Is this really The Greatest Depression?

[dice]

I've read a couple places that these times are being dubbed the 'Greatest Depression' and it seems to be getting propped up next to the Great Depression.



Are things honestly going to become so dire? We're in such different circumstances, there's no World War that we have to finance...whats going on? Everyone's talking about stockpiling food, universities closing down, Panasonic laying off 10% of their employees, travel companies boosting their rates by 20%...

At least gas is cheap, maybe I can escape with my 1970's chevy...

So are we just a bunch of drama queens? Or is this the real shiz?

The media must be getting such a kick out of this!

[Gabo]

If our governments keep their monetary policy, we will be in for a pretty severe depression. Sooner or later people will understand that you can't expand a market indefinitely without it collapsing.

[bman]

Nobody in the congress dares to take away the power of Federal Reserve or else they will end up like JFK.


It's up to you people to demand it.

[Brutha]

there's no World War that we have to finance...

Actually the Iraq + Afghanistan wars are around as costly as the first world war.

I've read a couple places that these times are being dubbed the 'Greatest Depression' and it seems to be getting propped up next to the Great Depression.

Maybe it's even worse.

[schola]

Everyone should watch this video series if they want to understand what's happening right now. Chris Martenson is another person who "called" the current crisis. This series explains the current crisis better than anything I've seen.

Chris Martenson | chapters - The Crash Course - chapters, Crash Course, Economy, Energy, environment, Peak Oil, videos

Have you ever wondered why we measure prosperity in "growth?" Why is a continually expanding economy a sign of prosperity? Can the system go on expanding into infinity?

[SomeRandomGuy]

Originally Posted by dice

Everyone's talking about stockpiling food, universities closing down, Panasonic laying off 10% of their employees, travel companies boosting their rates by 20%...

In my opinion, these things can't even be compared to things people suffered through in the Great Depression. The primary difference is that people expect so much more now. If people had to live today like people lived 100 years ago they would think it was the worst possible torture. The people who lived through the Great Depression were not concerned with Universities closing down or travel companies increasing their fees; they were concerned with surviving.

I think that what we may see is a correction, similar to what has happened in the real estate market, etc. People have been overspending, living excessive lifestyles, etc for a long time. Maybe the depression that people are predicting will be nothing more than a correction which forces people to tone down their lifestyle to a more reasonable level.

I am not a fan of the government trying to solve all of our problems. In fact, I believe by doing this the government has created most of our current problems. Having said that, however, I don't think that the federal government will allow the situation to get as bad as during the Great Depression. Think about how much money is being wasted on the War on Terrorism and the War on Drugs. That money could easily be diverted to social programs to ensure that American citizens can at the very least have a warm place to sleep and food to eat. If it gets too bad, there are other, more worthwhile programs, that could be suspended for this purpose (such as alternate energy programs, arts programs, historic preservation, National Parks, etc). I would really hate to see those programs suspended, but it would be better than seeing people starve to death.

[schola]

There is some good information in this thread as well:
Something Big is Coming

The first article posted was written by Ron Paul in July. This was before the September Crisis when Lehman Bros collapsed, before the bail outs, and before oil bottomed out.

[TheIronStar]

Originally Posted by dice

At least gas is cheap, maybe I can escape with my 1970's chevy...

So are we just a bunch of drama queens? Or is this the real shiz?

The media must be getting such a kick out of this!

To be honest, there's a lot that nobody really knows. Try to ask people about how long the recession/depression is going to last, and often even the economic wizards don't have that particularly much an idea, or it can degenerate into not-very-informed speculation; I wonder what constitutes a genuine educated conjecture on the matter as opposed to just a wild guess.

Though it's likely that fewer people in the US now worry about starvation as they did in the 20th Century's depression era, seeing a collapse of this scale would certainly put people more than a little on edge.

Things are also different given the global nature of the economy and the global wealth-concentrations compared between now and then.

So how long will it last? 2 years? 4 years? Most of a decade? Will it be a "depression", or just recession and relative stagnation? I haven't a clue. Will some sectors turn back upward shorter-term? How much rot is left in the system? There too, most people, even educated ones, may not have answers.

The media writes news the way it can. I don't exactly think media companies are happy these days, for that matter.

[luckyluciano]

I've been selling real estate for 24 years. I remember the last economic/real estate decline/bubble...I see the decline lasting another 5 years where there will be a bottoming out period of approx 3-4 years. I know the U.S. real estate bubble began deflating 3 yrs ago....because of the blatant excesses which occured thereg. I am Canadian and annually attend real estate sales seminars in the U.S. I met brand new liscencees, selling 40-50 homes/year earning $500k/yr in there their very first few years in the bus and scoffing at my production after being in the bus over 20 yrs.

People & companies need to unload some debt. This is going to take a few years to accept & come to terms with. It's a gradual process of deflating this balloon. 60-70% of the Mortgage business has been and still is REFINANCING! This means people are still using credit to keep afloat and are refusing to live within their means in an attempt to keep up with the Joneses!
Thus the coming of the layoffs. Layoffs force people to come to grips with reality and gives them an excuse to cut back & still keep up with the Jonses in a deflationary way.

As for countries....well they just continue to add zero's to their debt because they are the worst at living within their means. As long as the developed countries each add zeros at roughly the same pace...there is no problem.
Problem is...Free Trade is subtracting the zeros from developed countries and adding them to the emerging countries. Hopefully someone will figure that this is not working very well & try to balance out the whole thing without China inc. etc. screaming bloody murder too loud.

Lucky

[funchy]

We're not at great depression levels yet, but the fear is that we could be. Nobody knows where the bottom of this really is. This is definitely worse than a normal recession.

This is much bigger than a real estate market correction. It's bigger than a market slow-down causing job losses. The financial system is broken in some ways. Even the experts don't know what other things may be triggered. Markets are so interconnected and it isn't always clear what else will fall when one industry fails.

IMO expect it to keep going downhill for at least the next 2 years. Plan ahead, and put a little money aside. Even jobs you think are safe may not be.

[Angela Leeds]

Originally Posted by bman

Nobody in the congress dares to take away the power of Federal Reserve or else they will end up like JFK.


It's up to you people to demand it.

well-said, bman

[luckyluciano]

Originally Posted by funchy

We're not at great depression levels yet, but the fear is that we could be. Nobody knows where the bottom of this really is. This is definitely worse than a normal recession.

This is much bigger than a real estate market correction. It's bigger than a market slow-down causing job losses. The financial system is broken in some ways. Even the experts don't know what other things may be triggered. Markets are so interconnected and it isn't always clear what else will fall when one industry fails.

IMO expect it to keep going downhill for at least the next 2 years. Plan ahead, and put a little money aside. Even jobs you think are safe may not be.

Banks are not lending because they fear your house price will go down & they'll have to forclose also because they fear you will loose your job....pretty simple really. If Obama admin would acknowledge we are in a real estate rescession, the cause of most of the problems and do something to encourage people to buy real estate....prices may actually increase and the banks would not fear lending anymore.

[Brutha]

do something to encourage people to buy real estate....

I don't think that we need a new real estate bubble.

[Mr. Punch]

The downfall will continue for at least three years. The stock market will definitely not even out before 2010. This depression has some similarities with previous ones, but the defining thing will be that banks and cunsumers have excessive amounts of debt. We have, so to speak, consumed ourselves to death. The banks are scared and hesitant becuse they have been forced to write off so many bad loans. It has already gotten much more difficult to achieve creditworthiness, primarily because of the real estate market has depreciated vastly in value. We will see negative growth for many many months. No one has really got a clue, has they?

[garentee]

Gee it may give us the chance to pay attention to the important things in life.. Good food,good friends and making do with less...

[dice]

Don't think of it as job-loss. Think of this as a forced vacation

[Eric Roosevelt]

Originally Posted by Brutha

Actually the Iraq + Afghanistan wars are around as costly as the first world war.

Is that adjusted for inflation?

Also, is that only counting the American cost in the first world war, or is it including the price that Europe had to pay?

Also don't forget that a massive labor shortage was produced by the (approximately) 60,000,000 deaths+casualties of the first world war. That has to be factored into the economic analysis.

Maybe it's even worse.

It could well be, but when analyzing a crisis you also have to factor in the improvement that occurred before the crisis. There was lots of economic growth before we entered this current recession. This is especially true if you're counting net economic growth all the way from the 1930's.

[Eric Roosevelt]

Originally Posted by Mr. Punch

No one has really got a clue, has they?

No, I'm beginning to suspect that very few people have a clue what's going on. Maybe there's a few privileged intellectuals who understand what needs to happen, but usually they don't have much direct power apart from spreading their ideas.

[Brutha]

Is that adjusted for inflation?

Also, is that only counting the American cost in the first world war, or is it including the price that Europe had to pay?

I think it's the American cost which is adjusted for inflation.
The three trillion dollar war | Joseph Stiglitz and Linda Bilmes - Times Online

Also don't forget that a massive labor shortage was produced by the (approximately) 60,000,000 deaths+casualties of the first world war. That has to be factored into the economic analysis.

At the moment Europe is losing labor for another reason: Demographic change.
As people get older they are less likely to be able to work. Old people still have to be feed and need medical assistance while dead people don't.

It could well be, but when analyzing a crisis you also have to factor in the improvement that occurred before the crisis.

We will probably still have things like computers that make us productive after the crisis. We however have also other inventions like 100$ IEDs.

In fact, I believe by doing this the government has created most of our current problems. Having said that, however, I don't think that the federal government will allow the situation to get as bad as during the Great Depression. Think about how much money is being wasted on the War on Terrorism and the War on Drugs.

Money doesn't solve problems.
Feeding people is a problem of organization.

If the government loses control in places like Detroit, gangs will form that need police attention because they are actually violent and threaten to further destabilize the state.
I also think that it is unlikely in such a scenario that the government would legalize illegal drugs.

[schola]

Bloomberg.com: Asia

IMF Says Advanced Economies Already in Depression (Update1)

Feb. 7 (Bloomberg) -- Advanced economies are already in a "depression" and the financial crisis may deepen unless the banking system is fixed, International Monetary Fund Managing Director Dominique Strauss-Kahn said.

Continues at link...

[schola]

Hey Brutha, thought you might like this:

Black Swan Month

[Brutha]

Hey Brutha, thought you might like this:

Black Swan Month

Black Swan arrive unscheduled.

Which begets the question: What might constitute the “collapse of the U.S. Government finances by February 2009″?

Passing the Stimulus bill? Okay that might have been a bad joke...

[Excellent Lodestar]

Originally Posted by dice

The media must be getting such a kick out of this!

...and such a profit. "news" organizations are some of the only ones profiting during these times. feeding the hysteria. it's good business.

[Eric Roosevelt]

Originally Posted by Brutha

At the moment Europe is losing labor for another reason: Demographic change.
As people get older they are less likely to be able to work. Old people still have to be feed and need medical assistance while dead people don't.

I agree that's a problem. But if we're talking about that, we could raise other points as well. For example, we have more accumulated wealth and more labor saving technology than 80 yrs ago.

I think we have a tendency to underestimate the good times in between the bad times. This is also true for our personal crises. It's always hard to imagine something outside what you're currently experiencing.

Originally Posted by Brutha

We however have also other inventions like 100$ IEDs.

The threat of terrorism in certain regions (including the West) has increased, but on the whole the world is becoming more peaceful.

Maybe this trend will be temporarily reversed during the crisis.

[Susanna77]

Originally Posted by SomeRandomGuy

In my opinion, these things can't even be compared to things people suffered through in the Great Depression. The primary difference is that people expect so much more now. If people had to live today like people lived 100 years ago they would think it was the worst possible torture. The people who lived through the Great Depression were not concerned with Universities closing down or travel companies increasing their fees; they were concerned with surviving.

I think that what we may see is a correction, similar to what has happened in the real estate market, etc. People have been overspending, living excessive lifestyles, etc for a long time. Maybe the depression that people are predicting will be nothing more than a correction which forces people to tone down their lifestyle to a more reasonable level.

I am not a fan of the government trying to solve all of our problems. In fact, I believe by doing this the government has created most of our current problems. Having said that, however, I don't think that the federal government will allow the situation to get as bad as during the Great Depression. Think about how much money is being wasted on the War on Terrorism and the War on Drugs. That money could easily be diverted to social programs to ensure that American citizens can at the very least have a warm place to sleep and food to eat. If it gets too bad, there are other, more worthwhile programs, that could be suspended for this purpose (such as alternate energy programs, arts programs, historic preservation, National Parks, etc). I would really hate to see those programs suspended, but it would be better than seeing people starve to death.

You made quite a few good points there. I'm not in America but I tend to keep with your news via CNN, so while I can't claim I understand completely how the US works I am more or less up to date. And here in Europe we're looking forward to seeing you out of this crisis because it'll be good news for all of us.

Overspending was the big problem. Up until November Ireland, Iceland and England were seen as the great examples to follow. Especially Ireland who went from being an extremely poor country to becoming one of the wealthiest countries in Europe (almost overnight). Suddenly, as it turns out it wasn't wealth. It was extreme borrowing!

Over here, a lot of businesses are considering closing down. Wealthy landlords are unwilling to re-negotiate the rents, forcing businesses to close down. Greed still abounds and that needs to be addressed. Prices no longer match current wages, trade, etc. Unfortunately landlords are saying "if you can't pay get out and some other fool will come in and pay what I want".

[mercuryrising]

What I find particularly fascinating about economics is that it is largely based on theories of human behavior. It is not an exact science.

So we are told there is a recession or a depression, what is the behavior we exemplify? Fear, desperation, anxiety, distrust. And it is those feelings that propels the recession even further.

If we are told that this is a boom economy and there is money growing on trees, what is our behavior then? Confidence, elation, relaxation, trust. And those feelings propels the boom even further.

The problem is running an economy on feelings; it's what creates this bi-polar shifting. This economic model will destroy humanity when applied on a global scale.

Human beings are more than just consumers. They are not an unending series of wants battling for a limited supply of resources. As we enter a global economy, we will have to re-evaluate human behavior to reflect the reality of a global community. The current economic model doesn't even recognize the cause of prosperity, which is our creativity. And creativity is an unlimited resource.

[schola]

Originally Posted by mercuryrising

What I find particularly fascinating about economics is that it is largely based on theories of human behavior. It is not an exact science.

So we are told there is a recession or a depression, what is the behavior we exemplify? Fear, desperation, anxiety, distrust. And it is those feelings that propels the recession even further.

If we are told that this is a boom economy and there is money growing on trees, what is our behavior then? Confidence, elation, relaxation, trust. And those feelings propels the boom even further.

The problem is running an economy on feelings; it's what creates this bi-polar shifting. This economic model will destroy humanity when applied on a global scale.

Booms times are as bad as recessions, because the boom times almost inevitably cause malinvestment that must be rectified by a bust, or recession. Economies follow the laws of nature. They aren't completely governed by human emotion.

Irrational exuberance wouldn't cause gigantic bubbles to form without the meddling of central banks in the economy. Have you ever wondered where all the extra money that inflated the housing bubble came from? It came from the lax monetary policies of the Federal Reserve during the last 6 years.

Human beings are more than just consumers. They are not an unending series of wants battling for a limited supply of resources. As we enter a global economy, we will have to re-evaluate human behavior to reflect the reality of a global community. The current economic model doesn't even recognize the cause of prosperity, which is our creativity. And creativity is an unlimited resource.

Consumption based economics is derived from the ideas of John Maynard Keynes, whose theories are considered sacrosanct by most modern economists. On the other hand, the Austrian school of economics correctly observed that it is production that runs the economy. Like you say, it's the creators that generate prosperity. Consumption vs. Production

[mercuryrising]

Originally Posted by schola

Booms times are as bad as recessions, because the boom times almost inevitably cause malinvestment that must be rectified by a bust, or recession. Economies follow the laws of nature. They aren't completely governed by human emotion.

Irrational exuberance wouldn't cause gigantic bubbles to form without the meddling of central banks in the economy. Have you ever wondered where all the extra money that inflated the housing bubble came from? It came from the lax monetary policies of the Federal Reserve during the last 6 years.

Back in 1992 (when I was 16), I was a follower of Lyndon LaRouche. So I know all about bubbles and monetary capitalism.... here is a nice retrospective of LaRouche. He started to talk about the problems many people are parroting today back in 1976.

Here is the crux of the matter, IMO:

Money has nothing to do with the physical economy. By physical economy, I mean firms that actually create goods and provide services to households.

We originally left the gold standard because it was holding back the growth of the physical economy. The market and banking industry was a reflection of the real economy at the time. With deregulation of the money supply, this relationship switched. The physical economy was now driven by the market and banking industry. People could make money off of money itself... money became an intangible product or a service, as in a financial instrument.

That's all ♥♥♥♥♥♥♥♥♥. This type of policy is like a leech on the real economy. This is just a guess, but if this system had not entered the picture 30 years ago, most of us would not have to work. We would have created ample supply of necessities and our industries would be almost entirely automated. Instead, we are enslaved to a game we can't win.

People think we would all become lazy and have no motivation. Those people are addicted to the money game they think they can win. The truth is that in such a scenario a different kind of person would be on top of the human social hierarchy. Mainly, a person motivated by scientific discovery and technological advancement, along with an appreciate of human beauty and virtue. Not some infant motivated by meeting his desires (see most of the CEO's of major companies for an example).

Consumption based economics is derived from the ideas of John Maynard Keynes, whose theories are considered sacrosanct by most modern economists. On the other hand, the Austrian school of economics correctly observed that it is production that runs the economy. Like you say, it's the creators that generate prosperity. Consumption vs. Production

Beyond a demand- vs. supply-side economic debate is a banking system that depletes the value of the economy as a whole.

I essentially agree that supply-side economic policy is more reasonable, with the exception that that policy is not war-based. For example, WWII stimulated the economies of both Allied and Axis nations because it increased the need for industrial/technological development. It also cost millions of peoples lives. That's kind of like cutting off your nose to spite your face. The republicans have been trying this method for the last 8 years with the war on terrorism. That's why they invented al-Queda.

As an alternative, we need to look at endeavors that benefit the world as a whole. Setting up a community on the moon would be such an endeavor. Or finding ways to access the power of the sun (nuclear fusion) would be another. In truth, there are a host of ways to stimulate the economy in a creative fashion. For example, we could create an infrastructure of high speed rail from one side of the US to the other. Consider how many jobs and new technologies would come out of such an idea.

[schola]

Mercury, you raise some good points, but I'd like to point out that I'm not advocating "supply side economics." That's a completely different subject.

You'll find that the writers at the Mises.org website are no fans of supply side economics.

Demand side vs. supply side debates the question of whether government should provide stimulus to the consumer or the corporation. The Austrians question whether the government should provide stimulus at all.

[mercuryrising]

Originally Posted by schola

Mercury, you raise some good points, but I'd like to point out that I'm not advocating "supply side economics." That's a completely different subject.

You'll find that the writers at the Mises.org website are no fans of supply side economics.

Demand side vs. supply side debates the question of whether government should provide stimulus to the consumer or the corporation. The Austrians question whether the government should provide stimulus at all.

I don't know a lot about this school. I took a look at the website and I also read over the Wikipedia articles on Mises and the Austrian school.

My criticism of the laissez-faire economic theory (ie no government involvement, individualist/subjectivist economics) is that it completely ignores absolute corporate power. I would make the opposite criticism of Marxist theory: they ignore absolute state power.

If you look at our current crisis, it is because finance is in the hands of private bankers and not the government. Privatized banking is the problem and the government's acquiescence to those bankers is sickening.

I would say that I align myself with the American System, which is largely defunct at the moment. What I described above is that system. It's attributes are a national government that acts as a catalyst for technological advancement and scientific discovery. It controls the printing of money through a nationalized bank. It also maintains regulatory controls on trade to maintain national economic interests.

Glen Beck (a conservative talk show host) needs to study his history books a bit better, btw. Alexander Hamilton, the first Secretary of the Treasury, was the first to establish a nationalized banking system. This was largely to keep British bankers from controlling the new union and to make the monetary system congruent throughout the colonies.

This description of Friedrich List does a good job of explaining the American System:

List's theory of "national economics" differed from the doctrines of "individual economics" and "cosmopolitan economics" put forward by Adam Smith and J.B. Say. List contrasted the economic behaviour of an individual with that of a nation. An individual promotes only his own personal interests but a state fosters the welfare of all its citizens. An individual may prosper from activities which harm the interests of a nation . "Slavery may be a public calamity for a country, nevertheless some people may do very well in carrying on the slave trade and in holding slaves."

Again, activities beneficial to society may injure the interests of certain individuals. "Canals and railroads may do great good to a nation, but all waggoners will complain of this improvement. Every new invention has some inconvenience for a number of individuals, and is nevertheless a public blessing’. List argued that although some government action was essential to stimulate the economy, an overzealous government might do more harm than good. "It is bad policy to regulate everything and to promote everything by employing social powers, where things may better regulate themselves and can be better promoted by private exertions; but it is no less bad policy to let those things alone which can only be promoted by interfering social power.

Due to the "universal union" that nations have with their populace, List stated that "from this political union originates their commercial union, and it is in consequence of the perpetual peace thus maintained that commercial union has become so beneficial to them. … The result of a general free trade would not be a universal republic, but, on the contrary, a universal subjection of the less advanced nations to the predominant manufacturing, commercial and naval power, is a conclusion for which the reasons are very strong. … A universal republic …, i.e. a union of the nations of the earth whereby they recognise the same conditions of right among themselves and renounce self-redress, can only be realised if a large number of nationalities attain to as nearly the same degree as possible of industry and civilisation, political cultivation and power. Only with the gradual formation of this union can free trade be developed, only as a result of this union can it confer on all nations the same great advantages which are now experienced by those provinces and states which are politically united. The system of protection, inasmuch as it forms the only means of placing those nations which are far behind in civilisation on equal terms with the one predominating nation," appears to be the most efficient means of furthering the final union of nations, and hence also of promoting true freedom of trade." [4]

In his seventh letter List repeated his assertion that economists should realise that since the human race is divided into independent states, "a nation would act unwisely to endeavour to promote the welfare of the whole human race at the expense of its particular strength, welfare, and independence. It is a dictate of the law of self-preservation to make its particular advancement in power and strength the first principles of its policy". A country should not count the cost of defending the overseas trade of its merchants. And "the manufacturing and agricultural interest must be promoted and protected even by sacrifices of the majority of the individuals, if it can be proved that the nation would never acquire the necessary perfection … without such protective measures."