Paul Farrell's 7 Reasons Why America Needs A "Good Depression" Now...Or Face A Great Depression Later

Tyler Durden's picture

Another must read from one of the "less cheerful" people on MarketWatch.

1: Capitalism’s now a lethal soul sickness, needs a reawakening

What’s the real problem? Not the economy, not markets, nor even politics. Yes, our economic pains are real. But they’re just symptoms. Something’s structural wrong. Since 2000 endless bad news: Greed, deceit, stupidity, corruption, unethical behavior, lack of moral conscience.

The real problem’s deep in our character, the “mutant capitalism” Jack Bogle warned of in “The Battle for the Soul of Capitalism.” Sadly, that battle was lost. With it we lost our soul, our moral compass. America’s character is measured by our net worth.

2. We’re already in the early stages of a Great Depression

Comparing today with the Great Depression is common sport. In a Newsweek special “Seeing Shades of the 1930s,” Dan Gross wrote: “Wall Street, after two terms of a business-friendly Republican president, self-immolated on a pyre of greed, incompetence and excessive optimism.” Today’s “new normal” economy means high unemployment for years, inflation driving prices, rising interest rates, more debt, chaos.

We are destroying ourselves from within. Former U.S. Comptroller General David Walker warns that “there are striking similarities between America’s current situation and that of another great power from the past: Rome.” Three reasons “worth remembering: declining moral values and political civility at home, an overconfident and overextended military in foreign lands, and fiscal irresponsibility by the central government.” We are becoming more vulnerable to external enemies.

3. Good Depression exposes our self-destruct bubble-thinking

Before the 2008 crash, “Irrational Exuberance” author Robert Shiller warned in the Atlantic magazine that “bubbles are primarily social phenomena. Until we understand and address the psychology that fuels them, they’re going to keep forming.” Housing inflated 85% in the decade: “Historically unprecedented … no rational basis for it.”

Bubble thinking is an toxic virus that infected everyone. Shiller warns of another coming: “We recently lived through two epidemics of excessive financial optimism … we are close to a third episode.”

4. Good Depression will stir outrage, force real reforms

Writing in the Wall Street Journal, Jim Grant, editor of the Interest Rate Observer, wrote: “Why No Outrage? Through history, outrageous financial behavior has been met with outrage. But today Wall Street’s damaging recklessness has been met with near-silence, from a too tolerant populace.” Grant worries that Wall Street will run “itself and the rest of the American financial system right over a cliff.”

But we only went to the edge in 2008. Today, a rebellious “throw the bums out” hostility is blowing a new kind of bubble: Three years ago we did not have Tea Party, union fights, the Arab Spring and Greek austerity riots, all signs of an dark angry future sweeping across America.

5. Good Depression forces Wall Street to think outside the box

In a powerful Bloomberg Markets feature, “No Easy Fix,” we’re told Wall Street’s “profit formula has hit a wall.” Their “money-making machine is broken and efforts to repair it after the biggest losses in history are likely to undermine profits.”

Even Mad Money’s Jim Cramer openly admits hedge fund managers are pocketing megaprofits at capital gains rates while laughing at the stupidity of a broken political system that gives hundreds of billions in tax breaks to the richest, then takes taxes off the table as our middle class is dying under massive unsustainable deficits. Soon angry mobs will “fix” Wall Street.

6. Good Depression will deflate America’s warring soul

The American economy is a “war economy” driven by a egomaniac. I saw it firsthand as a U.S. Marine. Americans love being king of the hill, world’s cop, the global superpower. Why else spend 54% of our tax dollars on a war machine, 47% of the world’s total military budgets.

Why? Our war machine generates such “spectacular profits that many people around the world” are convinced America’s “rich and powerful must be deliberately causing catastrophes so that they can exploit them,” warns Klein in “Shock Doctrine.” No wonder the GOP takes military spending, like tax cuts for the rich, off-the-table: The war industry is a major political donor.

7. Good Depression now … avoids a far bigger depression later

In “The Price of Liberty: Paying for America’s Wars,” Robert Hormats, undersecretary of state and a former Goldman Sachs vice chairman, traces America’s wartime financing from the Revolutionary War to present wars. He warns that today we’re “relying on faith over experience, hoping that sustained growth will erase deficits and that the ballooning costs of Social Security, Medicare and Medicaid will be manageable in the coming decades without difficult reforms.”

Absent a brutal reset, we are on a historically predictable course says Kevin Phillips, Nixon strategist and author of “Wealth & Democracy:” “Most great nations, at the peak of their economic power, become arrogant and wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out.” Yes, burned out, unprepared.

So pray for a Good Depression earlier rather than later. Choose now and we can be prepared for whatever comes. Or a Great Depression will hit later, when we’re least prepared, the problems bigger, our faith weaker … don’t raise the debt ceiling.

And the take home message:

Totally predictable: No Black Swans in 2000, 2008 … nor in 2012

Yes, all was predictable: The events of the past few years were well known in advance. In fact, the events of the entire decade were predictable. The rich got richer off the backs of the middle class and the poor. Why? “There’s class warfare all right,” warns Warren Buffett. “But it’s my class, the rich class, that’s making war, and we’re winning.”

And they are also blind and deaf to the havoc their free-market Reaganomics policies are creating, selfishly undermining America, the world’s greatest economic power.

Lessons learned? Zero. Why? Wall Street, Washington and Corporate America are focused on one narrow-minded short-term strategy: Economic g-r-o-w-t-h, bull markets, megabonuses, tax cuts. In good times they tout “free markets.” But when greed bombs, they throw free-market “principles” under the Reagan Revolution bus and unleash their mercenary lobbyists to go whining to Congress for huge taxpayer bailouts and access at the Fed discount window, to siphon off more taxpayer money. And they’ll do it again soon,

Wall Street and their cronies are doing such a miserable job, America needs a new strategy: First, stop “kicking the can down the road.” Let a good old-fashioned Good Depression do the job that our hapless, happy-talking leaders refuse to do. Take our medicine. Let a new depression clean house and reawaken Americans to core values.

Trust me folks, it’s either a Good Depression now … or a Great Depression 2.

Absolutely spot on. Yet it will be completely ignored - the status quo's steamroller will not be denied: after all just think of all those insolvent entitlement and cheap, cheap credit that Joe Sixpack stands to lose if July 4th was a day of true independence from debt slavery...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Doyle Hargraves's picture

Read Murray Rothbard Bitchez!

CH1's picture

And the harder the crash the better. I want no banksters on the rebuild!

Ahmeexnal's picture

Time to give the bankster wanksters a good old south african necklacing.

Long tire manufacturers and oil!

Frankie Carbone's picture

The harder the cataclysmic collapse the more "fog and chaos". Which of course means that we all take a road trip to Wall Street for a good ole' fashioned lynchin'.

Anyone got a rope and an old chair strong enough to kick out from a bankster's feet? LOL

CH1's picture

Violence may sound tough on a chat board, but it ain't so cool in real life.

Seasmoke's picture

think you are 3 years too late with this....its too late to avoid a DEPRESSION !.....otherwise you can just write this again in another 3 years , as they keep kicking the can down the road

Herbert_guthrie's picture

I'm with you Seasmoke.
Too little too late.

Unfortunately, I belong in the "numbers don't lie" camp.

Hyperinflationary Great Depression.
Biggest fall in history.

Damn, sounds scary when I word it like that!

Hacked Economy's picture

 I tend to agree.  There will be a hyperinflationary depression.  When?  Dunno.  How fast and hard?  Dunno.  But the road leads straight to that cliff and no other.

oldman's picture

If this is not already a depression with 400,000 new filings weekly

Can you even imagine a 'real depression' will be like?

I can not even imagine it.

every thing about this article stinks---must've sold a lot of ham or chicken or hotdogs with this gibberish

tyler has a great sense of humor

Only place in town, baby

Vic Vinegar's picture

Grandpa Farrell needs to realize no one is trying to solve problems.  Things need to get real nasty before this one world currency can get into place.

Thomas's picture

It has been my premise that a Kondratiev-like third leg down is coming this way. The rot has not been purged. How one defends against the deflationary vs inflationary apocalypse is unknowable and unnerving.

Doeko's picture

BTFD is back Bitchez!

Cash_is_Trash's picture

The bail-out boom is causing massive malinvestments, as is properly pointed out by the Austrian School.

Case in point, Tiffany & Co.'s share price:

Good one Keynes, your shit theory doesn't provide any full-employment, just messes with markets and adequately needed market corrections.

That Peak Oil Guy's picture

The economic signals that are sent at times of stress are there for a reason!  If we try to manipulate them to keep everything rosy then we get unintended consequences like malinvestment.  Crazy!


Cursive's picture


Duly noted. We are awash in moral hazard, like a great tsunami of it. It is wrecking all of our institutions and laying waste to our society. Picking up the pieces will be an epic task and the beginning of a new era.

Cognitive Dissonance's picture


I appreciate the article's thrust and the info, but without busting balls.......I thought we were already in a good depression with an even deeper one just around the corner.

I guess it depends upon who you ask. Stay away from the unemployed, those on food stamps, those raiding their savings, IRAs and 401(k)s etc just to pay the bills and I guess your right.

Dr. Engali's picture

I totally agree with you CD. I know people on both sides of the spectrum. While they are good people, those with money turn a blind eye to what is going on around them. But when I drive to my office I see more and more faces digging out of the dumpsters looking for anything of value.

Vic Vinegar's picture

At this stage of the game it is time to bust balls!

Deepskyy's picture


I think what Paul is terming a "good depression" here is a structured collapse.  Like a condemned building being imploded by a proper team of trained demolition experts.  You bring the whole derelict mass down on itself, clean up the rubble and rebuild something useful in its place.  I think a planned default, a return to our own form of Constitutional, congress issued currency and not the Federal Reserve note, and a major shift politically would be a "good depression."  Yea, unemployment would shoot to over 20% most likely, and it would hurt like hell for a while, but then once we clear away all the crap, we can rebuild using sound money principles and effective regulation to limit corruption and hubris.

If we don't, like many of us have said in the hallowed halls of ZH and other websites, the status quo will continue to work... until it doesn't.  A disorderly collapse would be violent, bloody, and could lead to either a complete totalitarian state to attempt to regain control of our urban areas that would burn in the even the government checks stop coming.

CH1's picture

If they can claim anything resembling a "controlled collapse" the banksters will never go away. They must be seen as utterly discredited; the root cause of unavoidable pain.

Cognitive Dissonance's picture

Like a condemned building being imploded by a proper team of trained demolition experts.

You mean like this?

Or this?

Looks like they have already started.

iNull's picture

One has a right to be incredulous even if this were just your typical downtown office skyscraper. But Bldg 7 was an EOC (Emergency Operations Center). I worked on an EOC back in the 90s. Overengineering is an understatement. Overinspection is an understatement. There was a light mist that settled on some of the rebar overnight and as a result it developed a light rust (you could scrape it off with your fingernail). We had to sandblast the entire lot down to metal before installing it. These EOCs are engineered with 100% safety margins and are designed to survive anything short of a direct nuclear blast. I can tell you based on what (little) I know about the engineering and construction of commercial buildings. No fucking way did two little fires in Bldg 7 bring it down.

N.O. F.U.C.K.I.N.G. W.A.Y.

VyseLegendaire's picture

No, we 're currently in the 'Joyful Depression' phase. 

fuu's picture

11 years too late author. Put down the hopium pipe and get with the program.

HelluvaEngineer's picture

Exactly.  After the housing bubble and the past 2 years of bailout nation and accounting fraud, when this sucker goes it will leave a smoking crater.

fuu's picture

Also 6. Good Depression will deflate America’s warring soul is total bullshit.

Cognitive Dissonance's picture

I didn't want to say anything since I'd already busted Paul's balls but............a cornered and set upon ruling hierarchy always wants war, the ultimate diversion.

Even if it requires a false flag attack to get one cooking. Especially if it requires a false flag attack to get one cooking.

fuu's picture

I think we should always use the Operation Northwoods stuff as an example:

gaoptimize's picture

I think any reponsible leadership that would follow the policy guidance here is on hiatus until after the 2012 election.  By then it will be too late.

The Limerick King's picture

Should we choose to go through a depression?

Or print to avoid a recession?

I don't mean to be rude

But the truth is we're screwed

We'd be better off going to confession.

Henry Hub's picture

...And then get out Smith & Wesson

A Lunatic's picture

Shooting hollow points I'm guessin'

PulauHantu29's picture

From what I hear from everyone I talk to they are super mad about the record high Fat Bonuses on Greedy Wall Street while the rest of the country sinks into the abyss.

Very unfair.

CH1's picture

Yup, another deflection. Anything except allowing the legitimacy of the state to come into question.

"The state is holy and righteous. Anyone implying otherwise is an ungodly freak, a conspiracy theorist who poisons babies for fun."

kevinearick's picture


The economic motor is dead, and has been for quite some time. Now, the pony motor is dead too (illegal immigration for next generation mindless make-workers to feed the ponzi). The operators are not going to get another motor so long as the Family Law filter, which disengaged the economic gears for so long that they atrophied, remains installed.

All they know is exploitation, moving the cattle from meadow to meadow, relying upon a planet that is becoming increasingly inhospitable. All they can do is drop the relative price of oil, which has already closed all the exits, and monetize the debt directly between them, to pump the market feedback signal. How is solar, wind, and FracGas working for everyone?

The housing channel is already stuffed to overflowing, and, like the digestive system, the subsequent lack of circulation is spreading poison across the rest of the body. In this environment, the non-profits are now “learning” that they are losing the government funding necessary to control their properties, leaving them scrambling for real rent at 25% of their mortgages, due to the mirrored government overhead on both sides of the equation, subject to deleveraging, and their ignorant response is to seek real renters to carry both their mortgages and their pets.

Their bosses are planning to drop the whole spoiled population off at the family farm, and the family farmers are already shutting down operations in anticipation of the move. How long before they get rid of the homeowners tax deductions, credits, and subsidies, to clear the market, when Trump owns the front yard and the driveway, paying interest on interest on interest, at 0% effective? An intelligent community does not subsidize stupid, to hide a massive surplus of McMansions within dead governments.

“They had all benefited from the same quality education, and they shared a set of standards by which they lived, and they expected of one another adherence to these standards. Being one of the anointed elite meant belonging, meant freedom from self-doubt, meant always knowing what you thought and what you should think, meant comfort…Life can sometimes seem hopelessly complex, unpredictable, chaotic. Then a strange order makes itself known…This phase of the pattern, which benefitted him, was a wave that offered effortless surfing. Until it lost its benign character…In every complex system…just under the façade of order, which science has discovered and long thought it fully understood, lurked an eerie and disturbing chaos. But also, deep inside every chaos, an eerier kind of hidden order waited to be found.”

Behind the façade that poses for eyes to an empty soul, you see a skull cracking from the pressure in the brain. The manager becomes increasingly arbitrary, capricious, and malicious, because the box must be controlled amidst increasingly variable input and increasingly rigid output, as the bosses race for the exits. “Why” is an integral question; “because that is the way I was taught” is a derivative answer. Best to maintain your health, to keep a gap between yourself and those derivatives.

Peak government is the correct answer. What happens when the size of government contracts rapidly? All politics are local, aggregated into social behavior, with a feedback signal. What do you want to do with the energy in that slingshot, relative to the turbulence in the neutral line? If you owe the bank $X, you are in trouble; if you owe the bank $Y, the bank is in trouble. If the bank “owes” the me generation and its descendents $500 trillion NPV worth of entitlement promises, who is in trouble, and when does the buck break?

I eat breakfast with the farmers, ride a bike in the rain with boots hung over the bar, to a low wage job in an automated plant, and suddenly move away, after walking across town with my backpack. What do you do? What is each type of person in that small town thinking, if anything? Every empire maximizes productivity and then debt, with alternating feedback signals, in a recursive cycle, until it doesn’t, when all the exits are shut, and all the lies pop off the stack.

Calculate the square footage required per capita and compare it to inventory. Run a distribution for each sector and compare the result against currency carry trades. What is the economic effect of hoarding, and why does it happen?

At the cliff abutment, you are strategically pulling the looking glass back, shaving off sections of the cliff, and leaving the momentum of gravity to do the work for you. Allow Caesar to add rigid price controls. The larger the collapse, the more ingrained the lesson, the lower the overhead cost to the next system, and the bigger the battery, but you have to hit the next orbit. Critters will be critters; big is a least-common-denominator enterprise. Adjust Democracy accordingly.

So, you have a piston of pistons in the neutral line, with adjustable I/O surfaces, and a pathway for productive ignition of backlash…

MisterMousePotato's picture

Please, what is the quote in the middle? Funny, but it sounds like it might have been written by Thomas Wolfe.

MisterMousePotato's picture

Dean Koontz?!? No kidding. Prolific author of entertaining but trashy novels? (Or is it trashy but entertaining?) Should I be embarrassed that I compared him to America's finest author of all time? Or is one or the other over- or under-rated?

Silver Dreamer's picture

54% of tax revenue is spent on the military?  Wow, that's news to me.  When I read figures like that, I cannot help but immediately dismiss everything else written.

Taint Boil's picture

a link to cost of war on the bottom - Some other good links here too:

skipjack's picture

Oh jeez, another clueless asshole who has no idea what capitalism is.  What we have isn't capitalism; it's fascism.  If you cringe at the word fascism, then substitute corporatism.  Whatever.


If you insist on mischaracterizing, something, then you can't possibly fix it.


We NEED capitalism; we don't need fascism, corporatism, socialism or communism.


Got it ?

oldmanagain's picture

Don't get your definition of capitalism. Please define.

American Sucker's picture

Capitalism always turns into fascism.  As does socialism.

Tejano's picture

Well, he seems to like the term "mutant capitalism", whatever the hell that is. Says it can be fixed through prayer, "So pray for a good depression.." Thinks "outrage" will be a good thing. 

This Granpa must be off his meds.

Panafrican Funktron Robot's picture

Yeah, regulatory capture, not related at all to capitalism.  /sarc

The reality is that "capitalism" is ingrained in our very nature, and that is both the problem and the solution.  We continuously collapse on ourselves.  Immolation/phoenix cycle.  This time is never different.  There is no "fix".  The guy who said "Those who ignore history are doomed to repeat it" doesn't realize that being cognizant of history doesn't prevent the repitition, it just makes you that much more painfully aware but substantially less surprised when it does repeat.  The main takeaway is that at least you can minimize the damage in the "writing on the wall phase" to give you a better shot at surviving the "holy fuck the world is ending" phase.

Guy Fawkes Mulder's picture

Oh jeez, another clueless asshole who has no idea what capitalism is.

Oh jeez, another clueless asshole who has no idea what capitalism is.