Can Another Great Depression Happen Today, or in the Future?

While anything is possible, the existence of the Federal Deposit Insurance Corporation (FDIC) virtually guarantees that the US economy will never suffer another Great Depression.

The Great Depression was caused by a massive decline in the amout of money in circulation. Today, the FDIC insures almost all deposits in the banking sytem up to $100,000. In addition, the FDIC separately insures many retirement accounts, like Indvidual Retirement Accounts (IRA's). The fact that so much of the money deposited in banks today is insured, makes a decline in the money supply comparable to what happened during the Great Depression very unlikely. Without a massive decline in the money supply, another Great Depression cannot occur.

Had the FDIC existed prior to late 1929, or early 1930, most of the people lined up to withdraw their money from the banks would have recieved every penny of their deposits. The amount of money in circulation would never have declined to the levels it did, and the Great Depression would never have happened.

The only way another Great Depression could occur, would be if the FDIC failed and went bankrupt. Politically, that will never happen, as the politicians would then force the Federal Reserve to come up with whatever funds where necessary to keep the FDIC solvent, and all depositors would recieve their money. Remember, it was the failure of the Federal Reserve to do what it was created to do back in 1929-1933, that resulted in the creation of the FDIC.

Finally, the very existence of this blog will go a long way towards ensuring that another Great Depression does not occur.