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I keep saying that this will be worse than The Great Depression because able bodied Americans and people in other countries are forced to stay home and not work. Thus they are not contributing to the economy. So not only do we have sick people who are not contributing, the people who could are not contributing. This will inevitably lead to the collapse of individual American households and thousands of businesses. How will loans help if there are no customers? To make matters worse, we are not quarantining strictly, so the virus is continuing to spread rapidly.
I keep saying that this will be worse than The Great Depression because able bodied Americans and people in other countries are forced to stay home and not work. Thus they are not contributing to the economy. So not only do we have sick people who are not contributing, the people who could are not contributing. This will inevitably lead to the collapse of individual American households and thousands of businesses. How will loans help if there are no customers? To make matters worse, we are not quarantining strictly, so the virus is continuing to spread rapidly.
I also think this will be far worse than the Great Depression because fundamentally, we are in much, much worse shape now financially than we were in the 30s.
The "misery index" (unemployment rate + inflation rate) will be massively greater this time. During the Great Depression, the COL fell sharply (and it would have fell even more if not for government meddling in the economy). In this Greater Depression, runaway currency debasement is going to make the cost of everything skyrocket. Pensioners are going to have to go back to work, and savers are going to be financially raped.
I believe this is just an economic pause for 18 months because companies are sitting on billions of cash unlike any of the prior recessions.
Banks are not allowed to fail since the last 2 recessions they were expected to have reserves in place of major financial crisis. Those were the terms of the TARP that banks received free cash in exchange.
The other part is we have a digital economy today that is greater than our physical economy. There are millions of people that work without having to be at the office. That has already been in place for the last 2 decades. There are always people working from home doing legal work, your mortgage processor, recruiters, even medical workers can work from home with the right tools. Its the boomer generation that still requires workers to perform digital work on premise.
Yes, I'm a tech worker and many of us work from home everyday even before the crisis started.
The Great Depression and then the 2008 crisis were peas in a pod. The same thing caused both of them - systemic instability inside the financial system (banks). Then it spread outward. First to go was the speculative financial economy (market), then the main-street banking system, then the main street economy.
This is the opposite. The main street economy is the one sick this time because we can't allow productive people to be productive for fear of everyone getting sick and overwhelming the health care system. What makes our economy run is not allowed to run because of nature.
That has affected the markets, although the main-street banking system seems fine and ironically is a source of comfort in a way. However, they will eventually feel a hit when millions of people can't afford their mortgage payments, etc...
Full depression? I don't buy that now that the package was passed: like you I would put it more in the category of 2008-09
The big difference is in 2008-09 people were encouraged to go out and spend the stimulus money. Everything was open. Now you are not even suppose to leave your home and almost everything is closed. On top of that most of the world has shut down stopping international trade. Consumers are 70% of the economy and they are not consuming except for food and emergency supplies.
If we just had a bad downturn like 2008 I would agree. But the virus is a wildcard. We don't know how long it will take to get the all clear message. Is it going to peak in April, May? And we don't know if it will come back again full force later this year. If its 18 months or more to a vaccine will we get a repeat of this year early next year?
The Great Depression and then the 2008 crisis were peas in a pod. The same thing caused both of them - systemic instability inside the financial system (banks). Then it spread outward. First to go was the speculative financial economy (market), then the main-street banking system, then the main street economy.
This is the opposite. The main street economy is the one sick this time because we can't allow productive people to be productive for fear of everyone getting sick and overwhelming the health care system. What makes our economy run is not allowed to run because of nature.
That has affected the markets, although the main-street banking system seems fine and ironically is a source of comfort in a way. However, they will eventually feel a hit when millions of people can't afford their mortgage payments, etc...
This is why we should be staying home and not out co mingling with the world.
Debt economy is a house of cards. Oh we will get back to biz of some sort in two or three month, but think this maybe a fundamental change. Marginal biz isnt going to just switch on and lot of economy is service/luxury oriented. Many will go bankrupt and owner will have to start from scratch again if he/she decides to do so. You can make a personal living from small service biz, but its not a particularly lucrative one. Most people that open small restaurant or other small biz do it cause its possible to do on a shoestring. You dont start up a factory or even a traditional farm on a shoestring.
Definitely interesting times. Honest I prefer boring and comfortable, rocking chair and warm fire, but nobody asked me what I wanted. You get what you get. Like said before, least it isnt war and starvation.
Debt economy is a house of cards. Oh we will get back to biz of some sort in two or three month, but think this maybe a fundamental change. Marginal biz isnt going to just switch on and lot of economy is service/luxury oriented. Many will go bankrupt and owner will have to start from scratch again if he/she decides to do so. You can make a personal living from small service biz, but its not a particularly lucrative one. Most people that open small restaurant or other small biz do it cause its possible to do on a shoestring. You dont start up a factory or even a traditional farm on a shoestring.
Definitely interesting times. Honest I prefer boring and comfortable, rocking chair and warm fire, but nobody asked me what I wanted. You get what you get. Like said before, least it isnt war and starvation.
Yet
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