Resolved: Stop All This Depression Talk

I’ve always loved the start of a new year. A new year fills me with that warm, fuzzy “fresh start” sensation—for a few sweet weeks, I believe that all those things I didn’t accomplish the year before will be done.

Magically, I will become that person who finishes personal projects and goes to the gym four times a week and does The New York Times crossword puzzle and volunteers at the animal shelter and actually sends a bloody birthday card on time. 
Then February rolls around, and I’m still me.

So since we’ve all had such a rough 2008, and the financial markets remain skittish about 2009, let’s begin the year with a very reasonable resolution we can manage if we try. Let’s all agree to stop talking about “depression” unless we are referring to the kind you take Prozac for.  

A recent CNN poll found that 60% of those interviewed felt an economic depression was likely. Of course, most of these people weren’t financial professionals with MBAs or economics degrees. They’re average folks who only know what they read in the newspaper and see on television. But this illustrates how far irrational fear has spread, and furthermore, these average folks buy things. They buy things from companies that will not be able to pay back the debt they owe if customers stop buying.

Which is why I believe that financial journalists and the experts who talk to us need to shut up about our heading into another depression. And if my request isn’t enough to get the rest of you on board, check out this compelling list of reasons why we shouldn’t fear a depression, from our friends at Savant Capital.

1.) Government reaction time. The U.S. government was very slow to acknowledge the onset of the Great Depression, while in the face of the current recession, a rescue plan was quickly passed and put into place.

2.) The Federal Reserve. When the Depression set in, the Fed failed to lower rates quickly. This time around, the Federal Reserve acted swiftly to lower rates, injecting more liquidity into the system.

3.) FDIC insurance. This government safety net for bank customers did not exist in 1929. 

4.) Corporate earnings. The Great Depression saw a broad-based decline in earnings. In 2008, corporate profits are still relatively high, excepting the financial and auto sectors.

5.) Lending. In 1929, banks were overleveraged in stocks that were worthless or nearly worthless. In 2008, banks found themselves overleveraged by investments in mortgages backed by houses, which are tangible assets and still retain about three quarters of their value.

6.) Mortgages. During the Great Depression, a record 44% of all first mortgages were in default. In 2008, just 6.4% of all mortgages were at least one payment behind, according to the most recent reports.

7.) World trade. In 1929, intense protectionism prevented countries from working together to trade freely and respond to the economic crisis. In 2008, nations around the globe are working together in an unprecedented fashion to address the financial downturn.

And there you have it. Happy New Year to all! Now shut your pie hole.

Recent Posts

Investors Win Warner Chilcott Battle, But Expect a War

Investors this week pushed back on Warner Chilcott’s attempt to reduce pricing on its $1.95 billion term loan B, but most don’t believe the market’s repricing fight is over...

Bad Buyouts and What We Could Do about Them

Allied Stores. Burlington Industries. Charter Medical. E-H Holdings. Federated Department Stores… These companies are among the 13 that, between 1985 and 1989, issued a billion or more in junk bonds to help fund a buyout—then promptly went bankrupt...

A Repeat of 2009 Returns? Not. But No Disasters Either

As we here at Leveraged Finance News join you in saying goodbye to 2009 and looking ahead at the year to come, two little words spring to mind: do over? Maybe not all of it, but certainly returns...

Cha-Ching! High Yield Brings High Bonuses

While returns in the 40% to 50% range portend a 2009 Grinch-free holiday season for most leveraged loan and high yield bond professionals, those dedicated to selling and trading junk bonds are on track to receive the highest bonuses...

Index of Posts

4 Comments

The site content is OK, very good, very interesting. By the way electronic products class article? I would like to take a second look!Transformers Action Figures

Posted by: qing h | May 24, 2012 10:41 PM


The site content is OK, very good, very interesting. By the way electronic products class article? I would like to take a second look!Transformers Action Figures

Posted by: qing h | May 24, 2012 10:40 PM


Your nice article, thank you for sharing.At the same time, recommend to you xxx at newfreeshipping.com Ramos W6HD Tablet

Posted by: new f | March 27, 2012 9:36 PM


It is nice that you posted something like this Washion M9 3G and I am quite lucky to read it. Thanks for posting this!

Posted by: guo h | March 25, 2012 9:27 PM