A depression

Based on things in the news; I was wondering what would happen if we slipped into a depression?
Is this possible?
Should we prepare some?

Well, like all things in economics, it will not be declared until well after the fact of when it started.

There are some things that lean towards more than your normal downturn. It is better to be safe than sorry and just plan for harder times but not in a panicky way. That way would be say a multi-day blizzard or general natural disaster planning, hoarding like before Y2K is not always the wisest thing to do.

It is of course possible, and more probable if you read some sources over others. The things that have most caught my eye are the major banks on the brink for margin calls, borrowing from the Persian Gulf area, China, and 28 day loans from the US Federal Reserve.

Nobody knows whether there will be a major depression or, if so, what sort it will be. Will it be deflationary like the Great Depression, so that one should save every dollar possible, or will it be a “stagflation” like the late 1970s, when people bought tangibles because the dollar’s value was declining?

Nobody knows.

However, I do not see the total panic that attended the Great Depression, nor do I see the devastation in financial institutions that followed the disinflationary period following the 1970s stagflation.

I do think a person would be wise to be careful with his/her money.

My guess is no better than anyone else’s. But my guess is that 2008 will not be a lot better than now. There are those who are predicting an upturn in August or so, but I don’t believe it.

My guess is that late 2009 will see a turnaround. Until then, I think there is going to be plenty of trouble in the economy. But no “depression” in the classic sense.

One thing that must be remembered is that, even in the Great Depression when 25% of the work force was unemployed, fully 75% was employed.

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