What's the Next Chapter in the Economic Saga?

The past several years in the economy and investment markets have been extraordinary. We have had the deepest recession since the Great Depression of the 1930s. Banks, brokerage firms and AIG went bust, or almost failed before the great bailout. The venerable firm of Lehman Bros. actually failed, while others were merged and/or propped up by massive politician-backed infusions of cash. The predictions were dire, and the politicians flinched and bailed out the financial industry, not to mention General Motors and Chrysler.

The Federal Reserve moved to make money widely available at a nearly 0 percent interest rate. When that was not enough, they bought hundreds of billions of dollars of Treasury debt as the federal government ballooned its expenditures in the face of falling tax receipts. The sharp expansion of credit fired up the stock and commodity markets, but it did little to spur everyday economic activity

Now we are debating the debt ceiling at the federal level. State and local governments are raising taxes, cutting expenditures and employees. Even venerable Penn State is feeling the cutbacks. In the private sector, new hiring is agonizingly slow.

We are in a worse economical position today than in the late 20's through the early 30's. The news media won't hardly report on the existence of a recession, but we are closer to a major depression.

We have a presidential election coming up in 15 months. Historically, the party in power pulls out all the stops to make the markets and the economy look great just in time for voters to make their selections. Ours is not a perfect system. Yet what stops are left to pull out to make the economy improve in the next 15 months? Indeed, what is next?

The financial world may read like a Russian novel (that is, long-suffering), but we hope to avoid it becoming a Greek tragedy.

More: http://www.statecollege.com/news/columns/whats-the-next-chapter-in-the-economic-saga-809506/