In a bear market, there is always a bull run on Chicken Little helmets.

We are not headed for a Great Depression. There are no souplines stretching for city blocks. Yes the market may drift lower, but here are the major differences between then and now.

The United States of Bailouts

Yes we are now living in the United States of Bailouts, as the government has created a $700 bn mega-dumpster to buy at auction rotting paper that was crafted by habitually self-deceiving, hubristic hustlers on Wall Street, who, unburdened by conscience, felt entitled to follow their own codes of conduct as they went berserk enriching themselves.

Not just Wall Street, but taxpayers, will be staring morosely at this mountain of rotting paper for some time. And now we have Bailout 2.0, with the government exercising its powers under the former bill to buy equity stakes in damaged financial institutions (the prior bill said it could buy any type of distressed asset).

Readers, who I so appreciate, know I've been saying since last fall that the free market has turned into a free-for-all, that Wall Streeters have sewaraged the once white-shoe reputation of finance with a kind of thinking that exists only on the margins of the Bell Curve.

It is their unfathomable stupidity, and the fact that these exotic derivatives that so enriched Wall Street but now have the same rights to the US Treasury as plain vanilla Treasurys, that is engendering a voter outrage hot enough to melt platinum. Perhaps the upside here is that we may get a voter turnout this coming presidential election bigger than the turnout in Mali or the Sudan.

And yes, as I've noted, we have come full circle, as with a great thundering thump, the Federal Reserve took the unthinkable step of converting the last two major investment banks standing, Morgan Stanley (MS) and Goldman Sachs (GS) into traditional bank holding companies.

The Differences Between Then and Now

However, the differences between today and the Great Depression are many and sundry: 

The Dow Jones industrial average is down more than one-third from its high a year ago. The stock market lost 89% of its value from its peak during the Great Depression. During the most recent bear market, from March 2000 to October 2002, the market lost about 50%. Same for 1973-1974 and two other times since 1937.

With stocks down 36%, we are closer to a bottom than a top. Most, if not all, of the bear damage may have already been done.

*One big difference is that during the Great Depression, there was no deposit insurance, causing a huge run on banks (watch out for bank runs England-deposit insurance there is a paltry $4,000). As customers withdrew their money, you had banks failing right and left. About 7,000 and 8,000 failed between 1929 and 1932. Today, 13 have collapsed, with 117 on the government's watch list. Yes today's banks are much bigger than the banks of the '30s--but so far, absent Washington Mutual and Wachovia, the big banks have not toppled. And these two banks are being taken over by bigger players.

*Industrial production dropped by 45% during the Great Depression. So far it is down 1.5% this year, led by the downturn in the automotive sector. US manufacturing remains in a recession, however.

*During the Great Depression, the whole economic policy stance then was bad, analysts note. The Federal Reserve was designed to come to the aid of banks that were in trouble. For some reason, it didn't. Now it is.

*Gary Becker, a Nobel prize-winning professor of economics at the University of Chicago, notes in a Wall Street Journal editorial that although we are in the most severe financial crisis since the Great Depression of the 1930s, this is a far smaller crisis, especially in terms of the effects on output and employment.

*Becker reiterates that the United States had about 25% unemployment during most of the decade from 1931 until 1941, and sharp falls in GDP.

*Becker says with efficient auctions, the government may well make money on its actions, just as the Resolution Trust Corporation that took over many savings-and-loan banks during the 1980s crisis did not lose much, if any, money.

*Becker adds too that the crisis that kills capitalism has been said to happen during every major recession and financial crisis ever since Karl Marx prophesized the collapse of capitalism in the middle of the 19th century. He says he is confident that sizable world economic growth will resume before very long under a mainly capitalist world economy.