There is a popular misconception about how the Great Depression (we may have to rename that soon) actually occurred, starting in 1929. Most think it all happened in one sad day that Fall when the market crashed and then there were bread lines, soup kitchens, and all those pathetic black and white photos. Actually, it was much longer and more protracted as the many economic and business gurus of the day argued and dickered and dithered over what to do and how to do it – kind of like we are doing right now on both the US national level and the California state level.

World War I used to be called the Great War; then we had World War II. The Great Depression that Boomers of my age grew up hearing about endlessly from our parents and grandparents may be seen as Depression I shortly and what we are living through right now may shortly be known as Depression II. You may have noticed, as Depression II unfolds further, that we are not exactly in agreement about what to do about it. People like Robert Reich and Paul Krugman are screaming from the rooftops that this is a whole lot worse than anybody imagined and that Obama’s current $800 plus Billion Stimulus Package, now delayed until mid-February as Congressional Wordsmiths have at it, as huge as it may be, is actually just too mild and modest for the conflagration that we face.

Others, including some familiar Republican Congressional leaders and vocal Democrats (no party has a monopoly on ostrich-like behavior!) are complaining that, now that the Democrats are back up on their horse again, we are resuming their wild and crazy spending – not that the lately departed GW Bush Administration on their way out was any slouch in the spending department last Fall. There is, sadly, absolutely no consensus on what we do now. Rome is really burning, folks – take a moment and smell the smoke.

Suddenly, we are all experiencing the group realization that our banking sector is upside down, underwater and hanging on for dear life. We are actually, seriously discussing nationalizing the US banking system – something Sweden (a whole other can of worms) did to mixed reviews in the 90’s. Banking is different from other businesses because, if you own a dry cleaning business, you can be running on fumes with no money and nobody will notice as long as you keep pumping out suits and shirts and things in those maddening plastic wraps with the cardboard thingies hiding in the sleeves and those paper-wrapped hangers.

But, if you are a bank and your numbers show that you are not making it financially, the FDIC Boys will come and swoop in, shut you down, and presto, you are not a bank anymore. There are no incentives in banking to let anybody know how bad things are going financially. In fact, all the incentives go in the other direction: to hide how badly you are doing and hope that nobody (the FDIC, in particular) notices and comes in to shut you down before you figure out what to do next to stay alive. Our major banks sit in circular firing squad fashion doing just that right now – many are insolvent and hoping nobody will notice.

Some people still don’t get it. We have spent much of the 70-plus-year-post-World War II period patting ourselves on our collective backs, assuring ourselves that another Depression cannot ever happen here again because we fixed all the systemic flaws that caused the last one and made much of the 1930’s a Lost Decade for the US and world economies. Sort of like after World War I, when it was still the Great War, reasonable and intelligent minds actually believed that war on the global level was abject madness and therefore, rationally speaking, should effectively be banished from the human stage, never to happen again. Within a generation, that naïve thinking (from a Monday Morning Quarterback’s perspective, looking back from here in the 21st Century) was demolished by the horrors of World War II, and some 50 million humans died amid untold economic misery giving birth to a 50-year Cold War and the modern world we live in today.

Just when we thought that another Depression was impossible, that we had made the world economically safe in perpetuity, our all-too-human propensity to tinker, push the envelope and make, remake and revise our rules, often forgetting the reasons for the rules in the first place, has landed us right back where we believed we would never be again. Mix into this Witches’ Brew our greedy ingenuity in squeezing out all the juice out of all the lemons, aided by previously undreamed of computing power ushering in a cornucopia of exotic financial instruments that nobody understands, and we now find ourselves sliding into the unimaginable: Depression II.

Toto, we’re not in Kansas anymore – we face a nightmare that just a few short years ago we declared impossible – over, never going to happen again, not to worry. And now we had better deal with it, and deal boldly with it right now without all the drama and usual bickering to avoid making the same mistakes and false-starts they made back in the 1930’s, which economic historians now believe served only to prolong and even worsen that Depression – or, we may not get another chance. We had better fasten our seatbelts and return our tray tables to their full, locked and upright positions, because this is going to be a very long and extremely painful, downward sleigh ride. Sometime, well into the 2010’s or 2020’s, we will look back and gnash our teeth over this missed opportunity if we do not grab it right now.