One thing that does bother me is that everyone is speculating that the market is going to fail us. If everyone starts pulling money out of the stock market, it IS going to crash, and it will be a self-fulfilling prophecy.

I do have to hand it to the FED recently for not lowering the interest rate and making the situation worse.

But, if we leave the market to itself, it will correct.

What we are seeing is people who have made poor choices reaping the consequences. We will have a lot of people in a dire situation, there's no doubt. But those who made the good decisions are going to pull through, nearly unscathed.

One thing we cannot afford, however, is to pour more money into social programs.

The best thing we can do is eliminate the income tax immediately, to maximize the wealth of each individual.

yes, perception is such a huge part of the downturn. People assume the economy is bad, that company 'x' is about to fail, that there is a shortage of rice, gas, or whatever.

They curtail their spending, pull money out of company 'x', buy up massive amounts of rice, gas, etc.

End result? The economy gets bad since people are not spending as much especially large ticket items, company 'x' goes out of business when all their capital got withdrawn, there is a shortage of rice and gas because people purchased more than they needed.

Spot on, Josh. Self fulfilling prophecy indeed.

If they continue to cut rates, the risk is the rate of lending falls below the rate of inflation.

Correct me if I am wrong, but I believe this is the approach taken during the Great Depression.

Right you are sir. A low rate of borrowing, coupled with some ridiculous lending practices, led the general population into a false sense of wealth. Changes to fixed expenses (such as a rate increase resulting in an increase of a mortgage payments), as well as an increase in the price of gas, made many a household unable to meet their commitments. As a result, people turned to their credit cards to make ends meet. Of course, it catches up eventually and people lose their homes. Increasing foreclosures result in decreasing property values (simple supply and demand) and the spiral continues downward.

Please elaborate. Don't fund any social programs? North America may see a large increase in homelessness and a very large increase of people relying on food banks. Shall we turn our backs on these people while the economy suffers a temporary setback? If so, we might end up with a portion of the population that were once hard working home owners who end up swept under the rug and feeling too hopeless to redeem themselves. The other day I read that half of Calgary's homeless population are employed. Perhaps if they had access to social housing programs they would not need to be on the streets?

That is really your best suggestion? I would have to think this would result in a government who has an awful lot of outstanding debt and no income. This would result in a huge devaluation of the currency. That would result in a huge decrease in purchasing power, as well as a massive losss in faith of the US economy.

I find the whole "As worse as the great Depression" actually laughable.
Why ? Because even percentage wise, we are now at such a high level economically, that "Depression" like era's need economic downfalls that are GREATER then what happened during the Depression.

It's like having the loss of 30 percent of 100 dollars, compared to the loss of 3 million dollars of 10 million. Sure, percentage wise its the same, but in the end, you still have 7 million dollars, still alot of money.

Plus all the safechecks these days we have that were implemented after the '30s crash, just to prevent such a thing.

That's why I said it was a good thing they didn't lower it

Yes and no. The economic bubble of the 20's was caused by the Federal Reserve (don't question me, just take it, because I don't wanna get into it).

After the crash, FDR slowed the recovery of the Great Depression with his big government ideas.

Yes, part of the reason was because the Federal government didn't involved around the time, but it wouldn't have had to be involved if the FED hadn't caused the bubble in the first place.

And we should let it run it's course, because it will eventually be fixed, even if it does hurt for a while.

Charity has never failed. Trust me. Here in Colorado (particularly Denver) we have what I call a "Homeless Industry" where charities fight to feed the homeless. No one will be hurting for too long.

Yes. As horrible as that sounds, it's for the better. We can't afford to subsidize these people. I offered a solution of temporarily (at least) eliminating income taxes.

2 points here. 1, the government does not get its money solely from the income tax, but quite a few other ways as well.

2, it would grow the economy immediately. Why? because when you have more money floating around, people are more willing to spend it. When people are more willing to spend it, the economy grows.

It would actually result in *more* government money, because as the spending increases, sales tax increases, and the government gets more money.

Josh, I must admit I assumed your point regarding a rate cut was sarcasm. My apologies. I won't question your statement regarding the Fed and the Depression, because I really know little of it. I would like to comment on your last point though. The vast majority of federal revenue is generated by collecting income tax. 44% to be more specific. Compare this with the paltry 3% brought in through sales and excise taxes. It would require a heck of a lot of spending (and yes, I do understand that the money would be spent over and over again with the government earning more and more taxes) for this to come close to balancing out. Additionally, I doubt there would be that much more spending going on, as I would hope people would use that money to pay off debts (idealistic, I know).