Before the Great Depression the United States and other industrialized nations were subject to an extreme cycle of Booms and Busts in their economies. In a day investments and savings could be wiped out in the blink of an eye due to the chaotic nature of markets, inflated book keeping, maximizing profits, and banks collapsing under the weight of bad asset.
Roughly every ten years or so the markets would collapse and people would be left in ruin if they were swept up into the mess. Here is a list of some of the crashes that have happened over the last 200 years.
Panic of 1819
Panic of 1825
Panic of 1837
Panic of 1847
Panic of 1857
Black Friday (1869)
Panic of 1873
Paris Bourse crash of 1882
Panic of 1884
Encilhamento
Panic of 1893
Panic of 1896
Panic of 1901
Panic of 1907
Depression of 1920–21
Wall Street Crash of 1929
What stopped these these devastating crashes? Well the implementation of the Glass-Steagall act that separated commercial banking from investment banking. It in essence put an end to the casino style gambling that the banks would engage in. They could no longer use depositor money to hedge bets against their own capital and thus the system because far more stable.
As many of you know in 1999 the Glass-Steagall Act was repealed at the behest of Republicans, Conservadems, and ultimately signed into law by third way President Bill Clinton. In that regard it took 8 years for the system to revert back to the 1800s and we had a financial collapse that wasn't just isolated to the United States, but took along with it the entire worlds economy because of the broad nature of trading and international banking systems. What happens at home no longer stays at home but in turn affects the entire world.
We have not reinstated the Glass-Steagall act and instead of sweeping financial reforms we got after the Great Depression, we were offered the band-aid of The Dodd-Frank act. Thus our country remains at risk to this economic terrorism and gambling of the banking industry.
An article this morning at moneymorning.com the next big crash may come before President Obama's term ends:
Washington is engaged in a massive "campaign" to make Americans believe the economy is in recovery. But in reality the United States is at the brink of a devastating economic crash that will cause catastrophic market losses and impoverish millions.
That's according to Peter Schiff, the best-selling author and CEO of Euro Pacific Capital, who delivered his frightening warning to investors in a recent interview on CCTV.
"The problem with politicians is they don't want to level with the voters and tell them how bad the economy really is and what the cure for the disease is," Schiff said.
The "disease" Schiff refers to is a toxic combination of our massive $16.4 trillion debt and the Fed's continued devaluing of the dollar through its controversial 7-year long "easing" program.
The Fed is currently purchasing $75 billion a month in Treasury and mortgage bonds, a form of stimulus.
President Obama and like-minded politicians claim this stimulus has pushed the economy forward, boosting GDP and keeping inflation low.
But Schiff says "it's another lie."
Now this article is a small drop in the bucket in terms of attention it will garner and it would be a miracle if anyone will actually listen considering we didn't listen to this man in 2006. I don't like to run around screaming the sky is falling or that impending doom is upon us but this is a clear warning that something is not right. Until we get commercial banks out of the business of gambling then we are setting up one large house of cards. We need to continue to put pressure on our senators. Precious few in the Senate even acknowledge this is a problem. The lone voices are perhaps Elizabeth Warren and Bernie Sanders calling for a 21st century return to the Glass-Steagall act. At this point it is not a matter of if - but when it will happen.
Schiff goes on to say:
A noted economist, Schiff has been a fierce critic of the Fed and its policies for years. And his warnings have proven to be prophetic.
In August 2006, when the Dow was hitting new highs nearly every day, Schiff said in an interview: "The United States is like the Titanic, and I'm here with the lifeboat trying to get people to leave the ship... I see a real financial crisis coming for the United States."
Just over a year later, the meltdown that became the Great Recession began, just as Schiff predicted.
He also predicted the subprime mortgage bubble burst, nearly a year before the real estate market fully crashed.
We didn't listen then. Will we listen now? What are the chances that this guy will be right in his predictions a third or fourth time?
Considering Obama said in his state of the Union:
Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better.
Not a good sign. It's actually quite frightening that wages have remained stagnant but those on the top have reclaimed over 95% of all gains since the Great Recession.
Considering that Schiff goes on to say:
Schiff points out recent market gains, with the Dow recently setting record highs and remaining above 16,000, is yet another lie giving investors a false sense of security.
"It's not that the stock market is gaining value... it's that our money is losing value. And so if you have a debased currency... a devalued currency, the price of everything goes up. Stocks are no exception," he said.
You have been warned.