Does anyone think our economy is reliving the Great Depression right now?

Question

I think so, cause I keep hearing about a rising unemployment rate. Where I work at, our sales are tragically low, probably due to high gas prices. I hear a commercial on the radio everyday about rising food prices and higher costs of living and credit card debt. So, what's anyone else's 3 cents on this? Is it as bad as I think it is?

Answer 1

We have to start bringing jobs back into the country. Everything we buy now is made out of the country.  The economy  is scary right now. The government wastes our money........billions of our tax dollars leave the country in the form of foreign aid to help other people.  Nasa is another example of waste....billions is spent on a space program that is useless to the general population. The number one concern is bringing jobs back to our country.

Answer 2

Not even remotely - our period now more closely resembles 1991-92 (which I remember being rough, but we managed).

The Great Depression was a worldwide economic crash. Today, much of the world is booming - and the source of our malaise in rising prices is because of this boom.

Unemployment was often above 30%, versus less than 6% today.

Inflation was nonexistent during the Great Depression - in fact, it was price DEFLATION that caused the misery. The crops that were planted at the start of the season were worth so little at the end of the season on the open markets that farmers went out of business. Same with factories. This led to generalized scarcity.

While there was inflation prior to the start of the Great Depression, many blame the Federal Reserve for precipitating the Depression by jacking up interest rates rapidly, choking off the money supply. The idea was to force some austerity upon people in order to get them to curtail their spending. But rates were ratcheted too high too quickly, which caused a sudden stop. Indeed, the money supply was cut by one-third in short order. Today's monetary engineers are much more careful.

One major proximate cause was the stock market collapse. While the markets have risen and fallen since, at the time there were few sophisticated investors, and many people took out margins they couldn't support during a bull market. While bull markets cover up many analytical sins, bear markets are merciless in dealing with them, and the market crash caused much financial ruin. Today's investors are far more savvy, or at least more cautious. Very few have taken out margin calls they can't back up - and those who have are the major institutions, not the individual households.

While credit card debt is very high today, it is not the same animal as margin debt. Credit card companies have an interest in keeping debtors out of default, and a small industry has developed around managing debt. Furthermore, in the worst-case scenario, bankruptcy courts offer far more protection today than they did in the Great Depression.

Moreover, risk is more widely shared today. Those companies that diversified risk poorly during the mortgage boom in the past ten years are now gone - destroyed by their careless ways. Those that have survived have passed much of the risk on to investors. The major banks backing credit cards today are far more resilient than the banks that backed industry 80 years ago.

Also, while bank runs were common and destructive in the Great Depression, bank runs are nonexistent today thanks to programs such as the FDIC. Thus bank failures are highly unlikely, and the chain of liquidity is not likely to collapse.

Other factors include rampant protectionism - the US didn't want to import goods, and our trading partners retaliated by refusing to import ours. This helped create a general drop in demand across the board. Today, we are highly integrated with our trading partners - and indeed our weaker dollar puts us in excellent position to boost the economy through exports.

Then, wages were very inflexible because much of the nation's workers were union. Today, wages are far more flexible, which is unfortunate for us laborers, but at least our labor system moves more fluidly (ie, you can find a job more rapidly today). This means that businesses today can take far more flexible actions to remain afloat.

There was no way to protect the unemployed - who at one point made up 1 in 3 workers. If you lost your job, you'd probably also lose your home in short order. Today, there are unemployment benefits, and various social programs such as WIC, etc. You may lose your house, but you'll be able to find subsidized housing and assistance finding a job. It stinks, but you have a place to start over again that isn't in a shanty by the railroad tracks.

A final factor I'll mention here has to do with workers - they were largely uneducated and poorly able to adapt to changing conditions. The rise of powered farm machinery made many farm workers obsolete - there was nothing they could do. While there are many Americans in this unfortunate position (I think of the textile workers in North Carolina who have a high school education), they are by no means a substantial percentage of the workers. Indeed, the remedy for unemployment today is often more schooling, which is highly successful.

In conclusion, I don't think a comparison to the Great Depression is warranted. While times are slow now, we'll have economic expansion again, perhaps even by this time next year.

Answer 3

I feel we are very near to that point again. When people have to choose what medicines they have to fill and what they may be able to do without just to afford one, things have gone way to far.

Answer 4

Industrial and technical economics preclude a Great Depression.  Advances in information management enable analysis of models of catastrophic events.  Resource availability and transportation technologies facilitate immediate and timely response to stagnant elements which are the identifiable causal factors of depressions.  Recession management replaces complete slow down of business and labor activity.

Answer 5

The easiest way to look at a countries finances is the currency exchange.

Right now people are not paying good money for the dollar.

This country is in trouble. You better start saving, clearing your debt and keeping your job it's going to get rough.