I know this is a long post. But it such a great article and sooooo important to what is going on currently in the economy. Clearly the snippets only give you a snapshot but this is thee glory.
[The stock markets are spiraling like whirling dervishes, one of the nation’s largest financial institutions has flirted with bankruptcy and the former Federal Reserve chairman Alan Greenspan invoked the ghost of past calamities when he wrote that the current economic turmoil is likely to become the “most wrenching” since World War II. Meanwhile, home foreclosures are at their fastest pace in at least 30 years and in a survey conducted by USA Today and Gallup, more than half of respondents indicated that they had fears the downturn could become a depression.
Well, the economists are here to say that you can dig up the family silver and stop training the kids how to jump onto a moving train. While many who study the nation’s economic health agree that a recession has probably already begun, and that it may be long and severe, they also say the odds of a full-blown depression are almost nonexistent.
Even if consumer confidence hit rock bottom, that most likely would not be enough, by itself, to cause a depression. For things to become really dire, the nation’s financial institutions would have to fail at the same time that unemployment began significantly rising. Only if banks suddenly closed, or it became impossible for companies to access short-term lines of credit, would things begin spiraling out of control.
“To understand the Great Depression is the Holy Grail of macroeconomics,” Mr. Bernanke wrote in a 1994 paper, when he was a professor at Princeton focused on analyzing the financial cataclysm that began in 1929. While economists have made great progress, he continued, “we do not yet have our hands on the Grail by any means.”]-NYT
