Mar 25 2009

Did We Go Too Far?

“Since Thomas Rowe Price, Jr., founded our company in 1937 – in the heart of the Great Depression – the firm has witnessed many market downturns, including the long slow 1973-74 bear market…the bursting of the technology bubble in the early 2000s and subsequent broad market decline.  Although the magnitude and duration of the declines have varied, one thing has held true.  The markets have always come back.” – Edward C. Bernard, Chairman, T. Rowe Price

 

It has been a rough ride now for a long time – so much and for so long that I am reluctant to make any suggestions or even mild predictions on when we will begin to see anything significantly positive.  I don’t know about you, but it is impossible for me to grasp the enormity of the trillions of dollars of “toxic” debt that we are only beginning to understand.  The financial casualties and corresponding numbers are so far-reaching and incomprehensible that it makes my head spin.  I think it is safe to say that every individual and institution on this planet has been affected by now.

 

Of course this major economic mess has become the ultimate political debate in the U.S.  Finger-pointing and highly charged theatrical accusations prevent constructive consensus.  If there is a proper path for steering the world out of this mess – we can’t even come close to agreeing on what it is.  I tend to believe this is a classic example of a situation where “there are no answers – only choices.”  Being more of a Keynesian economist than anything else, I do believe that it is in the best interest of everyone for the government to step in and take action – to ensure liquidity, minimize systemic failures, and support the creation of jobs.  The real question for me is – how far should the government go?  Just maybe the burden being created is too great.  Maybe this is deficit spending beyond what we can ever hope to recover from – I just don’t know! 

 

In the early 1930s, President Roosevelt was criticized for not preventing more bank and business failures – which prolonged the Great Depression.  Some (Democrats) are convinced that Roosevelt acted brilliantly, while others (Republicans) blame him for everything bad that has happened over the past sixty years.  One thing that most seem to agree on is that it took World War II to bring prosperity back – at least in the U.S.  Well…I for one would rather not experience a world war – so let’s hope and pray we have taken the proper course of action.  Please feel free to post your good news!

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