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Do you guys have any theory on why it's not possible for us to fall into another great depression? Or are we pretty much doomed???
Absent some outlandish stupidity on the part of political leaders, it isn't possible to re-create the same economic conditions. And understand -- FDR was really, really stupid in many of his actions. The man could give a stirring talk on the new-fangled radio thing, but his ideas on economics were truly stupid and helped create and prolong the Great Depression.
Most people forget that in the 30's, the US economy had 30% of the workforce employed in agriculture. That seems unthinkable to people today, because we have less than 2% of the US economy's jobs involved with (directly or indirectly) ag. People just cannot comprehend what it would mean if 30% of the working population of the US were working on a farm, owned a farm, sold inputs to farmers, hauled farm goods to markets, etc.
Why does this matter?
1. Farm commodity prices were crushed by the tariff act passed back in 1922 -- not the Smoot-Hawley act, but some act with four different names on it. The tariffs on ag commodities resulted in (just like Smoot-Hawley) a trade war, but first on ag commodities. By 1930, ag commodity prices were in the crapper, and they weren't going anywhere.
2. A drought started in 1930-31. There were actually several drought episodes in the Great Plains region from 1930 to 1940, but this first onset drought was a factor in the onset of the Depression. The '30-'31 episode was especially intense in the southest, where they normally have abundant rain and could grow most anything. The cotton crop was still the big money maker, and without enough precip over the 18 months (early 1930 to August, 1931), cotton was pretty much done for.
3. Now we start to see a bunch of farms failing due to low commodity prices, as well as drought. As the farms failed, banks started to fail, because large numbers of farmers could not repay their loans. The bank failures started in '31, but they really picked up speed by 1932.
4. Now we get into the Dust Bowl years. In 1934, we had the Mother of All Droughts. 80% of the continental US was affected. Crop yields were pretty low in a huge area of the central US. Banks were calling loans left, right and center. FDR was now in office and starting to do some truly stupid things in his attempts to "support commodity prices." A couple of examples: FDR and the Democrats passed legislation that, in the guise of propping up commodity prices, bought millions of piglets and pregnant sows at higher-than-market prices to reduce the supply of hogs for meat.
Same deal with cattle. FDR had this absurd program where the AAA men came around and pressured farmers to ship their cattle; they were paid something like $9/head/cow, and $3/head/calf.
The price increases didn't appear. That's because we were in a deflation, and the only way to get prices back up in a deflation is to re-inflate. People become scared of banks, so they pull their money out of banks, shove it into the matress and refuse to spend it. Prices keep going down in search of buyers, but the buyers simply don't want to buy.
If you want to see a history of Keynesian stupidity run amok, go read up on the Agricultural Adjustment Act, or the "AAA." To hear the press babble about FDR today, you'd think he was a saint. If you were a farmer in the 1930's, and you had to deal with the goons who came around pressuring or intimidating you to sign up for the AAA, you were under no such delusions whatsoever. Then, as now, city people had and have no comprehension of what farm economics are really like. People in cities were clamoring for someone to "do something!" - without having any clue what "something" should be. The nut of the problem, so the thought of the day went, was that ag prices were too low, which was causing farmers to default on their loans, which was causing banks to fail. Ergo, if we made farmers prosperous again, then the farmers would pay the banks, and the banks would stop going insolvent and would start lending again, which would bring back the economic sectors that the cities depended on.
Yea, nice idea on paper. Really poor in implementation. In hindsight, it was a fantastically stupid idea: it wasn't the way to deal with a deflation. The best way to deal with this issue is to attack the banking issues directly. Keep the banks solid, keep people's faith in the banks, keep the banks lending. Keep money moving through the economy. If the farmers need higher prices, then find them new markets for their output, instead of getting into trade wars to prop up commodity prices. If the government wanted to prop up commodity prices, they could have bought more output and given it to the jobless/poor, or even shipped it overseas as relief aid. Think for a minute of how different the world would be today if, instead of trying to prop up ag prices by destroying supply, FDR had simply bought up the surplus and shipped it to, say, Germany.
5. Now the crap really hits the fan. The Dust Bowl is making it impossible to live on much of the Great Plains, never mind farm. Huge, rolling black clouds of silt and dust roll back and forth across the land, some dust storms even make it all the way to the Atlantic Ocean. 100 million acres are involved in the Dust Bowl, but the drought, coupled with government stupidity, breaks so many farmers that 2.5 million people pick up off the Great Plains and head westward to California, Oregon, Washington. Some head to Montana and Idaho as well. Suffice to say, with unemployment running 20%+, more people suddenly showing up in the local labor pool are not welcome.
Millions and millions of acres of farmland are taken out of production, and there was a huge shift in the employment patterns of the US in the years after 1935.
We're not about to have another Great Depression. The conditions are vastly different, the structure of the US economy is vastly different. Two of the reasons why are no-till farming and the other is that the structure of the entire US economy has changed towards more service-oriented jobs. This can be beneficial, because services often need less capital input than things like farms and factories.
Could we have a hard recession? Oh yea. No doubt. And given the magnitude of the change in the financial sector, the recession could go on for quite a while. The typical fall-out from real estate bubbles, for example, lasts for upwards of nine years.
But will a bunch of people from Oklahoma be showing up in what is now Silicon Valley, wanting to pick oranges and cherries for $0.10/day? Nope. Those orchards are gone, the Dust Bowl isn't going to happen again, and farmers are much smarter businessmen today.
So, how are we doing four years later? I know how I'm doing, and it feels pretty depressed, but if I say the word I'm thinking I'll get censored. Household income is slashed in half, despite the wife and I holding four jobs between us (two full-time and two part-time), barely paying the mortgage and the bills, can't afford to buy oil for heat so I spend my 'spare' time cutting and splitting wood to burn, took the last of my savings and invested in a couple of beehives and bees (and won't see a return, if any, until next Summer) just before my full-time job slashed my pay by $200/mo. so now I'm running a negative cash-flow, the cars are crapping out and won't pass inspection but there's no money to fix them so we're going to have to start running illegally if we want to keep working, and that will eventually cause problems with the law because if I get stopped I just might lose my cool. No cable or satellite TV, no broadband internet, no 'going for drives' just to see the scenery because gas costs too much (twice as much) and we have to ration what we [s]can afford[/s] can't afford to buy but do anyway just to be able to keep going to work, wife doesn't know it but I'm skipping meals so that she doesn't have to and supplementing the pot with wild game (which she says she would never eat but she likes it just fine as long as she doesn't know it isn't beef) and going out to eat in a restaurant is right out...and there ain't gonna be nothin' under the tree this Xmas, that is, if I cut one down and put it in a stand instead of burning it.
How's that for some run-on sentences?
Yeah, four more years of Obama, I can hardly wait.
We had a depression, just not a "Great" one. All the media can admit is it was a "Great Recession." Since the Great Depression we never had the foreclosure levels we do now, an unemployment rate above 8% for so long, interest rates low and still no borrowing, until the last four years. And as the previous poster said, even some working more than one job are having trouble.
So, how are we doing four years later? I know how I'm doing, and it feels pretty depressed, but if I say the word I'm thinking I'll get censored. Household income is slashed in half, despite the wife and I holding four jobs between us (two full-time and two part-time), barely paying the mortgage and the bills, can't afford to buy oil for heat so I spend my 'spare' time cutting and splitting wood to burn, took the last of my savings and invested in a couple of beehives and bees (and won't see a return, if any, until next Summer) just before my full-time job slashed my pay by $200/mo. so now I'm running a negative cash-flow, the cars are crapping out and won't pass inspection but there's no money to fix them so we're going to have to start running illegally if we want to keep working, and that will eventually cause problems with the law because if I get stopped I just might lose my cool. No cable or satellite TV, no broadband internet, no 'going for drives' just to see the scenery because gas costs too much (twice as much) and we have to ration what we [s]can afford[/s] can't afford to buy but do anyway just to be able to keep going to work, wife doesn't know it but I'm skipping meals so that she doesn't have to and supplementing the pot with wild game (which she says she would never eat but she likes it just fine as long as she doesn't know it isn't beef) and going out to eat in a restaurant is right out...and there ain't gonna be nothin' under the tree this Xmas, that is, if I cut one down and put it in a stand instead of burning it.
How's that for some run-on sentences?
Yeah, four more years of Obama, I can hardly wait.
so because you are doing worse in four years everyone is?
my wife and i have seen our incomes grow by over 100% in the last 4 years, with investments growing many times more. according to you logic the whole country has seen their income double because just 1 person has. just because an individual is doing better or worse does not reflect on the entire country. a sample of 1 in a country of 300 million is not significant and you should know better. maybe you should have tried harder if others are doing as well as many others.
gas prices are not double, if they were gas would be over $7 (april) a gallon or $8 a gallon (june). You can find historical prices online pretty easily. please do not to lie, it violates the ninth commandment of God.
Do you guys have any theory on why it's not possible for us to fall into another great depression? Or are we pretty much doomed???
It's very much possible we do. The safeguards put in place post Great Depression have been whittled away. Post Great Recession nothing has changed. Criminals are still in business and realized they can actually make a lot of money an get away clear.
EmeraldCityWanderer..
I suggest you go to the "The End of Middle Class Growth" thread in this Economics forum. There is a link to a very good article that will give you recently aggregated economic data that will support Zymers anecdotal experience, and might really surprise you.
It's the essence of a game of economics - "those who have" must have more. In the process of getting more, "those who have" undermine wages of "those who don't have as much", all way to the point where they cannot sustain demand and economic expansion. It's classic Marx' analysis of booms and busts.
Ruling classes tried Keynesian ideas to override booms & busts. Later owning classes tried to lend expropriated wages back to the wage slaving classes in order to sustain demand. Then both groups decided to blow a real estate bubble up, so they could hook lower classes on home equity lines of credit and postpone a bust. Unfortunately, compound interest is a beatch, debt snowballs way outside of capacity of the real economy to service it. And there is no way around compound interest going berserk but a mega bust. $1 at 3% interest should yield $19.2 in 100 years. 19 fold economic growth in 100 years anyone? It's impossible. Mega busts, (hyper)inflation and global wars (on terror?) are the only ways to restart insanity of the compound interest credit over.
Keep in mind that Marx had no clue about ecological, energy and resource limitations. In the light of these limitations 19 fold economic growth is out of this world. A bust is a must.
So, how are we doing four years later? I know how I'm doing, and it feels pretty depressed, but if I say the word I'm thinking I'll get censored. Household income is slashed in half, despite the wife and I holding four jobs between us (two full-time and two part-time), barely paying the mortgage and the bills, can't afford to buy oil for heat so I spend my 'spare' time cutting and splitting wood to burn, took the last of my savings and invested in a couple of beehives and bees (and won't see a return, if any, until next Summer) just before my full-time job slashed my pay by $200/mo. so now I'm running a negative cash-flow, the cars are crapping out and won't pass inspection but there's no money to fix them so we're going to have to start running illegally if we want to keep working, and that will eventually cause problems with the law because if I get stopped I just might lose my cool. No cable or satellite TV, no broadband internet, no 'going for drives' just to see the scenery because gas costs too much (twice as much) and we have to ration what we [s]can afford[/s] can't afford to buy but do anyway just to be able to keep going to work, wife doesn't know it but I'm skipping meals so that she doesn't have to and supplementing the pot with wild game (which she says she would never eat but she likes it just fine as long as she doesn't know it isn't beef) and going out to eat in a restaurant is right out...and there ain't gonna be nothin' under the tree this Xmas, that is, if I cut one down and put it in a stand instead of burning it.
How's that for some run-on sentences?
Yeah, four more years of Obama, I can hardly wait.
I mean no offense, really I don't. But if you and the wife each have a full time and part time job, hunt for food and burn wood, drive old cars and have no pay TV or internet I find it hard to fathom how you can be in such financial straits. Something in your story simply doesn't jive.
I can remmeber when the experts said we would not have any more recessions also because they had monitery policy figured out.Now we see QE that is done to direct investment to equities and yet its not working. They are now fearfu;l of deflation setting in. They basically can't control what they thoguht they could i the end or certainly we wouldn;t have come so close to the collapse of the bankig system and thus deep depressio as we did in 2008. Just a few years before they were encouraging home buying as the best source of welth building.
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