What is currently going on in the global financial world does not need to turn into “the Next Great Depression.” Globalnomics, my new term for modern economics, portends low inflation on the longer term as Developing Countries continue to develop and Advanced Countries continue to find new and better ways for improved productivity and innovation.

In the United States the current housing problem looks more like the Savings and Loan problem than it does a Great Depression like problem. I have experience here. I was responsible for moniotoring the risk of ginnie mae’s portfolio of mortgage-backed securities during the Savings and Loan crisis a few years back.

Sure housing prices have fallen across the nation which makes the current problem a bit different from the S&L problem, but with the prediction of low inflation in the future (my Globalnomic theory), current long-term mortgage rates can be lowered to 4.0 percent easily (and maybe even lower) in the United States. These lower mortgage rates, in and of themselves, recovers much of the lost equity that has currently been experienced and will make most all home loans hole, if not prosperous, again.

And just wait. All those toxic assets, which a high percentage include the second and third home condos that those wall street guys invested in and built in sunny California, Nevada, Arizona, and Florida. In a few years, when the global economy has recovered and back on its feet, the Baby Boomers will snuff all those toxic assets up and live their golden years in ’sunny blis”.

It reminds me of the days when i used to travel down to Dallas during the S&L crisis and see all the forty story buildings sided with ‘gold’ tint sitting empty. Do you know what happened to those. The Government after taking them over sold them to a bunch of ‘high tech’ companies and turned the Texas economy around to one that was more diversified than the one which was pretty much solely dependent upon ‘oil”. Funny how that happens, isn’t it?

I think this article provides tremendous context relative to the doom and gloom we’ve been hearing from various media pundits on the state of our nation’s banks. Too many people regurgitate the “Banks are insolvent. Let them all fail.” rhetoric without any idea as to the real fundamentals that support such a statement.

I don’t think readers should take this article to refute Krugman, Roubini, and Grantham, but use this article to educate their view on their predictions. In the end, Roubini, Krugman, and Grantham are not so much commenting on the true state of the nation’s banks but on an implied over leverage in our economy. The truth, however, is that most banks today are not insolvent and, if given time, Roubini, Krugman, and Grantham’s realities can be mitigated simply by the forces of inflation, cheap money, and time. The question is, is there any monetary or fiscal policy which can buy enough time for banks to straighten up? Or, will market fear and irrationality spur continued forced selling, asset deflation, and the ultimate realization of doomsday scenarios?