There was no deposit insurance in the early 30s. When a bank failed, the money literally disappeared. The Fed abdicated its responsibility by not providing liquidity to perfectly solvent banks. Thus, the bank runs fed on themselves. Money disappeared and commerce ceased literally overnight. This time around, there was deposit insurance. In fact, it was expanded to include money market accounts after Lehman went. Yes, plenty of morons lined up outside of suspect banks, but there was zero chance money was going to disappear a la the 30s. If folks can't see the difference between what the Fed should have done in the 30s and the near-criminality of the policies pursued by Bernanke and Geithner, they are shockingly ignorant.
Well, this logic is flawed... Modern banks aren't financed by deposits and money did disappear exactly like it did in the 30s. Obviously, the various Fed programs were rolled out to stem the tide. I am not sure what "near-criminal" Fed policies you might be referring to, but the various measures taken after Leh were applied to prevent the repeat of the 30s.
I'm not concerned with bank shareholders or their creditors (other than depositors). You, as board spokesman for the banker-centric regime in place here and across the pond are. In the 30s, commerce stopped. Businesses and individuals lost the ability to pay for anything overnight as the money in their accounts disappeared. That was never at risk here. Bank deposits - guaranteed. Money markets - guaranteed. I'm not saying there wouldn't have been a painful credit squeeze and near-depression, because there would have been (and should have been). Now we're out of it, but have transferred the price to those who can least afford it, by sending the price of necessity items through the roof and not letting asset prices clear to where folks can afford them on their newly reduced incomes.
Main article: Depression of 1920-21 On March 4, President Harding assumed office while the nation was in the midst of a postwar economic decline, known as the Depression of 1920-21. By summer of his first year in office, after a series of actions by the Federal Reserve to lower interest rates, an economic recovery began. President Harding convened the Conference of Unemployment in 1921, headed by Secretary of Commerce Herbert Hoover, that proactively advocated stimulating the economy with local public work projects and encouraged businesses to apply shared work programs.[113] Harding's Treasury Secretary, Andrew Mellon, ordered a study which demonstrated historically that, as income tax rates were increased, money was driven underground or abroad. Mellon concluded that lower rates would increase tax revenues. Based on this advice, Harding cut taxes, starting in 1922. The top marginal rate was reduced annually in four stages from 73% in 1921 to 25% in 1925. Taxes were cut for lower incomes starting in 1923. The lower rates substantially increased the money flowing to the treasury.[114] By late 1922, the economy began to turn around. Unemployment was pared from its 1921 high of 12% to an average of 3.3% for the remainder of the decade. The misery index which is a combination of unemployment and inflation had its sharpest decline in U.S. history under President Harding. Wages, profits, and productivity all made substantial gains during the 1920s. Libertarian historian Thomas Woods contends that the tax cuts implemented by President Harding ended the Depression of 1920-21 and were responsible for creating a decade-long expansion. Historians Schweikart and Allen also argue that Harding's tax and economic policies in part "...produced the most vibrant eight year burst of manufacturing and innovation in the nation's history."[115] http://en.wikipedia.org/wiki/Depression_of_1920-21
In a heavily indebted society, zdreg, especially where much of the debt is held externally, the problem with deflation is that debtors will end up returning much more buying power to their creditors than they borrowed, thus increasing the real cost of borrowing. This happened in the Great Depression, and those with cash and few debts were able to buy assets very cheaply. The rich got richer, much richer. However those with mortgages and substantial debts lost nearly everything in many cases, as they were foreclosed on.. The situation today would be even worse were the US to suffer any substantial deflation in the overall economy. Look what deflation in just one sector, Real Estate, has caused! High inflation is just as bad of course, and it hurts the poor far more than the wealthy. The Fed is trying to walk a tightrope between inflation and deflation by aiming for mild inflation. Time will tell how well they succeed.
Well EMU is raising it's rates ahead of the FED. The only Fed Chair that will dissent against QE3 is the DALLAS FED CHAIR. So, lets see what happens in JUNE when the FED stops buying up BONDS. Oil at 106 and climbing. We are closer to falling back in the hole than ever before. IE: what the pundits would call a "Recession" what I would call the smoke clearing and the country waking up to the fact we have stagflation, which is far worse than a depression and will last a decade if not longer.