“When their credit ran out, the game stopped”, is claimed for the cause of the great depression. My thoughts are that the World Economy Has Stopped TODAY because of the world wide debt. Please read my Debt Restart plan in an earlier posting .

The Worldwide DEBT is the problem.

“Marriner S. Eccles who served as Franklin D. Roosevelt’s Chairman of the Federal Reserve from November, 1934 to February, 1948 gave his view of what caused the Depression in his memoirs, “Beckoning Frontiers” (New York, Alfred A. Knopf, 1951):

As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth — not of existing wealth, but of wealth as it is currently produced — to provide men with buying power equal to the amount of goods and services offered by the nation s economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

That is what happened to us in the twenties. We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system. This debt was provided by the large growth of business savings as well as savings by individuals, particularly in the upper-income groups where taxes were relatively low. Private debt outside of the banking system increased about fifty per cent. This debt, which was at high interest rates, largely took the form of mortgage debt on housing, office, and hotel structures, consumer installment debt, brokers’ loans, and foreign debt. The stimulation to spending by debt-creation of this sort was short-lived and could not be counted on to sustain high levels of employment for long periods of time. Had there been a better distribution of the current income from the national product — in other words, had there been less savings by business and the higher-income groups and more income in the lower groups — we should have had far greater stability in our economy. Had the six billion dollars, for instance, that were loaned by corporations and wealthy individuals for stock-market speculation been distributed to the public as lower prices or higher wages and with less profits to the corporations and the well-to-do, it would have prevented or greatly moderated the economic collapse that began at the end of 1929.

The time came when there were no more poker chips to be loaned on credit. Debtors thereupon were forced to curtail their consumption in an effort to create a margin that could be applied to the reduction of outstanding debts. This naturally reduced the demand for goods of all kinds and brought on what seemed to be overproduction, but was in reality underconsumption when judged in terms of the real world instead of the money world. This, in turn, brought about a fall in prices and employment.

Unemployment further decreased the consumption of goods, which further increased unemployment, thus closing the circle in a continuing decline of prices. Earnings began to disappear, requiring economies of all kinds in the wages, salaries, and time of those employed. And thus again the vicious circle of deflation was closed until one third of the entire working population was unemployed, with our national income reduced by fifty per cent, and with the aggregate debt burden greater than ever before, not in dollars, but measured by current values and income that represented the ability to pay. Fixed charges, such as taxes, railroad and other utility rates, insurance and interest charges, clung close to the 1929 level and required such a portion of the national income to meet them that the amount left for consumption of goods was not sufficient to support the population.

This then, was my reading of what brought on the depression.”

Posted by Allen Charles Report at 9:48 AM
Allen Charles Report

“Left a good job in the city, Working for The Man every night and day…….
If you come down to the river, Bet you gonna find some people who live.
You don’t have to worry ’cause you have no money, People on the river are happy to give.

Wait, have patience, advanced forms of energy are coming. We’re just in a slow patch.

Credit will return, with more controls. Risk taking will resume, from lower levels. Driving will go on with alternatives, like walking and trains and advanced(electric, hybrid, biofuels) personal transportation.

If by Consumerism being dead, you mean excess consumerism, or consuming more than you produce, well not ever really because there will always be some individuals who produce many, many times more than they consume and the vast majority will continue to consume more than they produce. Your much maligned machines and the intelligent people who construct and operate them make this all possible. Don’t you understand the simple concept of horsepower. Human powered agriculture for anything but indulgent gourmet kitchen gardens(not that there’s anything wrong with that) is a joke. A thousand of acres won”t be weeded with a hoe.

Our national debt was less than 1 trillion dollars on January 20, 1981. It took us more than 180 years to accumulate this debt. Our national debt is now more than 10 trillion dollars. Do you care if the money you have now is worth a lot less in the future? Do you care about very high inflation?

To reduce the national debt, the federal government may have to increase many sales taxes on the wealthy and others, have many sales taxes our country has not had for a while, and may have to have many sales taxes our country has never had before.

I discuss the Securities Turnover Excise Tax, other sales taxes, dealing with the financial crisis, and other topics on http://www.newgeography.com/users/kenstremsky

Congress should eliminate the Federal Reserve or veto many of its decisions.

Congress should consider backing our currency with gold, silver, and other commodities.

People may want to support an Amendment to the United States Constitution that allows state governments to “coin Money” – make gold coins and silver coins.

If the highest federal corporate tax rate is NOT greater than 15 percent, many businesses may hire more workers, increase wages of many workers, and increase dividends. Many businesses may have an easier time obtaining loans and investments. Pension funds of government employees may make a lot more money. There may be less need for food stamps and Medicaid.

The federal government and state governments should stop taxing interest from savings accounts, dividends, capital gains, and estates. Many individuals and businesses may be better able to reduce their debts. Many businesses may have an easier time obtaining loans and investments. Many people may have an easier time saving for college tuitions and retirements.

I hope the federal government, state governments, local governments, and businesses will spend more money on buses within cities, buses between cities, passenger rail, and freight rail.

I hope our cities become more walker friendly and biker friendly.

I hope the federal government, state governments, local governments and businesses care more about improving local food supply, drinking water, energy resources, and local manufacturing.

I discuss Amendments to the United States Constitution that would help State Legislatures reduce the amount of harm caused by the federal government on http://www.newgeography.com/user/kenstremsky

I ran for United States Senate in 2002.

My website is http://www.myspace.com/kennethstremsky