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Underneath the Happy Talk, Is This As Bad as the Great Depression?

George Washington's picture




 

Washington’s Blog

The following experts have - at some point during the last 2 years - said that the economic crisis could be worse than the Great Depression:

How could that possibly be, when the stock market has largely recovered? (Let's forget for a moment that the stock market rallied after 1929, but then crashed in a double dip).

To find out, we'll look at a couple comparisons to get an idea of what is going on in the rest of the economy. And then we'll compare the government's efforts in the 1930s to today.

Housing Crisis Rivals Great Depression

As I noted last month, the current real estate slump rivals the Great Depression:

Zillow's Stan Humphries said:

The length and depth of the current housing recession is rivaling the Great Depression’s real estate downturn, and, with encouraging signs fading, will easily eclipse it in the coming months.

During the Great Depression, home prices fell 25.9 percent in five years. The U.S. housing market is now down around 25 percent from its peak in 2006.

As housing price expert Robert Shiller pointed out in September 2008:

Home price declines are already approaching those in the Great Depression, when they plunged 30% during the 1930s [i.e. over a 10-year period]. With prices already down almost 20%, it's not a stretch to think we might exceed that drop this time around.

As I wrote in December 2008:

In the greatest financial crash of all time - the crash of the 1340s in Italy .... real estate prices fell by 50 percent by 1349 in Florence when boom became bust.

 

How does that compare to 2001-2007? The price of Southern California homes is already down 41% [that was before the first-time homebuyer credit, Hamp and other governmental programs temporarily boosted prices]. Southern California hasn't fallen as fast as some other areas, and we're nowhere near the bottom of the market.

 

Moreover, the bubble was not confined to the U.S. There was a worldwide bubble in real estate.

 

Indeed, the Economist magazine wrote in 2005 that the worldwide boom in residential real estate prices in this decade was "the biggest bubble in history". The Economist noted that - at that time - the total value of residential property in developed countries rose by more than $30 trillion, to $70 trillion, over the past five years – an increase equal to the combined GDPs of those nations.

 

Housing bubbles are now bursting in China, France, Spain, Ireland, the United Kingdom, Eastern Europe, and many other regions.

And the bubble in commercial real estate is also bursting world-wide. See this.

In addition, the percentage of Americans who owned houses during the 1930s was much lower than today, which means that a larger portion of the public is being hurt from falling home prices today as compared to the Great Depression.

Meredith Whitney, Nouriel Roubini (and here), Zillow, Case-Shiller and even S&P have been calling a double dip in housing.


States and Cities In Worst Shape Since the Great Depression

States and cities are in dire financial straits, and many may default in 2011.

California is issuing IOUs for only the second time since the Great Depression.

Things haven't been this bad for state and local governments since the 30s.

Loan Loss Rate Higher than During the Great Depression

In October 2009, I reported:

In May, analyst Mike Mayo predicted that the bank loan loss rate would be higher than during the Great Depression.

In a new report, Moody's has just confirmed (as summarized by Zero Hedge):

The most recent rate of bank charge offs, which hit $45 billion in the past quarter, and have now reached a total of $116 billion, is at 3.4%, which is substantially higher than the 2.25% hit in 1932, before peaking at at 3.4% rate by 1934.

And see this.

 

Here's a chart summarizing the findings:

 

 

(click here for full chart).

Indeed, top economists such as Anna Schwartz, James Galbraith, Nouriel Roubini and others have pointed out that while banks faced a liquidity crisis during the Great Depression, today they are wholly insolvent. See this, this, this and this. Insolvency is much more severe than a shortage of liquidity.

Unemployment at or Near Depression Levels

USA Today reports today:

So many Americans have been jobless for so long that the government is changing how it records long-term unemployment.

Citing what it calls "an unprecedented rise" in long-term unemployment, the federal Bureau of Labor Statistics (BLS), beginning Saturday, will raise from two years to five years the upper limit on how long someone can be listed as having been jobless.

***

The change is a sign that bureau officials "are afraid that a cap of two years may be 'understating the true average duration' — but they won't know by how much until they raise the upper limit," says Linda Barrington, an economist who directs the Institute for Compensation Studies at Cornell University's School of Industrial and Labor Relations.

***

"The BLS doesn't make such changes lightly," Barrington says. Stacey Standish, a bureau assistant press officer, says the two-year limit has been used for 33 years.

***

Although "this feels like something we've not experienced" since the Great Depression, she says, economists need more information to be sure.

The following chart from Calculated Risk shows that this is not a normal spike in unemployment:

As I noted in October:

It is difficult to compare current unemployment with that during the Great Depression. In the Depression, unemployment numbers weren't tracked very consistently, and the U-3 and U-6 statistics we use today weren't used back then. And statistical "adjustments" such as the "birth-death model" are being used today that weren't used in the 1930s.

 

But let's discuss the facts we do know.

 

The Wall Street Journal noted in July 2009:

The average length of unemployment is higher than it's been since government began tracking the data in 1948.

***

The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.

The Christian Science Monitor wrote an article in June entitled, "Length of unemployment reaches Great Depression levels".

 

60 Minutes - in a must-watch segment - notes that our current situation tops the Great Depression in one respect: never have we had a recession this deep with a recovery this flat. 60 Minutes points out that unemployment has been at 9.5% or above for 14 months.

 

Pulitzer Prize-winning historian David M. Kennedy notes in Freedom From Fear: The American People in Depression and War, 1929-1945 (Oxford, 1999) that - during Herbert Hoover's presidency, more than 13 million Americans lost their jobs. Of those, 62% found themselves out of work for longer than a year; 44% longer than two years; 24% longer than three years; and 11% longer than four years.

 

Blytic calculates that the current average duration of unemployment is some 32 weeks, the median duration is around 20 weeks, and there are approximately 6 million people unemployed for 27 weeks or longer.

 

Moreover, employers are discriminating against job applicants who are currently unemployed, which will almost certainly prolong the duration of joblessness.

 

As I noted in January 2009:

In 1930, there were 123 million Americans.

At the height of the Depression in 1933, 24.9% of the total work force or 11,385,000 people, were unemployed.

Will unemployment reach 25% during this current crisis?

I don't know. But the number of people unemployed will be higher than during the Depression.

Specifically, there are currently some 300 million Americans, 154.4 million of whom are in the work force.

Unemployment is expected to exceed 10% by many economists, and Obama "has warned that the unemployment rate will explode to at least 10% in 2009".

10 percent of 154 million is 15 million people out of work - more than during the Great Depression.

 

Given that the broader U-6 measure of unemployment is currently around 17% (ShadowStats.com puts the figure at 22%, and some put it even higher), the current numbers are that much worse.

 

But it is important to look at some details.

 

For example, official Bureau of Labor Statistics numbers put U-6 above 20% in several states:

  • California: 21.9
  • Nevada: 21.5
  • Michigan 21.6
  • Oregon 20.1

In the past year, unemployment has grown the fastest in the mountain West.

 

And certain races and age groups have gotten hit hard.

 

According to Congress' Joint Economic Committee:

By February 2010, the U-6 rate for African Americans rose to 24.9 percent.

34.5% of young African American men were unemployed in October 2009.

 

As the Center for Immigration Studies noted last December:

Unemployment rates for less-educated and younger workers:

  • As of the third quarter of 2009, the overall unemployment rate for native-born Americans is 9.5 percent; the U-6 measure shows it as 15.9 percent.
  • The unemployment rate for natives with a high school degree or less is 13.1 percent. Their U-6 measure is 21.9 percent.
  • The unemployment rate for natives with less than a high school education is 20.5 percent. Their U-6 measure is 32.4 percent.
  • The unemployment rate for young native-born Americans (18-29) who have only a high school education is 19 percent. Their U-6 measure is 31.2 percent.
  • The unemployment rate for native-born blacks with less than a high school education is 28.8 percent. Their U-6 measure is 42.2 percent.
  • The unemployment rate for young native-born blacks (18-29) with only a high school education is 27.1 percent. Their U-6 measure is 39.8 percent.
  • The unemployment rate for native-born Hispanics with less than a high school education is 23.2 percent. Their U-6 measure is 35.6 percent.
  • The unemployment rate for young native-born Hispanics (18-29) with only a high school degree is 20.9 percent. Their U-6 measure is 33.9 percent.

No wonder Chris Tilly - director of the Institute for Research on Labor and

Employment at UCLA - says that African-Americans and high school dropouts are experiencing depression-level unemployment.

 

And as I have previously noted, unemployment for those who earn $150,000 or more is only 3%, while unemployment for the poor is 31%.

 

The bottom line is that it is difficult to compare current unemployment with what occurred during the Great Depression. In some ways things seem better now. In other ways, they don't.

 

Factors like where you live, race, income and age greatly effect one's experience of the severity of unemployment in America.

 

 

 

 

 

In addition, wages have plummeted for those who are employed. As Pulitzer Prize-winning tax reporter David Cay Johnston notes:


Every 34th wage earner in America in 2008 went all of 2009 without earning a single dollar, new data from the Social Security Administration show. Total wages, median wages, and average wages all declined ....

And see this, this, and this.

Food Stamps Replace Soup Kitchens

1 out of every 7 Americans now rely on food stamps.

While we don't see soup kitchens, it may only be because so many Americans are receiving food stamps.

Indeed, despite the dramatic photographs we've all seen of the 1930s, the 43 million Americans relying on food stamps to get by may actually be much greater than the number who relied on soup kitchens during the Great Depression.

Inequality Worse than During the Great Depression

I recently reported that inequality is worse than it's been since 1917:

Most mainstream economists do not believe there is a causal connection between inequality and severe downturns.

 

But recent studies by Emmanuel Saez and Thomas Piketty are waking up more and more economists to the possibility that there may be a connection.

 

Specifically, economics professors Saez (UC Berkeley) and Piketty (Paris School of Economics) show that the percentage of wealth held by the richest 1% of Americans peaked in 1928 and 2007 - right before each crash:

 

Figure 1

 

As the Washington Post's Ezra Klein wrote in June:

 

Thumbnail image for inequalitygraph.jpg

 

***

 

Krugman says that he used to dismiss talk that inequality contributed to crises, but then we reached Great Depression-era levels of inequality in 2007 and promptly had a crisis, so now he takes it a bit more seriously...

Robert Reich has theorized for some time that there are 3 causal connections between inequality and crashes ....

 

Reuters wrote an excellent piece on the issue of inequality and crashes (discussing the first three factors) last month:

Economists are only beginning to study the parallels between the 1920s and the most recent decade to try to understand why both periods ended in financial disaster. Their early findings suggest inequality may not directly cause crises, but it can be a contributing factor.

***

Inequality is actually worse now than it's been since 1917.

 

The War Isn't Working

Given the above facts, it would seem that the government hasn't been doing much. But the scary thing is that the government has done more than during the Great Depression, but the economy is still stuck a pit.


Specifically, many economists credit World War II with getting us out of the Depression. (I disagree, but that's another story).

This time, we've been at war in both Iraq and Afghanistan far longer than we were in World War II. But our economy is still stuck in a rut.

Moreover, the amount spent in emergency bailouts, loans and subsidies during this financial crisis arguably dwarfs the amount which the government spent during the New Deal.


For example, Casey Research wrote in 2008:

Paulson and Bernanke have embarked on the largest bailout program ever conceived .... a program which so far will cost taxpayers $8.5 trillion.

[The updated, exact number can be disputed. But as shown below, the exact number of trillions of dollars is not that important.]

So how does $8.5 trillion dollars compare with the cost of some of the major conflicts and programs initiated by the US government since its inception? To try and grasp the enormity of this figure, let’s look at some other financial commitments undertaken by our government in the past:

As illustrated above, one can see that in today’s dollar, we have already committed to spending levels that surpass the cumulative cost of all of the major wars and government initiatives since the American Revolution.

Recently, the Congressional Research Service estimated the cost of all of the major wars our country has fought in 2008 dollars. The chart above shows that the entire cost of WWII over four to five years was less than half the current pledges made by Paulson and Bernanke in the last three months!

In spite of years of conflict, the Vietnam and the Iraq wars have each cost less than the bailout package that was approved by Congress in two weeks. The Civil War that devastated our country had a total price tag (for both the Union and Confederacy) of $60.4 billion, while the Revolutionary War was fought for a mere $1.8 billion.

In its fifty or so years of existence, NASA has only managed to spend $885 billion – a figure which got us to the moon and beyond.

The New Deal had a price tag of only $500 billion. The Marshall Plan that enabled the reconstruction of Europe following WWII for $13 billion, comes out to approximately $125 billion in 2008 dollars. The cost of fixing the S&L crisis was $235 billion.

CNBC confirms that the New Deal cost about $500 billion (and the S&L crisis cost around $256 billion) in inflation adjusted dollars.

So even though the government's spending on the "war" on the economic crisis dwarfs the amount spent on the New Deal, our economy is still stuck in the mud.

Given that the government has done so much, but we are still mired in a situation which in many ways is comparable to the Great Depression, it is not a very radical statement to say that the government is doing the wrong things to address the downturn.

I hope that the economy recovers. But the above comparisons are worrisome, indeed.


Note: Happy talk cannot fix the economy. If it could, I would write with a more optimistic spin.

 

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Wed, 12/29/2010 - 19:28 | 836833 wang
wang's picture

more happy talk

Buy, buy, buy: Holiday shopping 2010 may break records

 

This year's holiday shopping season is on track be the biggest ever. Americans are surpassing pre-recession spending to break new consumer ground.

 

http://bit.ly/g7OiN6

Wed, 12/29/2010 - 18:17 | 836716 onlooker
onlooker's picture

The same? Maybe different?

 

US Population 1930-- 123 million

US Population 2010 – 308 million

 

High school Graduates

1930--- about 22%

2000--- about 70%

 

Population City dwellers versus huge numbers for Rural. Big numbers Rural 1930. The ability to get food from small farming and hunting was much better than today.

 

In 1930, the debt could be estimated for the World. There is no way in hell that we know how many Trillions that exist in the leveraged devices that are unreal and in the shadows or completely backed out.

Information is much better for the sheeple. Milner said there had been a revolutionary change in demand for information and now there was "as much information generated in the last two days as there was in the history of civilization up to 2003." FDR could not walk and the American did not know they had a paralyzed President in office. That was the small stuff they did not know.

The population of the 30s was passive. There was a Communist movement and the Veterans did march on Washington for their Bonus. Eisenhower and MacArthur on horse back with drawn sabers led the US Army to run off and burn the area the Veterans had squatted. Overall, the local sheriff could control the population.

The un-rich were used to being screwed over. The wealthy could buy or control justice. Where as the wealthy can still afford and control justice, the un-rich don’t tolerate getting screwed over as well as the used to.

Post WW1 the US was secure and unthreatened. The military spending was nil.

Immediate drop in citizen birth rate(hard times) will hurt the SS system by reducing the numbers paying into it. It will also reduce housing demand.

Wed, 12/29/2010 - 18:14 | 836712 MyKillK
MyKillK's picture

My view is that this will be worse than the Great Depression, we just haven't yet hit the double dip. The other big difference is that the economy is much more centrally planned this time around which gives the government the ability to manipulate it into making it look better.

5 years from now there will be no doubt this is a worse financial disaster than the GD.

Wed, 12/29/2010 - 17:46 | 836671 New_Meat
New_Meat's picture

GW, great info as usual, thanks for your effort and insight.

I think that it is too early to tell whether this situation is worse than GD.  If The Bernank has been effective, then he has delayed the '32 fall off the cliff.  Can this fall be prevented?  Unresolved housing and borrowing failures argue against prevention.

- Ned

Wed, 12/29/2010 - 17:14 | 836567 compound interest
compound interest's picture

It may be worse than the GD of the '30s. In the '30s, the dollar was a very important currency in the world, but not as important as it has been in the last 80 years. In the last 70-80 years, the USD gradually became the unquestionable reserve currency on this planet. Its proven, long-term stability made it a symbol. It is accepted anywhere you go. There are many poor countries where the USD is much better accepted than their own currency. Any living person now on the planet has lived most (or the full length) of their lifetime in a world where the USD is the most important currency, the real hard money. It is the first paper currency to have done that. Very impressive.

This symbol, this "unquestionable" money can be ruined, however. It seems to be happening now..

This hard-earned position has made the US be able to borrow more than it would have been able to borrow in the thirties. The credit-line for the US is based on a very good credit history, the world is trusting the dollar, trusting the USA.. but it now seems that the US policy makers think that the trust for the currency is unlimited. They will stretch it to the point where the trust will break, the credit line will freeze.. That is why it can be worse than the GD was, I think. The monetary abuse is worse now, the consequence may be worse too. There are some limits for the dollar, but the policy makers just act like there aren't any.. Back then, policy makers didn't act like their currency had unlimited creditworthiness, because there had not been as long history of the USD as it has been since then.

Wed, 12/29/2010 - 17:08 | 836561 andybev01
andybev01's picture

Here's your happy talk, and I'm pretty sure it comes with a happy ending.

 

http://www.youtube.com/watch?v=JwIddYGse9g

 

 

Wed, 12/29/2010 - 16:58 | 836532 tempo
tempo's picture

Survey says US firms to be hiring and increasing capital expenditures...but the hiring will likely be overseas or part time.    Corporations pay the lawmakers to increase deficit spending to increase domestic consumption for goods made with slave labor and without environmental laws.  Its called hedging.   If capital expenditures are made in the US, the equipment will likely be made overseas and paid for with tax credits that only increase the deficit.   Its going to be different this time because of globalization.  The jobless recovery will continue.   The next shoe to fall may be a contraction in college enrollement.  The average graduate has over $24000 of student loan debt and the default rate in now near 10% for those who even attempt to start paying off the loans.   Student loans outstanding is now larger than credit card debt, approaching $1 trillion.   As Buzz lightyear says...to liquidity and beyond.   Expect $6/gallon gasoline and soaring food costs.  2011 and beyond is going to suck.

 

Wed, 12/29/2010 - 16:52 | 836509 Dr. Porkchop
Dr. Porkchop's picture

I think you guys are going to have to come up with a lot of wonderful new lies, or people just aren't going to want to go on living.

     - Eliot Rosewater

 

Wed, 12/29/2010 - 17:26 | 836619 Mark Medinnus
Mark Medinnus's picture

...without refreshing the tree of liberty.

Or as Bela Oxmyx says, "The most cooperative man in this world is a dead man. And if you don't keep your mouth shut, you're gonna be cooperating."

Wed, 12/29/2010 - 16:04 | 836345 Thoreau
Thoreau's picture

No comparison. In 1930, we had a large self-sufficient/agrarian populace, plenty of natural resources, a huge manufacturing base in place, and far far less personal debt. Today we have food stamp farming, fewer resources with many more consumers, a dwindling manufacturing base + unfair international wages to compete against, and debt out the ying-yang.

Throw in the longest sustained US war(s) in the Middle East - with no end in sight, escalating federal deficits, escalating state, county, city deficits, an educational system that seems designed to retard learning anything of significance, an overmedicated society inundated with cancer, diabetes, auto-immune diseases, ADD, etc, 60 million souls playing Farmville/Frontierville all day long, a mis/disinformation MSM that shields any relevant information on any of the referenced topics, etc, etc ad nauseam.

There's still plenty of opportunity for personal enlightenment, success & and even peace. But taken as a whole, our society is headed for the mother of all crashes. Time to reboot.

Good stuff, Washington.

Wed, 12/29/2010 - 17:29 | 836569 Mark Medinnus
Mark Medinnus's picture

Good stuff, as well, Thoreau.

But how do we reboot?  Ignorance and arrogance are a hard combination to beat, except with a stick.

 

Wed, 12/29/2010 - 15:46 | 836265 Mark Medinnus
Mark Medinnus's picture

The American mind is an empty vessel nursing, perhaps, the largest gullibubble in history. 

Wed, 12/29/2010 - 15:43 | 836262 Dirtt
Dirtt's picture

Lawlessness.

We aren't engaged with helping the economy because the criminals who perpetrated the mess are entrusted with this "recovery."

And if you aren't inside the criminal racket then why would you want to provide for the criminal racket.

NO matter how hard BEnron tries...Until we start to see the frog-marches Modus Operandi will be to Starve The Beast.  Happy New Year GW!

Wed, 12/29/2010 - 15:32 | 836234 Withdrawn Sanction
Withdrawn Sanction's picture

In a lot of respects, today is similar to the 1930s in the ways named (high unemployment, many on relief, real estate price collapses, etc.).    In other important ways, though, it’s quite different.  To name an obvious difference, nearly 10,000 banks failed from 1930 to 1933, and in so doing took their depositors’ money with them.  Today, we’ve had about 200 failures but no depositor losses. 

However, in another important, if less-obvious way:  mind sets have changed.  In the 1930s, there was genuine shame attached to a failure such as the loss of job, businesses, or house.  Today, not so much (and perhaps that is to the good).  There seems to be an attitude today of entitlement. 

Here I’m not primarily referring to individuals (though that certainly exists among some); but rather, to bankers as a group who feel entitled to the contents of the public purse.  And why?  For no other reason than because they fu*ked up; they failed at doing their jobs properly.  And rather than losing their jobs for incompetence, what do we see?  Not shame, but a brazen demand that their losses be transferred to society’s tab…oh, and a few million in bonuses if it wouldn’t be too much trouble.    

And that brings us to the biggest difference between then and now and why today’s setback will be much deeper:  the totality of indebtedness is multiples larger than it was in the 1930s.   Pile the derivatives pyramid on top, and the amount of paper waiting to be paid is breathtakingly larger today.   Few want to even recognize the scale of the problem involved, let alone take the trouble to clean it up. 

But, rest assured, it will be cleaned up, one way or another.   My own bet is on repudiation.   The reason is simple:  a debt that cannot be paid, will not be.  As a practical matter, the younger among us (18 to 40 in particular) seem unlikely to feel much shame in walking away from debts they had no say in creating and whose benefits they have not enjoyed.  Who can blame them?  They will see such debt swindles for what they are:  profoundly un-democratic transfers of wealth that they’re nevertheless expected to pay for.   Good luck with that. 

 

Wed, 12/29/2010 - 14:31 | 836076 Rastadamus
Rastadamus's picture

Got gold? Babylon is hell of falling!

Wed, 12/29/2010 - 14:26 | 836061 Clycntct
Clycntct's picture

"Note: Happy talk cannot fix the economy. If it could, I would write with a more optimistic spin."

If the weather man tells you it's sunny out and when you step out you get drenched. It's of little value to get his positive spin on reality.

So beware being told it sunny while being pissed on.

GW thanks for all your hard work.

Wed, 12/29/2010 - 14:23 | 836054 Sean7k
Sean7k's picture

Nice piece GW. You might have a typo: the new deal was 500 MILLION? not billion. That was back when a billion meant something.

Wed, 12/29/2010 - 14:27 | 836065 George Washington
George Washington's picture

Original Cost: $32 billion (Est)
Inflation Adjusted Cost: $500 billion (Est)

Wed, 12/29/2010 - 15:02 | 836156 Sean7k
Sean7k's picture

GW, the total government budget for those years was 32 billion. Not all of that money was spent on the new deal. The US ran a total deficit over those years of 22 billion. I think those figures, while documented, may be high. 

Wed, 12/29/2010 - 15:29 | 836230 Trimmed Hedge
Trimmed Hedge's picture

I think yuor high....

Wed, 12/29/2010 - 14:21 | 836047 Racer
Racer's picture

And Zimbabwe Ben and his cronies the banksters are doing all they can to make the inequality even greater such is their sheer greed for power and money that they just can't stop!

Why does a billionaire need to cheat to get more money? Why do banksters need to cheat to get more money? Because they are now soo greedy that they just want all of the money from all of the poor, sick, old and unborn

Wed, 12/29/2010 - 14:23 | 836053 TruthInSunshine
TruthInSunshine's picture

It's not about money.

Money is just one of the tools in their toolbox.

It's about global control.

It's about a pie that's so big, and how big the slices will be, and who will control what slice.

Wed, 12/29/2010 - 17:16 | 836584 Seer
Seer's picture

I think that it's just the natural outgrowth of continual growth- things get mushed into fewer large piles.  If things don't grow then these people lose their power.  It's a big rat race, and they know that if they don't run faster (grab more money) that it's all over.  Their only hope is to divide us up, making us believe that the real culprits are the Chinese, or the "illegals."

Wed, 12/29/2010 - 15:01 | 836152 flattrader
flattrader's picture

I thought GWB built the pie higher for all of us.

Wed, 12/29/2010 - 14:44 | 836107 andybev01
andybev01's picture

Double+, bingo!

Wed, 12/29/2010 - 14:18 | 836033 Rogerwilco
Rogerwilco's picture

We're in a period of history that resembles the Great Depression, and like the 1930s it's not a pleasant time for many people. A world war followed, and we should be concerned about (and prepared for) a repeat of that bit of history.

Wed, 12/29/2010 - 14:16 | 836032 KillTheFed
KillTheFed's picture

Thanks, George.  I believe the economy is in ruins and is worse than the Great Depression.   I believe it is all part of the corporatist agenda that includes coring out of the middle class and creating a new fuedalistic class of dependents.  Forty three millon people on food stamps and the 99ers all are dependent on the government.  As long as the government delivers on the subsistency money then the new lower class will continue to vote for them and will not riot.  Control through the pocketbook.  Don't be surprised to see more willingness of our growing underclass to give up more Consitutional rights for protection from phatoms like 'terrorists' (physical security) or the economic terrorists (i.e. bankers) for economic security.  A pure democracy (as opposed to a Repulic) is a lot easier to control due to the mob rule factor.  All you have to do is go back to Ancient Rome and see how the Ceasars controlled the masses with bread and sport to maintain their power.

Wed, 12/29/2010 - 14:14 | 836030 TheMerryPrankster
TheMerryPrankster's picture

Economic propaganda is the only product being produced in record volumes by American corporations. Shall we beleive our eyes and ears or the constant lies from the corporate media. 

If the economy is so good and on the road to recovery, green shoots, better than expected - etc. - than why are the powers that be investing in ever more desperate measures, like QE2?

The quiet desperation of the banking machinery as it quietly slides into the economic quicksand is not as sexy as "dancing with the stars" but it will in fact impact the population longer and harder, and since they are preoccupied with bread and circus, it will seem to be a huge surprise, when in fact it is as obvious as an iceberg directly in the path of the ship of state.

The entire preoccupation of the Federal Reserve has been to manipulate appearances via cash injections into the markets and the banks to soften the crash with the bodies of the rest of the economy.

This could have been handled much better, but the crash was inevitably laid with the birth of the 1st baby boomer, and it will likely end with the death of the last baby boomer, but in the meantime life goes on, no matter how desperate or unfair.

 

Wed, 12/29/2010 - 14:05 | 836000 Mr.Kowalski
Mr.Kowalski's picture

I think it depends on where you live. Is modern day Detroit as bad as the Depression ? Yes it is. Parts of Ohio, Calif, Nevada and other places are probably at Depression level misery. But not all parts of the US are like this.. the "fly over states" like SD and ND still have almost no unemployment. Problem is, since such a large percentage of Americans own homes, they are not a mobile as they were in the Depression and today there is a social safety net in the form of welfare, social security and unemployment that make it somewhat more liveable than it was in the 1930's.

Wed, 12/29/2010 - 17:46 | 836672 TruthInSunshine
TruthInSunshine's picture

I think it depends on where you live.

 

Indeed.

I hear Manhattan (home of the rapacious Vampire Squid and similar squidlings & Washington D.C. (and its suburbs of certain areas in Virginia and Maryland - government employee & contractor 'row') are doing as well as ever - better, in fact.

Wed, 12/29/2010 - 14:42 | 836099 andybev01
andybev01's picture

If I were going through hard times I would certainly want to be homeless in California than a frozen wasteland like the Dakotas or desolate like Nevada.

Wed, 12/29/2010 - 14:58 | 836141 flattrader
flattrader's picture

"homeless in California than a frozen wasteland like the Dakotas or desolate like Nevada."

As a friend of mine in Minnesota noted, "Twenty below keeps out the riff-raff."

 

Wed, 12/29/2010 - 17:06 | 836556 andybev01
andybev01's picture

I agree, my tribe all hail from Wisconsin and Michigan. You don't see a lot of hands outstretched this time of year up there.

Wed, 12/29/2010 - 14:30 | 836074 tamboo
tamboo's picture

the fact that nd has it's own state bank that is unbeholden to the fed probably has nothing to do with it.
the kosher crowd blew a big wad o goy cash on something that didn't work? imagine that. actually it did work quite well for some but the problem still isnt solved for some reason.
here's a hint:
http://tracker.zaerc.com/torrents-details.php?id=15317&hit=1

Wed, 12/29/2010 - 14:27 | 836062 Freddie
Freddie's picture

North Dakota has a lot of energy in nat gas and oil shale.  States with energy that are developing it are holding up.  Hussein is a Saudi puppet and closing the Gulf drilling was a gift to the Saudis.  The Dems are totally owned by the Saudis - ditto UK politicians. In the US, all the federal land gets locked up because there is almost endless energy locked up on tens of millions of acres of land.  If that land was opened up - we might have a shot at paying off the debt.

Wed, 12/29/2010 - 15:38 | 836247 Panafrican Funk...
Panafrican Funktron Robot's picture

Yeah, clearly the Saudis aren't playing both sides.

http://fosterfriess.files.wordpress.com/2009/06/bushsaudihands1.jpg?w=450&h=318

15 of the 19 alleged hijackers were Saudi.  Ergo, let's invade Iraq and co-opt their oil production on their behalf, in the name of freedom.

Wed, 12/29/2010 - 15:03 | 836160 weinerdog43
weinerdog43's picture

Good grief.  A big fat junk for you. 

Let's see:  The former president of Halliburton was who?  Thinking, thinking...hmmm.

Wed, 12/29/2010 - 14:02 | 835992 TruthInSunshine
TruthInSunshine's picture

p.s. - I wouldn't be surprised if a full 40% of all U.S. 'banks' (included by FDIC charter status) are fundamentally insolvent, assuming they were forced to mark their assets to fair value, and given that their only lifeline to cash keeping them afloat is through government/Federal Reserve 'games.'

How the hell else are banks with massively depreciated asset-backed paper, and where the traditional profit/revenue model of making loans has broken down, surviving?

Wed, 12/29/2010 - 15:47 | 836273 Panafrican Funk...
Panafrican Funktron Robot's picture

http://research.stlouisfed.org/fred2/series/TOTLL?cid=100

Loans are down over a trillion dollars from the October 2008 peak (the bump in late March 2010 was as a result of an FASB rule change that brought about 450 bln in loans from off-balance to on-balance sheets). 

http://research.stlouisfed.org/fred2/data/TOTLL.txt

Raw data.

 

Wed, 12/29/2010 - 13:55 | 835978 apberusdisvet
apberusdisvet's picture

 

Everyone that says that our debt is unsustainable misses a key reality;  it will never be paid.  Regardless, we will, probably, all wind up living a subsistence existence.  Either we just have to learn how to be hunters and gatherers again or institute the development of a new version of Soylent Green.  But that presupposes that there won't be WWIII; the only way out for a true kleptocracy of the elites.

Hard choices.

Wed, 12/29/2010 - 17:08 | 836560 Seer
Seer's picture

Subsistence = sustainable.

Hunter/gatherer isn't going to happen for 6.5+ billion of us.  Though I'm likely in a better position than many of the world's population, I have no illusions that I'd be able to get by as such.  The only thing that I feel that I can do is to be as productive growing/managing food as I can be: doesn't guarantee that one won't end up on the wrong end of a gun, but giving is likely going to be far less detremental than stealing...

Wed, 12/29/2010 - 13:53 | 835970 Common_Cents22
Common_Cents22's picture

can you imagine the horrible headlines if a Republican was in the white house?

 

the lame stream media is so biased, it is a wing of the democratic party.

Wed, 12/29/2010 - 14:08 | 836013 Freddie
Freddie's picture

The corrupt newsmedia is totally covering for Mugabe 2.  ALL of them including Fox/Prince Al Waleed News.   How did the Saudis invest in or have deals with all the US TV networks which control almost all the TV channels?

Wed, 12/29/2010 - 17:34 | 836643 New_Meat
New_Meat's picture

dang, the Saudis?  bbbbut I was told ...

Wed, 12/29/2010 - 17:03 | 836547 Seer
Seer's picture

Probably based on the same reason why they weren't implicated in 9/11.

Must be because of "socialism"...

Wed, 12/29/2010 - 14:39 | 836090 andybev01
andybev01's picture

Gee, could it be ass-loads of cash perhaps?

 

Just askin'.

Wed, 12/29/2010 - 14:54 | 836133 flattrader
flattrader's picture

and deregulation.

Wed, 12/29/2010 - 14:38 | 835967 TruthInSunshine
TruthInSunshine's picture

Here are three reasons it's different FOR NOW:

1) Credit cards. Take them away (there were none in the 30s) and watch the riots begin within a month.

2) Payday loans and equivalents + millions not making mortgage payments but living as squatters (I'm not passing moral judgment, but simply pointing to a fact).

3) GOVERNMENT SUBSIDIES - electronic welfare (food) debit cards, social security, Medicare/Medicaid, government heating/electricity subsidies, etc.

There are more than the above 3 differences, and people who visit ZH are well aware of this.

However, take away just the three items above, and watch the chaos unfold on your 3D LED 50" HDTV.

Corporate & individual welfare and ridiculous credit have created a massive and permanent underclass in Amerika, which has been turned into an important constituency for politicians AND consumer segment for corporations who deal in government provisioning contracts.

Wed, 12/29/2010 - 15:51 | 836286 Eternal Student
Eternal Student's picture

Agreed. I'd like to point out one key difference between now and the Great Depression that GW missed as well. Namely, Tent Cities.

The Tent Cities have completely dropped off the MSM radar, though they appear to be alive and well. However, instead of more people living in them, what we have is a very large number living in foreclosed houses without being evicted. I forget what this number is, but had the Banks been aggressive here, we'd be seeing tent cities with much larger populations. My guess is it would easily boost the number by an order of magnitude. I'd also guess that the scale would start approaching that of the Great Depression, if not surpass it based upon raw numbers.

So, instead of large Tent Cities, we have a smaller set, with a large population of people living rent free in foreclosed houses. And this doesn't include the squatters who break into a foreclosed house and take it over.

That's one better difference than the GD, I suppose.

Wed, 12/29/2010 - 16:56 | 836522 Seer
Seer's picture

Hey!  Thanks for bringing this up, the fact that it's being hidden from us.  It points out how polished Edward Bernays' work has become!

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