Posted by Karl Denninger
Of course not.
In 1930 there were all sorts of statements about how it was “all under control” and “prosperity was returning.” Some examples of the 1929 and 1930 idiocy:
“Financial storm definitely passed.” – Bernard Baruch, cablegram to Winston Churchill, November 15, 1929
“I see nothing in the present situation that is either menacing or warrants pessimism… I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.” – Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929
“I am convinced that through these measures we have reestablished confidence.” – Herbert Hoover, December 1929
“[1930 will be] a splendid employment year.” – U.S. Dept. of Labor, New Year’s Forecast, December 1929
“For the immediate future, at least, the outlook (stocks) is bright.” – Irving Fisher, Ph.D. in Economics, in early 1930
“…there are indications that the severest phase of the recession is over…” – Harvard Economic Society (HES) Jan 18, 1930
“There is nothing in the situation to be disturbed about.” – Secretary of the Treasury Andrew Mellon, Feb 1930
“The spring of 1930 marks the end of a period of grave concern…American business is steadily coming back to a normal level of prosperity.” – Julius Barnes, head of Hoover’s National Business Survey Conference, Mar 16, 1930
“… the outlook continues favorable…” – HES Mar 29, 1930
“… the outlook is favorable…” – HES Apr 19, 1930
“While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.” – Herbert Hoover, President of the United States, May 1, 1930
“…by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent…” – HES May 17, 1930
“Gentleman, you have come sixty days too late. The depression is over.” – Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930
“… irregular and conflicting movements of business should soon give way to a sustained recovery…” – HES June 28, 1930
“… the present depression has about spent its force…” – HES, Aug 30, 1930
“We are now near the end of the declining phase of the depression.” – HES Nov 15, 1930
Then there was this little “event” in 1931.
A bank in Austria. A big one, in fact.
It swallowed a debt-ridden rival during the depths of the original crash (sound familiar? Greece gets IMF money but there’s no realistic way they can pay anyway) and failed in the spring of 1931.
The panic spread to Germany, and bank runs began (sound familiar?- Greece gets a supposed bailout, but the CDS and bond markets for everyone else over there that are levered too highly continue to blow out?)
Bernanke claims to be a student of The Depression.
But like Hoover and our Fed of the day, during the original iteration of the credit collapse both The Fed and Administration refused to force de-leveraging and the recognition of losses; indeed, they did the opposite – they put in place programs to intentionally lie about asset quality and financial institution health.
Now the latent insolvency that was already present has come to the forefront in Europe, exactly as I expected it would – that the second wave would not start here, in The United States.
I have said this, in fact, for nearly two years – when there was plenty of time to not make this mistake.
But just like in 1930, protecting the rich and powerful who screwed the nation out of its wealth and jobs was more important to the politicians and policy-makers than serving the people of the country and holding those who caused the crisis to account.
Now we are on the edge of realization of the same risks and outcomes that we had in the 1930s.
Doing the same thing over and expecting to get a different result is one common definition of insanity.
Ben Bernanke and President Obama are insane, and time to alter course either has – or shortly will – run out.