Carnegie Management Group

The Great Depression of 2010-2012 could mirror the 1930’s Great Depression that lasted from 1930 to 1942—a period of 12 years!

The retirement of the 78 million baby boomers (26 percent of the U.S. population) born after World War II could produce a Great Depression that unfolds between 2010 and 2022—another period of 12 years!

The Great Depression of the 1930s was caused by:

(1) The newly created Federal Reserve allowed one-third of the nation’s banks to fail. One-third of the nation’s money supply (liquidity) disappeared instantly when banks closed their doors. That will not happen today because the FDIC and the Fed have guaranteed the banking system.

(2) Congress raised taxes five times during the 1930s, which prolonged the Great Depression. It lasted from 1930 to 1942––a period of 12 years!

(3) The 1930 Smoot Hawley Tariff Act ended free trade, which pushed the rest of the world into an economic depression. The Democrats want the support of the AFL-CIO unions (and their campaign contributions), which explains why most Democrats are fiercely anti-free trade. The Republicans want the support of the oil lobby (and their campaign contributions), which could explain why Congress has not passed a comprehensive energy bill that would end our dependence on foreign oil.

Raising taxes could push the economy into a great depression that could last well beyond the 2010-2014 recession and bear market!

Demographically, this economic downturn is expected to last until 2011—another 12-year period! Economics 101 is very clear: Cutting taxes will increase state and federal tax revenues and, hence, create jobs. Raising taxes on any economic group will increase unemployment.

The worst credit crisis in history is a global problem. The global banking system owns trillions in toxic mortgage debt that will take many years to write-off.

The assets in IRAs, 401Ks, and pension plans declined by 50 percent during the 2000-2002 recession and bear market. Retirement funds declined by over 40 percent during 2008, as the S&P 500 fell by 40 percent.