Glenn does a nice job of pointing out the similar way in which "reporters" give both political and financial elites an easy platform from which to spout off, largely uncontested.

However (and this is not a criticism of Glenn, just a point I feel needs to be made), there is a very important distinction to be made between the two cases. The war in Iraq was not inevitable - had the press done it's job and investigated the Administration's claims at the time, war might have been avoided.

This is not true of the financial mess. A crack up at least similar to the one we are experiencing now was inevitable.

The reason is our economy depends on perpetual growth for it to function. Think about the simple act of taking out a mortgage. Even if you are safe and conservative, getting a 30-yr fixed loan at 5% interest, you will still pay back about 2 to 2.5 times the face value of the loan to your bank. In other words, if the loan amount is 200,000, if you make the minimum payment over the life of the mortgage, you will pay back the 200k principle plus about 250k in interest, for total payments of 450k.

The reason this has been so affordable is that economies have grown 2-3% every year over the last several centuries. When you get a 3% raise every year, and the value of your home rises 3% every year, this is a pretty good deal, easily affordable.

BUT, what if economic growth disappears, and is replaced by economic contraction? Then the value of your home DECLINES by 3% every year, as does your income, assuming of course that you keep your job at all. What looked like a good deal becomes an albatross around your neck, and your mortgage takes you into bankruptcy.

The point is, we are all so used to growth, that even conceiving of the possibility of a new era of economic contraction is completely foreign to us. We simply can't imagine it. I believe we are at just such an inflection point, and I can't envision what it will look like on the other side either - I've lived my whole life in the growth era and don't have any basis for understanding the details of what comes next, or what it will look like.

This applies not only to the average joe, but also to the captains of industry and their lackeys, like Jim Cramer. So, Cramer should definitely be blamed for not checking up on the CEO's he invited on his show, but he should be cut at least a little slack for not seeing just how bad things could get.

This really will be a different kind of depression, because the good old days will not be coming back.

Your economic analysis treats growth as if it just happens, or not, independent of all else. It does not.

My previous post presented no analysis of growth, so I'm having trouble understanding how it can be criticized. I merely stated that our economies will stop growing, which would lead to financial collapse.

In case you're interested, here is the analysis (necessarily brief and high level given the forum) that explains why growth will stop:

Economies have been able to grow over the last several centuries due to the availability of land and exploitable natural resources (fresh water, fish, metals, etc.), and, particularly the last 200 years or so, cheap and abundant energy resources in the form of fossil fuels. And advancing technologies have successfully exploited this natural bounty and allowed economies to industrialize and grow.

Well, fossil fuel resources are limited, as are land and fresh water. The earth is now "full", even overfull - there are no more new areas with vast tracts of arable land, no new fisheries. Indeed, the existing fisheries are being over exploited so that we are in danger of losing them as a food source. Top soil is eroding faster than it is being replaced. Water tables necessary for irrigation are being drawn down unsustainably. Fossil fuel production, particularly oil and gas, is peaking now, which means less available energy for economies (which need not just the same as last year, but more next year in order to grow). You see where this is going.

Now, when it comes to finance, financial assets are supposed to be a proxy for real wealth - land, energy, etc. You can inflate the money supply successfully (i.e. create debt obligations) while real wealth is increasing, more land, water, metal, energy, etc. is available this year than last. When real wealth goes into decline, any new debt creation, and much of the old debt, will probably not get repaid since there isn't enough real wealth to back it up.

Reduction in real wealth equates to economic contraction, which is the kiss of death for our economic model, which relies on perpetual growth.

But has real wealth dried up? Or was it that the over leveraging of the underlying debt obligations you mention got to the point that the real wealth underpinning them couldn't sustain it any further?

My short answers to your questions are 1) no, real wealth has not dried up, although it is stagnant or increasing slowly, and 2) yes, the slowing expansion of real wealth could not keep up with the relatively rapid expansion of debt.

The original point I inteded to make was that our economy was headed for some kind of crisis similar to the one we are actually seeing now. I believe the recklessness of the investment banks, specifically their irresponsible use of leverage, brought this on earlier, and has made it more severe, that it otherwise might have been. But that something similar would have been in our future anyway.