I know one of the questions everyone has is, 'What if the central planners had never stepped in with easy monetary policy? What if we had never had any of the QE programs by the Fed and Treasury?' I want to try to address these questions and also give me guess at to what prices would have looked like.
The first thing we hear is that if these programs had never been created and implemented then the 'recession' would have been much worse, but considering that it has been a depression (given real UE and real GDP numbers), is it true?
We need to start a long time ago however. So long ago that we really can't guess what the price action would be now. If we start with the fact that the bank runs in the beginning of the 20th Century were manifested by John Pierpont Morgan, that the First World War was created by European Aristocrats, and the Great Depression was instituted by Wall Street, then we can see where this is all headed. We can't accurately find P* (price) becuase it has been so distorted over the years.
Yet let's continue the historics so we can see how much manipulation has occurred. After the Great Depression FDR devalued the dollar in terms of gold (I am also going to stay away from social programs), then WWII started - another war that was created by the financial system. Then the Military Industrial Complex got in full swing and has had war after war since, costing tax payers trillions of dollars for slightly better technology at the expense of a lot of bloodshed.
The 70's saw the MIC lose a big war with the Fall of Saigon, and before that the US was already going bankrupt and had to pull back the gold standard from the international market. Then we get into the coked up Wall Street of the 80's and all of the shady deals that happened then, ending with the collapse in '87. The 90's had the LTCM scandal, NAFTA (which shifted industry across the ocean), the end of Glass-Steagall, and the dot-com bubble (and many small wars). Then we get false pretenses for wars after 9/11, a housing bubble, and another stock market collapse. So really, more lies and scandal by the Fed and UST were just the norm come '08.
It will be impossible to discover accurate P* (price) given all of their previous losses. Price discovery uses standards and metrics that monetary policy has blasted into sand over the century. If we had not had all of that lying and cheating then maybe an ounce of gold would be worth what it was in 1912 and we would still be purchasing dinner with our metal change. But the fact is our currency's purchasing power has been inflated away and we now spend $100/month on internet. We spend $5 for a beer. We spend $5 for a gallon of gas.
So what if there had been a collapse of finance in '08 - however orchestrated by ineptitude and malfeasance - and proper measures had been made? First let's assume control right at the top of the market: I am not sure but I would assume that the banksters shorted the markets on the way down, even the PPT and other government working groups (they are concerned with only making money anyway). So if we had it proper, we would have let the big banks go out, and other banks that were not in trouble could have bought their holdings on the cheap. It is possible that community groups could have bought mortgages cheaply and people who had never been entraupanuers who had savings became the new banking industry.
Yes prices would have fallen, but we see now that there is a 1:1 ratio on goods to services. So houses would have been cheaper, but oil would have been too. Therefore the pensions would have been lower but we would be buying the same amount of goods. The only reason higher prices are wanted is because corporations wanted their stock prices higher. The average person on the street would have been better off.
Unemployment is a hard one to figure out. A lot of work had already been outsourced. Maybe there would have been a return to community though. Maybe those corporations that needed high equity prices would have gone under and local companies would have hired those out of work. Basically all we did was keep the crappy system together at the benefit of the rich. DJ 5000, oil at $50/b, gold at $1k, it doesn't sound bad to me.