Depression risk might force U.S. to buy assets

[kuzadd]

http://www.reuters.com/article/ousiv/idUSGOR27660220080212

In the late 1980s and early 1990's Connolly worked for the European Commission analyzing the European monetary system in the run up to the introduction of the euro currency.

While Connolly already sees some parallels with the 1930s, he expects that a more pro-active central bank and government will probably help avert a repeat of that scenario today.

The build up of a credit bubble in recent years was similar to the late 1920s run-up to the Great Depression, he said.

Then, investors were very optimistic about new technologies, and stocks rose against a backdrop of low inflation, and a trend toward globalization. There was even an equivalent of the modern day subprime mortgage debt meltdown in the form of U.S. loans to Latin American countries which had to be written off.

"The big difference is the attitude of central banks and specifically the attitude of the Fed," Connolly said.

Some economists have blamed the U.S. economy's travails in the 1930s on the Federal Reserve's hesitation to inject reserves into the banking system.

However, today's Fed has tried to preempt the danger of a protracted economic slump and has responded swiftly to a credit crunch in the past year and gathering signs of deterioration in the economy, Connolly said.

an interesting and long read, but informative .

he ends the article:

"If we don't avoid depression, the only thing worth holding is cash," he added.

As I always like to say myself "cash is king"!!!

[Lazarus]

he ends the article:

"If we don't avoid depression, the only thing worth holding is cash," he added.

As I always like to say myself "cash is king"!!!

Unless of course that "cash" becomes completely devalued to the point where you will need to take a wheelbarrow load of C-Notes to the local shop to buy a loaf of bread and a litre of milk.