Little history from the GREAT DEPRESSION!~(

The question recently came up as to "I still have never gotten a great description how we got into the Great Depression?"

The truth is, it wasn't easy.

But one of the best 4 minute explanations ever is on this YouTube video: Causes of the Great Depression.

John Maynard Keynes, the king of Keynesian economics, would call these expansions and contractions, not recessions. You get them free with a capitalist economic system. With the exception of China, it seems that you may only get the contractions in communist systems (like USSR, Cuba, S. Korea and Venezuela).

Read more on the Great Depression at Wikipedia. As it pertains specifically to the USA, it is pretty heavy reading, though.

You can look at the similarities of the recessions of 2000 (the DotCom bomb) and the Great Recession of 2007-200x. In all cases there were financial bubbles at work. But the Great Recession was bubble-bulging in housing and financial markets throughout the USA and beyond. It effected all US industries and and all US States. No place to run from it, and no place to hide from it.

Apply called The Great Recession, it is a generational recession. That is, economists argue that you should only see such a recession about once in your lifetime.  Note the massive overhang of shadow banking and the increase in uncertainty (including the use of derivatives).

Of course, you should only experience a hurricane about once in your lifetime or see a massive flood about every 500 years. Sometimes historical precedent does not accurately foretell the future?

You should expect markets to overshoot, maybe wildly, in the future. The overshoot will be to down side and to the up, as well.

Keep going up, but carry a parachute.

BTW. Check out this article about doing the same-old, same old, after a recession obviously suggests that a new approach is needed. Creating the same college degrees as if there would be jobs for them is, well, not smart!

Hall, E. (2010). Lessons of recessions: Sustainability education and jobs may be the answer. Journal of Sustainability and Green Management. Jacksonville, FL: Academic and Business Research Institute. Retrieved from: http://www.aabri.com/OC2010Manuscripts/OC10079.pdf  

Keywords: recession, Recovery, Great Depression, Great Recession, Keynes, Sustainable Eduction

Wisdom for Kids from Warren Buffet. Even the Gov might understand.

Warren Buffet had these pearls of wisdom to share with Kids:

1. Never spend more than you have.
2. Save for the unexpected
3. Never borrow without a payback plan

I like it. Short. Sweet. Accurate. Simple.

So simple even cavemen could understand it.

I'm thinking that we need to transmit this repeatedly up to our friends in the Federal Government (and maybe even to the States).

Never spend more than you have. Boy do we break this rule. And we have broken it so long that it somehow seems normal. Over decades, there has only been a couple years during the Clinton era that we haven't run an annual deficit. Of course, debt builds over time (unless you go bankrupt).

Make no doubt about it, there are any number of things that will make our current level of borrowing infinitely worse than it is right now. Slower, lower or negative economic growth. Interest and inflation could sink us based on the percentage of government revenues that goes to interest on the debt (debt-servicing). On average we are probably paying about 1% interest on government debt, and that represents about 9-10% of the government revenues. (I hate to use the word revenues for the intake of taxes, let's call it government inflows.)

Sooo, if interest rates go up to 10% that would mean that almost all of the gov inflows would immediately become outflows to service the debt.

That brings us to #2, save for the unexpected. Ops. Didn't do that, did we!

That brings us to #3, never borrow without a payback plan. Ops. Didn't do that, did we!

Now we are in a sequester situation. That is a lot like your parents cutting off your credit cards. . . Painful. Not very sophisticated. Only partially effective. Lot's of side effects.

And that is our after-the-fact payback plan? It's not even a plan; it was the trap door contingency that legislators came up with for the unlikely event that they couldn't come up with a plan.

Keywords: Sustainable and non-sustainable (gov) spending, deficit, interest, payback, funding, budgeting.
(See www.SustainZine.com.)

Investing in mega trends (sustainability) your Mad Money...

Check out the investment ideas from Mad Money's Cramer...

Even if you can't make real money at sustainability issues, maybe you can make some Mad Money on some of the sustainability Mega Trends....

http://www.blogger.com/blogger.g?blogID=7060730943841798035#editor/target=post;postID=2317546930355124175

Here's the full Mad Money episode from Thursday Sept 29, 2011. Most of this is gotta-watch. But fast forward through the lightning round if you can't stand the Booo haaazzz.