Frozen Economy Not since the Depression have financial difficulties so immobilized spending and credit. Listen to the talk at a diner in Maine by Shoshana Zuboff <The polar ice cap may be melting, but the U.S. economy is frozen, starting right here in my small town. Gradually rising levels of dismay at the gas pump and in the supermarket gave way to paralytic shock last week when "lock-in" notices from the local fuel company arrived. This year's advance price for home heating oil is nearly twice what people paid last year. A collective gasp of disbelief from my tough, resourceful Maine neighbors echoed across the meadows and up the rocky coast. Many claimed they would never sign the contract. "What's your alternative?" I asked a friend. "I don't have one," he muttered.> More at the link: <a href="http://www.businessweek.com/managing/content/jul2008/ca20080714_683791.htm" target="_blank">http://www.businessweek.com/ma...3791.htm</a>
Originally Posted By Sport Goofy Thanks for the link. It was an interesting article. I'm not convinced that we're going to see Depression era economic hardships in the near-term, but its certainly possible if we keep kicking some long term liabilities (federal deficit, energy, health care, social security) further down the road without solving any of the fundamental problems. So far, the government policy has been akin to rearranging the deck chairs on the Titanic. We haven't addressed any of the fundamental issues that have gotten us to this point.
Originally Posted By fkurucz <<I'm not convinced that we're going to see Depression era economic hardships in the near-term>> I'm pretty certain that if backed into a corner the Federal Reserve will choose inflation over deflation, which means that we will keep seeing bailouts and "stimulus" checks in the future. This will no doubt create even nastier inflation than we are now seeing, but it beats the alternative of a great depression.
Originally Posted By Sport Goofy ^^ The problem is that the sort of inflation being created by the Federal Reserve and government is nothing more than a Ponzi scheme. Its not much different than the artificially inflated prices in homes during the housing boom. As in any Ponzi scheme, the music has to stop at some point and everything falls apart. The longer these schemes go on, the worse the impact of the bubble popping. Depressions are normally accompanied by widespread deflation. That can be very painful for business activity. The more we promote inflation, the worse the deflation will be when everything goes bust. This is my biggest concern with our economy now. We keep kicking the can down the road so that ultimately the consequences will be more severe than they might otherwise be if we just face some hard facts now and straighten things out.
