It's not about if there is recession - (how the FED/SEC triggered it) the question is can depression be avoided?

I am astonished that people still have any doubt that recession is mandatory - we are far ahead of that - the stock markets are one of the best economy indicators, hence recession is not a question. The real question is how deep and how long and can depression be avoided?

Official sources will always play down the situation for good and bad reasons. The good reason is that the economy does, to some degree, depend on psychology and attitude, hence officials should avoid triggering self-fulfilling prophecies. But we are way beyond that point, we are on the titanic and heading for the iceberg. Therefore, going forward people have to be prepared for that event.

The losses in the mortgage assets happened with a jobless rate of 6% -- imagine the effect at 10, 15, 25 or 30? - the last one we had during the Depression. Astrologically, we unfortunately have the confirmation that the 1930 situation is returning. By any logical evaluation, you come to the same conclusion when you are prepared to face the facts. The current collapse of the financial system happened during the 'good' times and this is the trigger why we unfortunately will likely drop into a depression. Bank losses will triple at 10-15% jobless rates because foreclosures will be at rates not seen in 80 years and people who could have paid their mortgages will also be in trouble. The bailout is just the warming up and, I have to say, the stupidity of Paulson and Bernanke is part of the responsibility for that. Letting Lehman fail undermined or killed the last faith banks had to each other plus the fact that SEC, FED and Treasury did not see it coming. To say the blunt truth, which nobody says publicly, they screwed up big time. Fuld said it in his testimony, they knew real time about the situation. It was in their power to step in before it was to late and, as it was, still they could have bailed them out. They were penny smart and pound foolish - a mistake of unbelievable consequences.

Well, that's the past - but that they are allowed to carry on is another big mistake. For whatever reason, they are not the right guys to solve it. $250 bil. capital to the banks covers just partly the new capital they need for the damage done now. Going forward, that will not be enough anyway and, if we see what the setup is, you cannot imagine how they can work it out. Morgan Stanley has at least $20 bil. of preferred shares so they need to earn $2 bil. per year just to pay them in markets they cannot make money plus have to wind down 75% of there leverage. A game they never can win, hence there is no incentive to be a shareholder. The only bonanza left is to screw around with taxpayers money by buying toxic assets on an firesale level and resell it to the TARP program. The best trading operations like SAC, Millennium (Hedge funds) stopped most of their trading operation, so investment banks can not do any better.

Coming back to the economic situation, markets got spooked today because a FED official used the "recession" word officially - that's pathetic - if we get lucky and just have a severe recession, I would be glad. The systematic banking crisis goes way beyond a credit crunch and we have still to see the worst. So let's prepare for it without falling into panic - but ignorance is not helpful at all. This is a hurricane of highest alert with a possible earthquake and tsunami. Do the best to make everything as safe as possible with a positive attitude, since the storm will come, that's inevitable to many mistakes over the last 20 years have summed up and covered. More on that on blogs to come.