Some indications of great economic depression

Does it feel like 1931 again?
EIGHTY years ago, the Creditanstalt, a bank founded by the Rothschild family, was declared bankrupt. Some say the demise of Creditanstalt eventually led to the banking crisis of the Great Depression.

In the words of the current US Federal Reserve head Ben Bernanke: "I think perhaps the most critical in May of 1931, the Creditanstalt, which was one of the largest banks in Europe, failed, which generated a wave of financial crisis around the world.

"Up till early 1931, arguably the 1929 downturn was just an ordi-nary - severe but ordinary downturn. It was the financial crises and the collapse of banks and other institutions in late 1930 and early 1931 that made the Great Depression great."

Bernanke said this in a 2009 conversation with the Council of Foreign Relations.

Today, the world is at a tipping point again as the small European debt problem involving Greece, which first emerged in late 2009, has snowballed into a full-blown crisis.
There have been murmurs that some of the big European banks are exposed to large amounts of toxic debts and are having problems raising capital.

The crisis, which started in Greece, has spread to Portugal, Spain, and Italy. Some say it will soon hit the shores of France and even Germany, the continent's strongest economy.

Germany's banks are today the most highly leveraged, a massive two and a half times more leveraged than their US banking peers, according to the International Monetary Fund.

Just this week, former British prime minister Gordon Brown wrote that Germany must stop the blame game and save the eurozone.

Brown opined in the Christian Science Monitor: "It is also time for Germany to acknowledge that it must be integral to solving the problem because it has been integral to the problem itself."

Central banks today generally work together, making a 1931-style financial crisis remote, yet the longer the market is uncertain of the health of European banks and the recapitalisation plan in place, the more the fear will breed more fears.

In a year in which the world had seen a tsunami shatter Japan, a civil war in oil-rich Libya, and an earthquake in the US when the Dow Jones was starting to rally, the omens from above are hardly confidence boosters.

Thus, if it feels like 1931 again, then one should expect what is ahead.

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