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SPOTLIGHT
Stock market's silver lining
When the going gets tough, the tough go shopping for stocks. Right now there's a fire sale, says this PBS TV host.
Growing your bottom line

Spotlight: Consuelo Mack

What we're experiencing is part of human nature and what PIMCO's Bill Gross describes as the "inherent instability of capitalism." We go through these booms and busts -- and then we learn our lessons during the busts -- and then it takes about a generation or so before we get ourselves back into some other asset-based "bubble."

Financial fallout
Cause of stock market crash
Real estate bubble
Great Depression reprise?
World markets
Shadow banking system
Bear market lessons
Risk of stagflation
Fixing retirement accounts
Domestic vs. foreign stocks
Investing in gold

Some have said that America's previous "bubbles" and market crashes were all in some way related to real estate. Is this market situation any different?

In my mind it was more than just real estate in this case. It was the credit bubble that developed around real estate and the whole "asset-backed" derivative security movement ... that's what got totally out of hand. You really can't blame real estate; you have to blame this era of easy money that was worldwide. Whenever you have that much money available looking for a place to invest, bad things can happen. And the "securitization" of America's real estate assets, the derivatives we've heard so much about, unfortunately, they became, as Warren Buffet termed them, the greatest financial weapons of mass destruction known to man.

Are journalists who compare today's crash to that which sparked the Great Depression being objective or are they engaging in sensationalism?

I think there is some sensationalism going on. I've had some guests on my show, people who are in their 70s, who had never seen the sort of credit freeze-up we've experienced, and I think that that's the only decent analogy hearkening back to the Great Depression. Credit is what makes the world go round, and when you can't access credit, when you have a situation where a company as large as General Electric can't access credit, which is what happened, I think that that is a fair analogy.

But that's where the analogy ends, and that's why I honestly feel that all this talk of a second Great Depression is overblown. We don't have 25 percent unemployment, we have 6 percent unemployment. Half of the nation's banks shut down during the Great Depression, whereas today we are experiencing some consolidation, but we're nowhere close to where we were back then. We are just much better equipped, we have much better regulations for banks, and we're mounting a global, coordinated effort to inject liquidity into the world's financial system.

So even though we're entering into an economic downturn, I don't think we're at risk of a depression -- that is unless, of course, we become very protectionist next year. That would be our greatest risk and our greatest challenge: If protectionism would be renewed both here and elsewhere around the world, that could really set us back seriously.

-- Posted: Dec. 5, 2008
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