Sub-prime Crisis? Yeah, right.

There is perhaps a moderate economic crisis looming in the not-too-distant future, with the sub-prime crisis in swing, and there is some reason to worry that another economic boom is going to be in the distant future as opposed to the near one.

However, I believe that these concerns are largely exaggerated. The hegemony of the US economically is not something that can be disturbed easily, something that was certainly not true prior to 1950. Even the worst-case scenario economic ramifications of the sub-prime crisis do not really rival some other "crises" that the US has experienced in the last 50 years.

For one, the petroleum shortages of the late 70's and early 80's were a far greater macro threat to our economy. Back then the US's economy was far more dependent and reliant on petroleum than it is now (it's true). Inflation was off the charts (highest levels in modern history, at least in 100 years in the US), and interest rates were fluctuating wildly. Nothing short of the death of American auto was at hand, and Paul Volker, bless his soul, was doing his best to try and stem the tide. Any economics professor will easily tell you (and will have the graphs to prove it) that the early 80's was easily the most volatile time economically since the Depression. An assortment of figures and data points from the era would show up on econ graphs as statistical anomalies inconsistent with trends of before and after.

And you know what? America didn't hit the fan. There was recovery (which had some, but not everything to do with, Reaganomics). It wasn't the Great Depression II. And life moved on. Gas prices now are, in real terms, still not even as high as they were in 1982 (I believe it's getting close). America didn't collapse into a pile of anarchy and chaos.

A more comparable analogy would be the S&L scandal, also in the 1980's. Thanks to President [deleted by Professor] Reagan, the American public ended up losing something like $300 billion (I'm too lazy to look up the real amount, but it's big) in the government's bailout of all the private S&L's that went under. The government was partly to blame, amid scandal and probably corruption and collusion. You want to talk about bank failure though? This was the time to talk about it. The ramifications of the S&L scandal also far surpass anything we have today.

And yet we're still here.

Inflation happens. Stagflation happens. And neither of these things are happening now in amounts that even remotely rival the 1980's.

And as far as the Depression goes... yes the stock market is volatile. Yes it is subject to crashes. However, the Great Depression had many causes, and the stock market crash had little to do with it. It was certainly the cause, but the Fed back then had no idea how to handle things. Deflation was going on. The Fed should have pumped money into the supply. It didn't. If it would have, there would likely have been recovery (if it did that and a few other things) in relatively short order.

Now, there is the whole China-could-pull-the-plug-on-us-and-plunge-our-nation-into-anarchy-and-war-and-chaos-if-they-wanted-to thing, but that's another story. And it's extremely unlikely anyway.

Peak Oil? Hmmm. I'm not sold. The energy companies will get off their keisters and develop alternative energy when it becomes economically feasible. I'm confident of this.

Maybe I'm too optimistic.