In September 2018 I wrote an article predicting the next economic crisis would occur in 2-3 years. I was wrong. It’s taken only 18 months. What follows are excerpts from that article, then entitled ‘Comparing 1929 with 2008 and the Next’. It is important to understand how the now three great economic crises of the last century are in many ways similar, marked by a joint collapse of financial markets and the real economy, the one determining the other, and vice versa, in a downward general spiral. In other words, how financial cycles and crises precipitate and enable real ‘great’ contractions (not normal recessions) and how, in turn, real economic collapse exacerbates financial collapse as well. It’s not that one causes the other; both cause each other.
What follows is the verbatim reproduction of that article (minus some comments on the then upcoming 2018 midterm elections. For the full article, go to my website)
The business and mainstream press this month, September 2018, has been publishing numerous accounts of the 2008 financial crash on its tenth anniversary. This month attention has been focused on the Lehman Brothers investment bank crash that accelerated the general financial system implosion in the US, and worldwide, ten years ago. Next month, October, we’ll no doubt hear more about the crash as it spread to the giant insurance company, AIG, and beyond that to other brokerages (Merrill Lynch), mid-sized banks (Washington Mutual), to the finance arms of the auto companies (GMAC) and big conglomerates (GE Credit), to the ‘too big to fail’ banks like Bank of America and Citigroup and beyond. These ‘reports’ are typically narrative in nature, however, and provide little in the way of deeper historical and theoretical analysis.
Parallels & Comparisons 1929 & 2008
It is often said that the initial months of the 2008-09 crash set the US economy on a trajectory of collapse eerily similar to that of 1929-30. Job losses were occurring at a rate of 1 million a month on average from October 2008 through March 2009. One might therefore think that mainstream economists would look closely at the two time periods—i.e. 1929-30 and 2008-09—to determine with patterns or similar causes were occurring.