>>Can the Depression happen again?Under what circumstances?<<
The honest truth is that while it was happening, people didn't understand it, and even now, people don't understand it.
Here's the version we learned in high school:
It was a time of unparalleled prosperity. People had loose money jangling in their pockets, and it sounded great. They were happy, and they smiled a lot. And some of them, who had never done anything like that before, decided to gamble in the stock market.
There was an equity bubble that sucked in all the loose money, and then it popped, and all the money went to money heaven.
And even though all the people were still there, and all the means of production were still there, because there was no money, nobody could work. So all the people had to beg on street corners for years until the government gave them jobs.
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There was a wise man, whose name was Don, and he said, the people with money didn't spend their money because they preferred to keep it rather than spend it.;^)
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And another man, whose name was Prudent Bear, said, the people were foolish and they gambled in the stock market, and so they were punished by a bust, because the bigger the boom, the bigger the bust.
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And there were other wise men, who said that the factories shut down because they had produced too much, and the farmers couldn't sell their products because they produced too much, and none of the people who didn't have jobs and were begging on street corners and starving to death wanted to buy what they made.
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And there was a little girl, whose name was CobaltBlue, and she asked, but where did the money go? The loose money that was jangling in people's pockets, and got sucked into the stock market, where did it go?
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The answer - I think - is that money is sort of like electricity. You can't put it in a box, because it disappears. The stuff you can put in a box is just paper, but real money is - has to be - out there crackling through the wires, making the world go round.
The old men who minded the money didn't know from electricity. They thought money was something you could put into a box, you could hide in a hole under a tree, that it was still money just sitting there. They didn't understand that the world had changed. They thought they were doing everyone a favor by stomping on the equity bubble, and giving the country a dose of tough love to cure the speculative excess.
They didn't understand that when they stopped the money from going around, all the factories shut down, and all the workers were put out of work, and no one could buy anything, and all the shops and all the farmers couldn't sell anything. And nobody could pay back their debts, and the banks failed, and then they were in a mess.
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It was a terrible thing. So terrible that the people in Germany decided to give Hitler a chance, because he said he could fix things. That's how terrible it was.
I'd love to know what it was like in China. Maybe you can find out and tell me?
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Oh, there's more, much more, inflation, deflation, the gold standard, devaluation, I'm giving the simplified version because you asked about our future, not our past. Just remember what I said - nobody really understood it then, and nobody really understands it now.
The one thing we seem to have learned is that we need to keep the money going around. |
