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

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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 of 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 does this chart from Clusterstock:

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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109 comments

  1. YankeeFrank

    Nice work George. What is so impressive is the way the MSM and government have figured to hide the truth from the people. With inflation and unemployment numbers corrupted beyond recognition, food stamps to hide the breadlines from prying eyes, and media stars all too willing to breathe one last breath into the fantasy of Empire America, I hope 2011 will be the year that Americans of all stripes finally stop believing the comfortable lies told by our “leaders” and take back the country from the warmongers and plutocrats that are sinking us faster than I could’ve imagined such a large and important country could fall. My class and generation (gen x – upper middle?) has unfortunately abdicated its role and instead chosen to follow a pied piper or three, maintaining the illusion that their vanity and pride matters and they won’t be fooled into believing in anyone again. They still believe life can be like a car commercial or the standard Hollywood RomCom where gee — aren’t they all so clean and attractive; and they drive such nice cars and have such nice houses and their embarrassments are never quite as jarring or painful as ours tend to be. Even though they largely did believe in Obama, now they’ve gone mute in order to avoid the sting of embarrassment that comes with betrayal. Apparently embarrassment is the worst feeling my class ever experiences (at least yet). Apparently we haven’t changed at all since Joyce’s time and The Dead are still with us. Its the great unwashed (the ugly term for those who aren’t supposed to matter) who will have to lead us to the promised land this time, like the last, though I fear they no longer know the way.

  2. attempter

    Things are far worse than the 30s.

    1. Back then, we had a government and society which were just normally corrupt, but which did still try to function for the good of the people, to some extent.

    Today we have a terminal kleptocracy, where every cent is simply stolen and thrown down the corporate rathole.

    It’s a fact – literally nothing the government initiates any longer has any purpose at all but to set up more corporate extraction points. If a policy won’t do that, then government won’t undertake it. (Compare WW2 with today’s purely profit-seeking, purely private-interest wars.) Obama would no doubt be sincerely confused if anyone suggested to him that the point of a stimulus or a jobs program is to create jobs rather than provide the pretext for contracting and employer tax credits and such. He’d say, “If the point isn’t to increase corporate rents, then why should it be done at all?” Everyone else among the elites agrees 100%. Until we get rid of them completely, nothing will change. We’ll sink into terminal depression, unto the restoration of medieval feudalism.

    2. Unlike in mid-century, there’s no longer a new plunder frontier. The mass “prosperity” of the West was based on the exploitation of the Global South. We’re gonna need another planet populated by weak tribal peoples for the next necessary primitive accumulation. (Capitalism’s natural tendency is to stagnate, and therefore it requires repeated plunder accumulations to jolt it into “growth” again.)

    3. That planet had also better have oil and water. Unlike in the 30s, today we’re at Peak Oil as well as at or beyond the limits of most other resources. We’ve trashed the earth and squandered the fossil fuel principal. It was hard enough climbing out of the first Great Depression during the ascent of cheap, plentiful oil. It’ll be impossible to do so during oil’s descent, if we keep trying to zombify “growth”.

    So whereas back then the car had just been stolen, but was largely intact, today even if we can recover it, it’s already been totalled.

    4. During the first depression, far more Americans could return to the farm. Today the malign separation of town and country is far more profound. The situation of the masses of permanently unemployed is therefore far more dire.

    (That’s another point – in the 30s, the system’s intent was still to eventually re-employ most of the unemployed. But today the goal is to permanently destroy as many jobs as possible. Those driven out of employment are intended to remain permanently so. Anyone who seriously calls for a “jobs program” and sincerely wonders why Obama doesn’t enact one completely misunderstands the situation.)

    This comes at a time where the unsustainability of fossil fueled agriculture makes it critical that America create millions of new small farmers.

    So both the physical necessity of food itself as well as our only chance at recovering our economic and political freedom will require that we redeem the land for food production on a democratic basis, and on a non-fossil fuel basis.

    Otherwise “depression” will be a mild term for the fate that awaits us.

    1. psychohistorian

      At this point in time the future is not evenly distributed…….this is train wreck folks in fascist/corporatist times and the screams will not be reported….until much later.

      Maybe only Skippy can understand but I laugh sometimes at how sick this all is. Where are those that speak of human morals and ethics?

      I hope the next guy that sideswipes me with his SUV/truck while I am riding my bicycle at highway speed does more than let me take off his side mirror with the back of my helmeted head. The pain of millions is really hard to experience as Jimi would say.

      1. psychohistorian

        I wasn’t really riding my bicycle at highway speed but my brain is now only 4.5 years old and it still gets confused, albeit, a bit funny at my expense.

        1. skippy

          Should have posted here rather than below.

          How long post injury? Axonal, white gray matter interface damage? MRI / PET scan? Were you unconscious for any matter of time and how long?

          Skippy…the very fact that you are typing is a good sign!

          PS. psychohistorian if you ask for my email its ok with me, ping Yves…if you have the time Yves.

      2. Jason Rines

        All of the events are cyclical. There are three camps of people on earth. The muggers, the visionaries and the vast majority in the middle. The visionaries merely recognize our genetic code to continue forward as a collective species that we all move forward or none of us do (this can be considered spirituality).

        The muggers have a more engrained “for the now” survival instinct, to hoard resources. Both the visionaries and the muggers are both driven by genetic coding which pushes our social evolution forward.

        Whatever empire forms throughout history are the next group of muggers. In our era, the rate of business is faster than other periods in history. So in one lifetime we view the rise and fall of an empire something new for our time period.

        The muggers centralize the wealth and defend it through the force of violence until such time as it becomes too uneconomical to continue. That is the phase of the end of empire and one the United States finds itself in. The end result is decentralization and not in such a healthy manner and always in the form of major military misadventure.

        Viewing this entire process unfold during one’s lifetime is a cause for extreme anxiety for it is not merely the details of the themselves that are disturbing but the reality that our species has this ugly side of muggers. The Internet and other forms of modern communications are highlighting the ugliness of this cycle more clearly than other times. As a species, we are now at a phase of being forced to look in the collective mirror of muggers and visionaries and pain is a strong catalyst of such happening.

        We tend to think of ourselves as more civilized than two tribes warring to either mug and consume all resources or invest it wisely for future continuity and prosperity. In some ways mankind IS a bit more civilized than thousands of years ago but only a smidgeon. Social evolution does happen. But when one stops and considers all of this then it can be a real downer.

        While this period will end, perhaps a decade or so from now with a increasing bangs and pops and a high time will come afterward, it will be hundreds more years before an individual can be born and not have to always look over his/her shoulder to be aware of muggers. The solution will be some form of genetic engineering. Currently, man is not nearly advanced either technically or evolved enough socially to weed out aggressive genetic attributes.

      3. skippy

        How long post injury? Axonal, white gray matter interface damage? MRI / PET scan? Were you unconscious for any matter of time and how long?

        Skippy…the very fact that you are typing is a good sign!

        PS. psychohistorian if you ask for my email its ok with me, ping Yves…if you have the time Yves.

    2. Jim the Skeptic

      attempter says: “4. During the first depression, far more Americans could return to the farm.”

      Actually that wasn’t much of an escape valve.

      There were severe droughts during the thirties. Many farmers lost their farms because of it. John Steinbeck was not describing some local phenomena in the ‘Grapes of Wrath’.

      In addition tobacco was the cash crop for many farmers and prices got so low that it cost more to sell it than the farmer was paid for the crop. My very religious grandfather was forced to make moonshine to make up part of the deficit. You do what you have to do!

      Going back to the farm may have been done in some local areas, but not for the majority of the country.

      1. attempter

        Yes, I didn’t mean to make it sound like it was a panacea. But the option was there for far more people than today, when the only difference between here and the mass shantytowns of the global South is a few years.

        Unless we restitute the land.

    3. ITDog09

      @attempter, You almost got it right on your second point:

      “2. Unlike in mid-century, there’s no longer a new plunder frontier. The mass “prosperity” of the West was based on the exploitation of the Global South. We’re gonna need another planet populated by weak tribal peoples for the next necessary primitive accumulation. …”

      I hate to be bring you the bad news, but we the middle class are the new plunder frontier. From privatizing Social Security, to disappearing health care, under funded pensions, worthless retirement accounts, and loss of home values, we’re all being robbed and sucked dry.

      Read the Shock Doctrine. That’s the GOP platform and what Democrats have bought into. The only difference between the book and reality is unlike Chile, Iraq, and the former USSR, we’re moving in slow motion rather than suffering a short lived coup.

      My second point is that fixing America will be impossible as long as we have “Free Trade”. Look, if you’re not willing to work for a dollar a day, a 16 hour day, with no health care, no labor laws, and no environmental laws, then you can’t compete. That’s why for 90% of us there will be no real recovery. We could begin to fix our economy overnight, and at no government cost, by using Tarrifs. Your toys will cost more, but you’ll have a J-O-B. And the other downside of tarrifs is that the top capitalist probably can’t make 500% profit on everything they sell. Oh well, life’s hard.

      1. attempter

        Thanks ITDog. Shock Doctrine is one of my core source books, and it’s usually relevant to whatever we’re discussing nowadays.

        I’m sorry my comment wasn’t clear enough on the liquidation of the middle class and restoration of feudalism which looms. That’s what I meant by depression being a mild fate compared to what’s in store for us unless we redeem the land for democratic food production. Otherwise we’ll starve in chains.

    4. Gavin

      What needs to be stressed is that the @#!$ has yet to hit the fan. The stock market and banks have recovered?? Does anyone need a refresher course in the art of creative accounting?? Beneath the window dressing, unspeakable disaster looms. The following is an excerpt from Chris Hedges: “2011: A Brave New Dystopia” http://www.truthdig.com/report/item/2011_a_brave_new_dystopia_20101227/

      “We have been gradually disempowered by a corporate state that, as Huxley foresaw, seduced and manipulated us through sensual gratification, cheap mass-produced goods, boundless credit, political theater and amusement. While we were entertained, the regulations that once kept predatory corporate power in check were dismantled, the laws that once protected us were rewritten and we were impoverished. Now that credit is drying up, good jobs for the working class are gone forever and mass-produced goods are unaffordable, we find ourselves transported from “Brave New World” to “1984.” The state, crippled by massive deficits, endless war and corporate malfeasance, is sliding toward bankruptcy. It is time for Big Brother to take over from Huxley’s feelies, the orgy-porgy and the centrifugal bumble-puppy. We are moving from a society where we are skillfully manipulated by lies and illusions to one where we are overtly controlled.”

      http://www.truthdig.com/report/item/2011_a_brave_new_dystopia_20101227/

      1. DingusMaximus

        Thanks for the links to that guy (Chris Hedges).

        That guy is a total arse: pompous & self-righteous.

        He certainly looks well fed and happy to indulge in our Western society.

        He wants to control how everyone thinks and acts. Only the most cultured and educated are allowed to decide what is appropriate behavior and entertainment.

        What a drama queen who loves to hear himself speak.

        He just goes on, and on and on and on about bashing corporations and this that and the other…

        He truly wallows in the filth with joy and satisfaction.

        He only speaks to the pretentious and privileged or people to lazy to think for themselves. He’s the Ann Coulter of the left. Yuuuuuuk.

        1. Skippy

          The love child of such a union would assuredly…be named DingusMaximus.

          Skippy…forgive your parents, love is a strange beast.

  3. Nonanomymous

    In the 1930′s, the federal government wasn’t on the leading vertical edge of accelerating deficit spending. If the declining housing market is the signal of a double dip recession, there isn’t much anyone can do about it, and Bernanke can take his academic credentials and go packing with the rest of Washington, DC.

    As long as basic needs are being met, the distribution of wealth can continue to stratify, and the wealth gap continue to grow. It’s when basic needs aren’t met that people will revolt.

    There won’t be any Great Society legislation that will appease the masses this time around, because the feds won’t have any means at their disposal with which to provide it. Thus a restructuring of society will be necessary, or a police state. We didn’t choose one in the sixties, and I don’t see us choosing one this time around, God willing.

    God bless and happy household holidays!

    1. Charles Kiting

      The police state came in the 70′s. You must have been asleep.

      I kid, but really we were all asleep. Things like the EPA and DEA have become shadow governments unto themselves by the end of the 70′s; they basically make law on their own, and Congress has willingly assigned them this task for fear of it hurting them at election time. So we have agencies populated with ideologues, passing lame-brained feel-good regulations that not only don’t work but also require ever-escalating budgets to enforce BECAUSE they don’t work.

      The excessive requirements placed on business and individuals amount to thousands of excise taxes which are severely limiting to mid-size business and middle class people, unaffordable to small business and lower class people, but a drop in the bucket to large business and the upper class. At first, these agencies (and they are just as much parts of local government as federal) meant well but if an ounce of prevention works then the ideologues think that a ton of prevention will work even better. As if dosage doesn’t matter.

      The kleptocracy is worst at the government level, but it permeates through all classes. Large business lobbying for increased regulation on their competitors all the way down to the person suing the grocer because of an orange a few days past its sell date. The DEA and police wanting stricter rules on drugs and alcohol, not because they are effective but because they are an increase in transferring funds from individuals into their departments. Newspapers large and small asking for government subsidies, as if their jobs as watchdogs are passe. The judicial branch finding any tortured logic it can to assist the other branches of government in acquiring more power.

      The tortured logic exists at the individual level too. There is no difference between big business and big government – to favor one but not the other is nothing but the thinking level of a lazy adolescent. Even the suffering is lightweight today. At least the people stuck in a breadline in the 30′s had to put up with the humiliation of waiting in line for hours, in competition with the other guys in line – they might actually SEE someone worse off they they are; today even the indigent get their assistance mailed to them so they don’t even have to forfeit any additional comforts.

      So yeah, in a sense we are much worse off than the Great Depression. Back then were were merely financially bankrupt and we let our morals slip a little, today were financially bankrupt and our morals have already been sold off.

  4. Antipodeus

    UNBELIEVABLE (but likely true). The GRAPHIC graphics put it all into perspective. Augean Stables, anyone?

  5. leroguetradeur

    attempter, the problem is, I’m not sure what it is you are doing but it is not thinking. For instance you say depression will be a mild term. This is almost content free, what is it exactly that is going to happen and when, quanitify it. You say fossil fuel agriculture is unsustainable. What exactly does this mean? That it will stop? When, and how?

    “today the goal is to permanently destroy as many jobs as possible. Those driven out of employment are intended to remain permanently so”

    The system, whatever that is, does not have goals. Who is trying to do this exactly, and why? What is the evidence?

    The problem is the strange mixture of assertions which are so vague in quantitative terms to be impossible to assess for likelihood or truth, coupled with a built in highly emotional reaction to these supposed events. The combination is almost useless. You can tell that the writer is very wrought up, thinks something bad has happened and is going to get worse, thinks something ought to be done about it, but you cannot get beyond that.

    When one thinks about your earlier remarks, for instance that smashing the banks by spontaneous collective action of moving deposits around would somehow play some role in getting the situation to where we want it to go, well, its incomprehensible.

    Get quantitative and get specific. Otherwise one really cannot say what you are talking about.

    1. attempter

      Thanks for your concern.

      I never said Move Your Money by itself would destroy the banks, but it’s part of the mix that could fatally weaken them. I did say that if a critical mass of people stopped paying their mortgages (which is nothing but protection money to criminal enterprises), such a self-jubilee would destroy the banks.

      It’s surprising that you find the nature of fossil fuels so hard to comprehend. As growers dependent upon them become unable to afford them, and as spot supply crunches become more frequent, the production and distribution system will fail.

      You sound like a candidate for a question that children are increasingly unable to answer these days (I’ve seen many anecdotes): “Where does food come from?”

      If your answer is, “the supermarket”, then you don’t understand the issue.

      As for the evidence that the system wants mass permanent unemployment, I think the refusal to do anything about jobs speaks for itself. What more evidence do you want? “He keeps shooting at me, but what’s the evidence that he wants to kill me?”

      Here’s a tip: When someone has the power to choose among a wide range of options, and he consistently chooses a particular kind of option, and consistently rejects another kind, odds are that’s proof of his actual intentions.

      The system, whatever that is, does not have goals. Who is trying to do this exactly, and why?

      The system is set up by the elites for the benefit of the elites. Its goal is to maximize their wealth and power. That’s how it was set up and that’s why it was set up.

      Is that really so hard to understand? You must be putting me on.

      1. lambert strether

        Don’t say “unemployment.”

        Say DISemployment. It couldn’t be more clear that 10% nominal (20% real) joblessness is the result of deliberate policy choice, fully shared by both parties, and rapidly being normalized by Big Media.

        DISemployment

      2. Charles Kiting

        Why would taking money out of a bank hurt them? All it does is take some liability off their balance sheets. They already WANT you to take the money out, that’s why the interest rates on deposits is so low. The only possible damage would be a loss of transaction revenue, but then you have the added responsibility of the safety of your cash and assets yourself so your transactions will go to security companies instead. (And why wouldn’t a bank just buy a security company then?)

        The only way you can really hurt a bank is by not borrowing. And people paying down debt as quickly as possible or letting the bank take over the over-valued house is doing exactly that. If you can’t do either because you don’t have a mortgage or you don’t have credit card bills, then you really shouldn’t care. Your dog in the fight is the people propping up the banks, which at this point ain’t the customers anymore.

    2. Toby

      leroguetradeur, you are asking impossible to answer questions, while asserting that quite exact statements are vague. I personally do not find e.g. “fossil fuel agriculture is unsustainable” at all vague. However, knowing exactly (you mean to the second? you’re not very clear how exact you want the answer to be) when the energy cost of extracting oil will outweigh the energy return is impossible, but after that point agriculture will no longer be able to rely on petrochemical fertilizers.

      You write: “The system, whatever that is, does not have goals. Who is trying to do this exactly, and why? What is the evidence?”

      While a system such as capitalism might not have conscious goals, at least when viewed from a certain perspective, systems do have implied goals in that they have systemic consequences. The evidence that the current system’s operating leads to job losses is evident in unemployment figures and trends combined with the maximize-profits-minimize-costs impetus it nakedly embraces.

      As to the “who exactly” part, are the names really important? Can they even be discovered? If I have understood attempter correctly, I would say he feels it is the system which is the problem, not the individuals.

      Generally though, commenting on blogs is not the right format for detailed expositions. For example, you state that systems do not have goals, but offer no supporting evidence. Sadly, we are obliged to spend time researching, if possible, what people say here, over at their own blogs — if one is interested enough to do so. I find attempter’s blog to be replete with information and argumentation. I don’t agree with all of it, but he is most certainly someone who dedicates a lot of time laying out his thoughts and analyses in a manner accessible to most.

    3. Michael H

      “You can tell that the writer is very wrought up, thinks something bad has happened and is going to get worse…”

      So according to you nothing bad has happened and everything is getting better?

      Two privatized wars for profit is nothing to get worked up about, 109,032 war related deaths in Iraq over the past six years, of which 66,081 were classed as civilians, is just a minor detail.

      I guess it all depends which side you’re on, obviously for top 1 percent in America, things have never been better. They can count on the working class kids to fight their wars, and back home, unemployment and poverty are no big deal, after all, those things only happen to other people, the non-rich.

      And so for the rich (and for you people like you), nothing bad has happened, everything is just wonderful and it will continue to get better and better.

      1. leroguetradeur

        “So according to you nothing bad has happened and everything is getting better?”

        No, certainly not. What an idiotic idea! We have gone through a major credit bubble and bust, as you say, several wars of highly dubious justification. The results of the credit bubble have been to increase inequality and destroy the living standards of millions of people. This has been an unmitigated disaster, that is not the issue.

        The question is whether attempter’s rhetoric comes close to diagnosing or prescribing for the problem. I am saying it does not, because it is not specific enough for anyone to make sense of what he thinks the problem is or how it should be solved.

        Take this question of industrial agriculture becoming unsustainable. It could be. But to make it a content filled proposition, we need to get more specific. What exactly happens to agriculture at $100 a barrel? At 150? At $200? Agriculture does not just stop, become unsustainable or whatever. It changes. There is probably some point at which a return to horse drawn machinery is cost effective. What price per barrel is that?

        Then lets ask, how likely such prices are, and by when, not by second, not by year even, but by for instance 5 year period.

        Make the proposition specific and we can have a reasoned discussion of it. Let us say, as an example, that oil will rise to 250 a barrel by 2030, at which point… what exactly? We no longer can afford tractors? Any tractors? Most tractors? Large farms? Pesticides? I have no idea from the rhetoric what attempter is actually forecasting.

        The suggestion that we should rephrase the material about what the system intends into predictions has great merit. It will at least make them falsifiable. We can look back at the trends and see: is it more likely that unemployment is in a temporary dip, or is this a long term and quasi permanent trend upwards? I am inclined to think that like most credit bubbles, this one will have medium term (5-10 year) negatitive consequences, and then will give rise to a recovery when debt has been written off. But this may be wrong and too optimistic, but lets have the debate in an evidence focussed way.

        1. linda stevens

          Sorry La Rogue, but you’re trying to start an actual discussion amongst a commentariat that mostly entertains itself by back-slapping each other with one hand, while circle-jerking each other with the other. Wrong site.

          1. Jason Rines

            No, the commentariat here sees problems with future growth. The investment community is now catching on and that is the group that funds reform be them bond vigilantes or funding media, politicians etc. Since it is early in the process it is a good time to be discussing what kind of country we wish to live in the next couple of decades.

            The mechanisms for information sharing of documentation and frame for debate does not currently exist. Some of us will remedy that.

            As for solutions, government of We the People must shift the power balance away from finance, defense, energy and healthcare lobbies which have captured government and are NOT INNNOVATING merely raising prices. The effect of continuing this environment lead to revolution which in our time is misdirected into major military misadventures. How does another world war with nuclear weapons being used sound? Nah, we just want some attention here as bloggers so we can self-congradulate ourselves…

        2. attempter

          Tractors, trucks, planes, trains, ships, the entire distribution system, manufacturing all those machines as well; synthetic fertilizer, pesticides, herbicides, corporatized seeds, the production and distribution of all of those; planting, irrigation, harvesting, processing, warehousing, retailing, refrigeration, plastic wrapping and containers…..that’s just the beginning of the list. It’s all absolutely dependent upon fossil fuels.

          At what price exactly will speculation on top of the Peak Oil-driven upward trend cause a catastrophic spike in food prices? Who knows, but it’s certainly not far off. Here’s one example. Months before the price hit $147 in 2008 artificial scarcity caused by rationing according to wealth drove massive food protests (dubbed “riots” by the corporate MSM) in dozens of countries. The crisis continued into the next two years. So there’s one example.

          But how ridiculous to quibble over this. Your economists don’t understand a single number, and every idea they have is also completely wrong, because their every word is a lie, their ideology is based on nothing but the justification of crime, and they themselves are nothing but criminals.

          On the other hand, more and more among the productive people, the actual citizens, understand the simple facts of our age: That capitalism doesn’t work, that trickle-down is a fraud, that representative pseudo-democracy is a scam, that all elites are nothing but criminals, nothing but absolutely worthless parasites, that we’re reaching the end of the road for easy resources and treating the earth as a dump, and that the only alternative to slavery, starvation, and death is to take our economies and politics back into our hands and do everything 100% for our selves.

          And all you want to do is quibble over matching x specific effect to y oil price? Like I said above, I doubt you’re serious. But just for the heck of it, we’re already back above $90, well into the death zone which will crush your phony recovery. More and more regular people will find it hard to afford decent food. That’s why food stamp usage is surging. That effect will only become more pronounced.

          1. leroguetradeur

            No more than a guess or series of guesses. I used to be very convinced by Simmons on Peak Oil (and by Deffyres), but was rather shaken by the citations in a piece on masterresource. The evidence for Simmons’ assertions seems rather limited.

            However, you do feel that there cannot possibly be enough oil to fuel China and India with malls and freeways and suburbs. Which would argue rising prices. My guess would be that a price per barrel of $100 will not produce any material change in how we do things. It will not raise food prices very significantly in the West.

            Is $200 likely? Maybe, and if so, probably around 10-15 years from now. $300? Maybe in 20 years from now.

            At either of those levels things probably start to change significantly, though whether agriculture is one of them is less clear. We could significantly reduce the dependence of agriculture on oil by just hitting the easy wins. Its when we start totally doing without tractors that it gets tough. We do not have to have oil to make artificial fertilizer. We do need energy, but not necessarily oil. We could run trains and barges on coal again if we had to.

            What probably does change is suburbs, car commuting, malls. If we remember the 20s, we did have commuting, but from walkable suburban train stations. We still had walk to shopping districts, and that sort of thing might come back. Housing gets smaller and more apartments rather than detached houses, easier to heat.

            I have trouble seeing all this happen very suddenly or dramatically, but maybe there is a case why it will. If so it would be interesting to hear it. I do agree that if we get to $500 a barrel, things will be very different, and that if we got there in the space of three or four years, attempter’s apocalyptic musings would be more or less on target. Is it likely?

          2. attempter

            You didn’t mention the effects of all the cancelled or delayed oil projects.

            http://attempter.wordpress.com/2009/06/03/timeline/

            When the classical Peak Oil effect (where demand tries to exceed supply) takes place, that’ll probably be a big part of the cause.

            The last I heard, we’re talking 2013-14 at the latest for that.

            Of course, the imperatives of democracy and freedom are even more pressing. Every unemployed, physically able person can start work tomorrow (well, once the ground thaws), as an autonomous food grower. For the first time in history, every single person who’s willing to work can be prosperous as his own boss. There’s more than enough land.

            So why again aren’t we doing it? Why don’t we start tomorrow?

          3. leroguetradeur

            Ever tried growing your own food? You need a surprisingly large area. In addition, you have seasons going against you – there is what in the UK was always called the ‘hunger gap’ in the early spring. Keeping one or two animals is no fun, and not cheap. But you have to have animals for fertilizer, and for meat.

            It can be done by some skilled and dedicated people – its basically subsistence agriculture or smallholding. But its backbreaking work and its very low living standards. Ever dug up a plot of potatoes? You don’t want to do it with a bad back or when you are 70. And in the end, you cannot grow it all. Small quantities of wheat or rye for instance, make no sense.

            You can get a sense of it in a part of rural England I sometimes travel to. There are still alottments there, strips of land leased by the local authority to people who want to grow. Probably however only a tiny percent of the residents take them up. There are stands outside some houses where produce is sold. Again however, try using them instead of the traditional markets, and you’d not get far. There is just not enough of it, and not enough variety, and in the winter they simply close down.

            What does seem to make sense in the apocalyptic scenario is the way people in England farmed in about 1800 before the enclosures. You had mixed farms, cattle, maybe sheep, horses for labor, a fairly sophisticated rotation system to preserve fertility of the soil. Very labor intensive however, and with agricultural wages very low indeed, but with extensive common land available. You can get a sense of how this was, and how the standard of living deteriorated with the enclosures, from Flora Thompson’s books (written much much later of course).

            I think a more likely scenario in the forseeable future is the continuation of existing farms, the preferential funnelling of oil supplies into farm machinery use. This means that something else would have to give, and that might be suburbs, malls and autos. Mass movement of population is implied, back to the cities. One can just about imagine that.

            The thing that its very hard to see is the social environment against which it happens. It must depend a lot on how fast it happens.

            You asked in one comment if I thought food comes from supermarkets. Of course not. But if you have to rely on what is grown within 10 mi8les, in Northern Europe, you don’t live well. Its not an argument against a low oil agriculture. It is an argument against thinking that the form this agriculture will take will be self sufficiency. I greatly doubt this will happen, any more than it did in 1900, when we also had low energy agriculture. We then had markets and market gardens rather than self sufficiency, and I think we probably still will.

            You can get some insight into this in the area I visit in the UK with organic box schemes. These start up every now and again, and the idea is that a grower supplies houses with a box of what he has. They make do with it. The problem is parsnips. It always turns out that at one point all the grower has is parsnips, or beets, or green beans, whatever, there just is not enough variety. So he buys in, and pretty soon he has proved to himself that there are two occupations, the grower and the retailer. Not to mention the wholesaler, who he increasingly comes to rely on for produce. And in the end, he realizes there is an unavoidable choice between growing and retailing, and he goes back to growing, and sells to the wholesaler.

            This is a basic economic issue and I doubt it will go away.

          4. attempter

            Ever tried growing your own food? You need a surprisingly large area. In addition, you have seasons going against you – there is what in the UK was always called the ‘hunger gap’ in the early spring. Keeping one or two animals is no fun, and not cheap. But you have to have animals for fertilizer, and for meat.

            It can be done by some skilled and dedicated people – its basically subsistence agriculture or smallholding. But its backbreaking work and its very low living standards. Ever dug up a plot of potatoes? You don’t want to do it with a bad back or when you are 70.

            I suppose that debt slavery will involve backbreaking work and low living standards.

            By contrast, working for ourselves, in democratic freedom, will be a much higher living standard, however physically hard the work. And it’s only under capitalism that 70-year-olds would still have to work in the fields. And the problems you describe are endemic to capitalism, not to economic democracy. A system organized along human lines wouldn’t have such problems. That’s just like the discussion the other day about Hardin’s “tragedy of the commons”, and how it’s a Big Lie.

            Sure, it’s hard figuring out how to make any of this work under these adverse conditions. But that’s no objection to the idea itself, but another count on the criminals’ rap sheet. It’s never anything but crime which obstructs or misdirects humanistic attempts.

            I personally have only had a small garden plot. That too was often back-breaking work. I lift weights and am in pretty good shape, but digging out rocks from the infill to prepare the spot sure gave me a workout. So I’m familiar with the work.

            I’d cultivate far more ground if the land hadn’t been stolen. I’d be a farmer if the land hadn’t been stolen. As it is, I plant and harvest on all the ground I can, no more and no less.

            Since I can’t redeem the stolen land in any other way, I’m trying to figure out how to do it politically.

    4. Tim Goswell

      Why are car accidents bad?

      Someone made that statement the other day and I’m still puzzled by it.

      Get quantitative and get specific, otherwise one really cannot say what you are talking about when you say “a car accident is bad”.

    5. Dan Duncan

      Whether or not one agrees with leroguetradeur’s harsh assessment, he does point to an interesting phenomenon.

      The vague, content-free mixture of unsubstantiated assertions is “hypergraphic” writing. Also called “The Midnight Disease” by Harvard neurologist Alice Flaherty.

      Hypergraphics tend to be hyper-philosophical or hyper-religious. Their writing is marked by an irresistible urge to string together abstract and interchangeable words.

      Take a good prefix, like “pseudo”, “neo” or “post” and combine it with a robust historical adjective, like “fascist” or “feudal”, tack on a noun picked up in a collegiate classroom…and you’ve got the core of Blog Zombie, hypergraphic prose:

      “The pseudo-capitalistic hegemon is embarking down a path of post-feudal servitude.”

      The interchangeability, of course, allows the Blog Zombie to come back strong the next day with:

      “The neo-Marxist Leviathan trudges down the post-apocalyptic highway of pseudo-serfdom.”

      Yes, it’s content-free and nonsensical, But it’s fresh! Plus, the writer appears to harbor quite the intellectual cache, so he “must be taken seriously”.

      As time goes by and those posts, how they do fly…

      The gravity of this gravitas serves as a grave attraction for other Blog Zombies to come and congregate…

      Cue some Oingo Boingo and an Evil Laugh….

      It’s a Dead Man’s Party!
      Who could ask for more?
      Everybody’s comin’, leave your body at the door
      Leave your body and soul at the door . . .

      1. Tamara G Ecclestone III

        Totally agree with you in defending laroguetrader and the status quo against all these whiners. Who cares about trivia such as war, inequality, social injustice, etc? All that is so passé, so yesterday, why can’t they put these things in perspective, see them as “interesting phenomenon”, as you put it, but nothing more, certainly no big deal? The poor will always be with us.

        Or better still, why can’t all these poor bastards just be born rich, like you, me, and leroguetrader, instead of showing up in industrial parking lots wearing shabby coats and dirty hats. I have a miles-wide estate large enough to house multiple golf courses, and complete with horses who shit healthier than 90% of those filthy peasants.

        1. leroguetradeur

          I care deeply about war, poverty and social justice. I was not born, and am not now, rich.

          That is exactly why I want understanding, specifics, evidence, not rhetoric. I actually want to do something practical about it. Evidence based politics, a new and interesting concept.

        2. Lidia

          Tamara! Conserve that shit. because it is gold. I read that traditionally the Chinese felt that it was discourteous to leave a dinner party without leaving a little fecal or urinary “contribution” to the cause.

        1. bob

          It’s dan. He really does light up any room he walks into. I continue to admire from afar his ability to lift the spirits of everyone he comes in contact with.

          I still love you dan.

    6. Lidia

      ay, yay, yay

      “today the goal is to permanently destroy as many jobs as possible. Those driven out of employment are intended to remain permanently so”

      The system, whatever that is, does not have goals. Who is trying to do this exactly, and why? What is the evidence?

      Solely in terms of “going back to the farm”… there are farms today where they don’t even have drivers for the tractors and combines: they drive themselves using GPS!

      Lerogue, have you ever studied high-school math? We are approaching what is called the asymptote. Infinite extraction. Infinite debt. Zero employment. These were supposed to be features, not bugs, of the system we adopted.

      1. leroguetradeur

        One can make little sense of this. Are you really saying that you expect an end point at which there will be no salaried paid employment in the US? Roughly what year, and how do you expect unemployment to rise on the way there?

        As to infinite extraction, presumably what is meant is the end of coal and oil and gas? Minerals too, perhaps?

        I would like to be clear. In many ways the world attempter envisages, small, local, no shopping malls, cars, is a more attractive one than the world we live in today, if we can keep medical advances and communications. That is not the issue. The issue is getting specific about what will happen and when in terms definite enough that we can tell whether what is being asserted is reasonable.

        attempter would benefit a lot from the process – his or her ideas might turn into something that would be really convincing, if they were spelled out, and could take forms different from any he or she has so far imagined, as the detail gets worked through.

        1. Lidia

          Why do you say “one can make little sense of this”, when it is you who can make little sense of it? Why don’t you say what you mean?

          I am not saying at all that there WILL be zero employment or infinite extraction… just that that is the MATHEMATICAL progression set forth, in stone, by our adopted capitalist precepts. The system will break at some point before then, but that doesn’t mean that I have mistaken the system’s trajectory, it just means that humans will not be able to withstand what the trajectory comports. Two entirely different things!

          Providing work is not the point of capitalist enterprise; the less work it provides, the better, as far as the bottom line is concerned. The fiduciary duty is to the bottom line.

          Then you have the mechanism which by which excess production is set aside (correct?) to use as seed capital for more production, which in its turn sets aside more capital, and so forth. This is an exponential process. The more capital is set aside, the more MUST be set aside in the next round, ad infinitum. But the REAL resources which must fuel the production are NOT infinite, so this will break down at some point. The link to debt is that (as far as I can tell) debt is the expression of overshoot: it’s the expression of how far ahead the exponentially-driven monetary system is ahead of the exponentially-driven real extraction rhythm. All the debt that is out there is a claim upon future extraction of real resources!!

          You have to consider the thermodynamics. Nothing is created or destroyed. Capitalism does not create wealth; it can’t create wealth. It can only shift resources around in space and time, and it does that with a troublesome effectiveness.

          The extra 5% or 3% growth most economists have come to expect has to come from within the system. But the system, composed of our earth and sun, is finite. People are looking for a level of growth that has always been impossible; it’s just that its impossibility was covered up by sleight-of-hand false accounting that has never recorded conquered lands, peoples, and natural resources as true inputs to its system. Now that the capitalist system is global, there’s no more “elsewhere” from which to get inputs. China was the last significant “elsewhere”, as I see it.

          1. leroguetradeur

            Its completely confused. The thing that would help is to stop trying to think metaphorically and in images about this stuff and to get focussed on real historical quantifiable events.

            You think that you can transfer arguments from one field to another. Thermodynamics, for instance, has nothing to do with economics.

            To figure out whether your ideas are valid, or even what they are, take some historical period, for instance 1850-1950, identify the quantities you are trying to think about, and show how they changed over time. Now that would be proper thought, and any trends which emerge will be interesting ones. This is what thinking about this stuff means. Otherwise you are just at the level of literary criticism. This is history, and sometimes its science. It has to be testable.

            Take something simple, unemployment. Has it risen, how, correlated with what over the period? i think actually its moved in cycles, and the present cycle will come to an end like the others and employment will rise again. This may be wrong. Prove it – plot the data and show us. Don’t just flail around with literary analogies, they show nothing.

          2. Skippy

            @leroguetradeur said… You think that you can transfer arguments from one field to another. Thermodynamics, for instance, has nothing to do with economics.

            Skippy here…for once we agree upon something, Thermodynamics is an empirical science, where as Economics is a cult full stop…it does not satisfy scientific theorem. To whit it is not unlike Catholic Catechism as a provisional, “reference text” and that it teaches Gnosticism ( http://en.wikipedia.org/wiki/Gnosticism ).

            Skippy…consult your market screen for further electron valued updates, to your over the crack in the ground vapors, bespoke by sexually untouched females. The pedophiles vouch for the authenticity, never fear your wealth creation opportunity is gifted by the gods!

  6. Positroll

    “The following experts have – at some point during the last 2 years – said that the economic crisis could be worse than the Great Depression”
    You might want to add the qualifier “for the US”. Much of the world has left the recession behind it by ( / for?) now. Also, thanks to the modern welfare state, the human suffering was and is a lot smaller this time around, especially in Europe – an unemployed Spaniard still has medical insurance, food and a roof above his head …

  7. Jim the Skeptic

    Post: “Specifically, many economists credit World War II with getting us out of the Depression”

    World War II did not get us out of the depression. It provided full employment until it ended, that was all.

    But during the war 8 million men went into the service and a large number of them were sent to war zones where there was little opportunity to spend their pay. That pay was sent home to be saved for later use. There was full employment in the country to produce war material and women entered the work force in large numbers. Tires, gasoline, sugar and many other items were rationed. Between 1942 and 1945 the public could not buy new automobiles. The personal savings rate reached about 25% in several years during the war.

    Federal income tax rates were very high leading up to the war and then got even worse.
    But the government needed even more funding for the war, so it sold war bonds to the public. The population had been burned badly by the banks so I believe that most of that personal savings went into a mattress or into government war bonds.

    When the war ended most of the men in the military were discharged. They went home, married, and set up a household. They and their wives accumulated personal savings were spent buying durable consumer goods. The government could redeem war bonds because the tax rates had not been reduced but war expenditures had been reduced. That consumer demand caused factories to hire more employees to raise production. Those were the jobs for the men recently discharged for the military.

    It was the accumulated savings which was spent over a short period which finally lifted the Great Depression.

    Wars leave a trail of death, destruction, and debt, not prosperity. Economists should be better educated.

    1. sherparick

      But the war created those policies of forced saving, along with 16 years of pent up demand and deferred investment, that created the long post-war boom. And the devastation that the war wrought with both our allies and former enemies (along with the Soviet Union’s communist autarchism) meant that the U.S. business and workers had very little global competition for 20 years. Contrary policies have been followed the last 10 years, when while conducting war, when a Movement Conservative Government cut taxes and tried to encourage a consumption boom based on the real estate while conducting small imperial wars on the cheap (in money and resources, if not human lives) abroad. And from the narrow confines of the elite, it has worked wonderfully, as huge fortunes have been made both in Finance and the wars (See the company formally known as Blackwater and Halliburton on war contracting profiteering and all the wealthy former executives of Countrywide, Washington Mutual, Indy Mac, Wachovia, AIG, Citibank, etc.)

      Because of unemployment compensation, food stamps, and other New Deal and Great Society programs, this slump is not as bad as the Great Depression. However, we may be treated to interesting experiment as the new Congress tries to shred these programs while further deregulating business and finance. In 1929, as Joe Stiglitz points out, the crash of 1929 came on top of the long extended depression in U.S. agriculture (a bit of family history is my maternal Grandfather lost the farm my Mom was born on in 1926 due to collapsing commodity prices) and the then world’s second largest economy, Germany, had gone into a deep recession in 1928. Add in bad, austerity driven, policies in the U.S., the U.K., and Germany following the 1929 crash and you find the far more harrowing condition of the U.S. and the world described in Schlesinger’s “Crisis of the Old Order” (first volume of the “Age of Roosevelt.”)

      The corruption of our elites is cultural and result of a decay in old values and principles and their mental capture by a group of memes and narratives that coincidentally justifies them making and keeping ever more fabolous wealth with little concern for the public weal. Here is a picture of an elite that is both clever and stupid at the same time, and terrible combination of of arrogance and provincialism. http://www.politico.com/news/stories/1210/46839.html

      1. Jim the Skeptic

        sherparick says: “But the war created those policies of forced saving, …..”

        Sir, war does not create policies of forced saving. I have lived through the Korean War, the Vietnam War, the Gulf War, the Iraq War, and the war in Afghanistan, none of which required rationing or forced saving! In fact they required no sacrifice except for those who served in the military and their families!

        ‘Pent up demand’ is economic speak, without a source of income to spend, ‘pent up demand’ is meaningless. ‘Deferred investment’ is more economic speak, irrelevant during depressions or Great Recessions, corporations will not invest in new plants or employees until they have more customers than they can currently service. I agree that after the war we had little global competition, but we also had few global customers until we had injected billions of dollars of aid into Europe after the war. If that caused our prosperity then we could have saved a step and just paid ourselves!

        I have become totally disgusted with ‘economic speak’ and the explanations which explain nothing. This nonsense has become dogma, handed down to students who must regurgitate this tripe or fail the class. At one time I thought it was otherwise harmless, but I now regard it as ‘COVER’ for the elite to impoverish the rest of us.

        My point is that it was the personal savings accumulated over years and being spent over a short period of time which caused the recovery from the Great Depression.

        Without the rationing of WWII, the personal saving rates would not have reached 25% during some of those years. And the recovery from the Great Depression would have dragged on for years after WWII, as those discharged men returned to unemployment!

        If spending oneself into debt to fight wars was so rejuvenating then we should be in a wonderful position now. Alas that has not been our experience.

        Wars leave deficits not prosperity, do a little research on the kings of England and their various problems with funding wars.

        And you can extend that logic to other forms of government spending such as trying to sustain demand.

        If your point was to defend “many economists” then just say so, and we will agree to disagree!

        1. emca

          While I agree with most of your opinion (more specifically though guardedly that War in and of itself does not end economic woes), I have a little difficulty in excepting the statement,

          “If that caused our prosperity then we could have saved a step and just paid ourselves!”

          Being in a dominate position industrially, while not causing our prosperity after War, certainly did aid it. WWII effectively eliminated or significantly reduced the productive base of many European (and other) powers of the time. The U.S. was spared such calamity. No one bombed Chicago.

          That the U.S. didn’t suffer industrial (and infrastructural) devastation and Europe did, would make it imperative Europe spend on reconstruction. The U.S. conversely had little to rebuild (outside transition which is part of the argument) and could profit the consequences of European folly of two major wars; the ideal customer for our own super-charged, post-war industrial capacity.

          This is not personal consumption as such, which as you argue would have been depressed, but reconstruction of a more fundamental base of infrastructure and industry.

          In this same vain the Marshall Plan was a brilliant investment. Not only could it be seen as a humanitarian gesture, but one that would profit the very investing nation, who industrial productivity was unequaled.

          In other words, paying ourselves when heavy self-investment had just occurred, when the need, demand,consumption and numbers thereof was in Europe where investments were lost, made little sense. Without want there is little demand and in post-war reconstruction, Europe had much want, therefore demand, unrealizable in the U.S.

          1. Jim the Skeptic

            I would agree that Europe paid a much higher price for WWII. The Marshall Plan was a very good investment, not because of the aid to our economy but because it lessened the liklihood of another war, 23 years later. We paid a high price in blood for that peace, some additional billions of dollars was a cheap investment.

            But post war aid did not get us out of the Great Depression. At best we were paying ourselves with our own money. At worst it was a financial drain.

            At the time, it may have made some sense to sell the foreign aid including the Marshall plan as an additional stimulus to our economy. But unfortunately, we have come to believe our own propaganda!

            We need to understand the end of the Great Depression if we want to learn from it.

            I sarcastically refer to our Great Recession, but it has been obvious for some time that we are rhyming with our history. The social programs started in the Great Depression have helped us deal with some of the worst problems. (Unemployment insurance, Social Security, insured bank deposits, and many more.) So it doesn’t look like same, but as has been said of the Great Depression, it was not too bad if you had a job.

            If the ‘powers that be’ think that they can paint this as history because of some pitiful growth in GDP or some fabricated rise in prices on the stock markets, then they are sadly mistaken. This is about JOBs, JOBs, and JOBS. We can not accept these levels of unemployment and under employment as the normal.

    2. jest

      A lot of it also had to do with restructuring of the economy, as well.

      I believe this was roughly the era when the US finally switched from being an agricultural economy, to one dominated by industry. No analogous switch is on the horizon, which is why this is so unsettling for everyone.

      I agree that the war was more of a catalyst, than a cure.

      George made a good point, as always, that the two present wars haven’t affected the economy at all, compared to WWII. But I’d imagine that’s because the economy of war then and now are totally different. Just look at the differences in how the wars were financed, for instance. If our troops need new uniforms today, how many would you expect would be made here with American labor?

      With the threat of Dictator DeMint stealing the White House in 2012, you know the threat of bombing Iran or North Korea for economic growth reasons will likely be on the table, because it “worked” so well in the 40′s. That’s what really scares me about all this war talk from David Broder, and the like.

      I guess there’s no problem that a war or a tax cut can’t solve.

    3. reason

      Yes – 100% correct. I’ve been repeatedly pointing this out (that forced savings during the war rebuilt household balance sheets), but nobody seems to get it.

      1. Jim the Skeptic

        I have had the same experience.

        The ‘powers that be’ and their supporters have too much invested in the widely accepted explanations.

        They can not avoid the judgement that their system inflicted the Great Depression upon the population. But they have avoided the more damaging judgement that the government and the population ended it by simple conservative means.

        Their explanation that WWII ended the Great Depression is a appeal to sorcery, magic, voodoo.

        There are none so blind, as those who WILL not see! :^)

      2. Stelios Theoharidis

        To add to a good description of the reasons for US economic growth after WWI. The general lack of international competition I believe is a major factor, forced system of savings makes quite a bit of sense as well, which is new to me. In addition to that:

        1. Marshall Plan was a stimulus program for Europe, but a significant portion of this funding was spent on goods and production equipment from the USA as it was the sole competitive producer. As the European economies developed they consumed more American goods.

        2. Lack of competition for major American firms and relative strength of Unions ensured that the economic benefits of manufacturing growth would be distributed amongst the population, stimulating domestic consumption.

        3. GI Bill allowed for a significant portion of otherwise uneducated Americans to enter into a pathway for upward mobility. I don’t think the benefit to US human capital, business development, and innovation can be understated.

        3. Federal-Aid Highway Act, Rural electrification act, other infrastructure spending ensured that economic growth in core US regions was extended into the periphery. (To note: anyone that says the west was built with rugged individualism and not federal money is sadly mistaken, much of rural America was a third world country at the time).

        4. Cheap resources from developing countries and a military, corporate, and intelligence apparatus to ensure that, nationalizing / democratic / distributive influences would be suppressed.

        1. Jim the Skeptic

          Stelios Theoharidis says: “…”

          For item 1, as I stated in comments above the Marshall Plan did not help us out of the Great Depression. At best we were paying ourselves to produce goods for Europe. At worse it was a financial drain. Neither is a way to set up a regenerative system which feeds on itself causing continuing improvement.

          For items 2, 3, and 3, I would agree with your statements if they were applied over the next decades after WWII. But not as a factor in ending the Great Depression.

          For item 4, that did not get us out of the Great Depression and I will leave it at that.

          I think that our experience with the Korean and Vietnam Wars tends to mislead us. We saw the economy heat up as those wars ate up war materials. What we could not see was that our economy was on a very strong decades long recovery, for reasons which you gave.

          1. Jim the Skeptic

            Oops. I wrote “What we could not see was that our economy was on a very strong decades long recovery, for reasons which you gave.”

            I should have wrote “What we could not see was that our economy was in a very strong decades long improvement, for some of the reasons which you gave.”

            That more clearly states my position. :^)

    4. Jim the Skeptic

      I have one additional thought as to what brought an end to the Great Depression.

      From: http://www.taxfoundation.org/publications/show/151.html
      Look at this these tax brackets from 1931 to 1951.

      Year Tax Rate Over $4000 Highest tax rate Income over
      1931 3% 25% $100,000
      1932 8% 63% $1,000,000
      1936 8% 79% $5,000,000
      1941 17% 81% $5,000,000
      1942 25% 88% $200,000
      1944 29% 94% $200,000
      1946 26% 91% $200,000
      1951 27% 91% $200,000

      Note the high tax rates for income over $200,000 after 1941. Those benefitting most from society were paying the most and not by some trivial amount. Those at the bottom were paying something, but nothing like those at the upper income levels. INCOME WAS BEING LIMITED TO THAT WHICH WOULD BE IMMEDIATELY RECIRCULATED INTO THE ECONOMY INSTEAD OF BEING SET ASIDE FOR WHATEVER REASON. That limitation in and of itself may have been a large contributing factor in the recovery from the Great Depression.

      Perhaps this information complements studies done by economics professors Saez (UC Berkeley) and Piketty (Paris School of Economics) as mentioned in the post.

      Rationing during WWII meant that some income was set aside anyway. But after WWII was over rationing was ended and automobiles could be purchased by the public for the first time since 1941. Manufacturers ramped up production to satisfy this new demand.

      The high priests (economists) will complain that money was being diverted away from investment but that doesn’t seem to have had a negative effect!

      This tax distribution continued to some extent until 1981 when there was a 18% bracket for income over $4,400 and 70% for income over $108,300. (Not adjusted for inflation.)

      In 1982 there was a 16% bracket for income $4,400 and the top bracket was 50% for income over 41,500. (Not adjusted for inflation.) This is about the time that middle class incomes started to stagnate.

        1. Jim the Skeptic

          Thank you.

          The tax information is from:
          http://www.taxfoundation.org/publications/show/151.html

          The Personal Savings Rate information is from:
          http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=58&Freq=Qtr&FirstYear=2008&LastYear=2010

          Here is a shorter link to the Personal Savings Rate:
          http://www.bea.gov/national/nipaweb/SelectTable.asp?Selected=Y
          Then select Table 2.1 Personal Income and its disposition
          Then select Annual as the Series and 1929 as the First Year

          Line 34 is Personal Savings as a percentage of disposable personal income.

          Here is the Personal Savings Rate for 1940 to 1947:
          1940___1941___1942___1943___1944___1945___1946___1947
          5.7____ 12.2___ 24.1___ 25.5____ 26.0___ 20.4___9.6_____ 4.2

          Notice that in 1946 the savings rate plummets and continues down in 1947 as the spending begins.

          1. Doug Terpstra

            Truth and solutions are so well hidden in plain sight that it takes a determined skeptic to find it. Well-done.

            For ushering in this present high-tech dark age we can thank the collusion of stink tanks and corporate media, including so-called public media (P)BS and (N)PR, who keep the obvious hidden. This stuff should be on 60-Minutes, Frontline, etc, with Bernanke, Geithner, Rubin, Orszag, and other aristocrats and their hangers-on in the hot seat. Instead, it is all devilishly censored under deep, dark snowdrifts.

  8. rd

    I live in one of the most affordable housing markets in the US but it has not gone up or down much in the past decade and our unemployment is around 7.5% with only a small rise in foreclosures above the historical base level and normal levels of vacant housing stock. The reported sales in the newspaper based on county records often have weeks where the highest priced home sold was less than $500k. One of the major reasons that our house prices are low is because we have high property taxes (about half of our total monthly payment).

    As a result, I use our market as a barometer of the true cost of building a house. In our market, developers can develop a half-acre lot, build an average house (@2,500 sf), and sell it for less than $250k (some zip codes @ $200k). I think this should be considered the floor price for housing markets in the US. House prices above this price range is essentially “goodwill” that can vanish overnight. As a result, there is still plenty of room for many of the large housing markets to fall further if their local economies don’t pick up.

    On the income and wealth inequality issue, I think it is highly likely to be part of the causes for a financial crisis since it directly impacts the ability of the average person to function in the economy.

    I think that one of the primary reasons that the bailouts are not achieving their goals is that most of the dollars are focused on maintaining income and wealth inequality instead of getting the money circulating through the economy.

    1. Cullpepper

      With respect, I think you’re watching a false signal… consider the components of that 2,500sq/f home. Where were they manufactured? How far were they transported? How much “cost” was saved by using cheap overseas labor, currency imbalances, and irreplaceable fossil fuel?

      I think you’re only accounting for financing (inflated, globally) and labor (depressed globally).

  9. Paul Tioxon

    What is the private debt, the spending fueled by credit cards, Helocs, cash out refinancing of not only homes, but 1-4 unit investment apartments of the small landlord middle class. The cash out refinancing of the more affluent, but not quite filthy rich who own 20 unit and up apartment houses.
    Car loans, student loans, dental and breast enlargement plastic surgeries by GE Money at the docs office? The private debt, while not the government projects, is an investment in material culture of consumerism. The private business debt, the commercial leasing of everything for small home businesses to small offices and shops.

    If you just look at public debt, and what impact that has on getting the economy going, you are not talking about the real spending and the truly enormous factor, the private sector.

    If the debt to GDP ratio is to be believed, and it seems reasonable to me, then a $14.3Trillion economy with 350% debt from the private sector is $50TRILLION. I personally observed the residential mortgage market balloon from less than $1T to $4T plus in a few years in the beginning of the decade. The FDIC chart shows the mortgages outstanding going up 900% from 1980-2005. What it does not reveal is that although mortgages outstanding may been a constant, much of the debt was churned through the refi machine of mortgage brokers, and of course sold for securitization.

    http://www.fdic.gov/bank/analytical/regional/ro20062q
    /na/images/BreakingChart01.gif

    So, of course the money being thrown at the problem by Obama does not have the critical mass or velocity necessary to move us out of the ditch. It pales in comparison to the $50T in private debt that drove the economy in the first place.

    1. Siggy

      I think you’re catching on. Ask the next question; Who created all the debt? It’s not the borrower that matters nearly as much as the lender who materialized the loan in the first place. Profligate borrowing requires the acquiesence of profligate lending and it is the lender who controls the initiation of the profligacy. What has failed is the assumption that the regulatory agencies would do their job. And so we have a triptych made in hell of a fiat currency, fractional reserve banking and regulators who do not regulate.

      Comparisons of this our Great Recession with the Great Depression are looking at the wrong clock. Each event stands on its own even though each shares a common thread, excess debt created by a fractional reserve banking system and the abrogation of regulatory responsibility. Crap think economics dressed in calculus and regression models has been used to clothe acts of blatant fraud and here we are dithering about how to compare this mess with the earlier one.

      This time it begins with massive corruption and fraud. It is also ending with massive corruption and fraud. Let us know when you benefit from the Ben Bernanke’s QE. When that happens we can all sing Happy Days Are Here Again and to hell with Koombuyah. Better yet who will revive the great american musical with a remake of Guy’s and Dolls?

      1. Lidia

        Siggy, I think you’re catching on. ;-)

        Now take some of your reasoning one step further => capitalism itself is the real-world analogue of fractional-reserve lending, and impels an exponential increase in resource extraction much the same way that fractional-reserve lending impels an exponential increase in debt.

        Now, the fiat money system is fake, but it still wants to re-materialize; it still wants to buy houses and cars and jet planes and caviar, all of which are represented by dollars even if the dollars are conjured up out of thin air.

        The way I see it, there is a link between peak extraction/waste and peak debt. One is the inevitable expression of the other.

        1. leroguetradeur

          “Now take some of your reasoning one step further => capitalism itself is the real-world analogue of fractional-reserve lending, and impels an exponential increase in resource extraction much the same way that fractional-reserve lending impels an exponential increase in debt.”

          Lidia, this will take evidence. Exponential is a mathematical term. Draw a chart, do the correlations, show us. Otherwise its just a rant.

          Is capitalism a real world analogue of fractional reserve lending? I have no idea, I have no idea what this means or what it would show if true.

          “Now, the fiat money system is fake, but it still wants to re-materialize; it still wants to buy houses and cars and jet planes and caviar, all of which are represented by dollars even if the dollars are conjured up out of thin air.”

          Now we have human motivations apparently being ascribed to an entity, the fiat money system. This system wants to buy things? People may want to buy things, the fiat money system? Its just nonsense.

          “The way I see it, there is a link between peak extraction/waste and peak debt. One is the inevitable expression of the other.”

          Put it in verifiable form and it might mean something. But I think it is probably false. Extraction, of what? What is peak debt? Put two numbers on them, explain how to measure them, plot one against the other, and show us the trends.

          What one sees in all this is the death of education in America. People have graduated from school or college without knowing what thought is. It must be post-modern.

      2. reason

        I noticed that it was briefly hinted at in Robert Reich’s paper but not followed up on – limited leverage and limited liability are a deadly combination. Goldman Sachs created a limited liability subsidiary to sell dodgy paper during the recession. The dodgy housing loans were made by limited liability companies set up for the purpose. These companies are largely outside the regulated sector. But with a simple rule – limited liability companies can not borrow more than x times their own capital (e.g. 2 or 3) – or loose their limited liability status – you could make this game uneconomic. And/Or as Steve Waldmann has suggested – change the tax structure to encourage equity and discourage borrowing.

      3. Paul Tioxon

        Make no small plans, bring back boffo box office blockbusters like a remake of The Wiz. You know, instead of Dianna Ross quantitatively easing on down the road, we do a white version, maybe put a young ingenue songstress, I’m seeing Taylor Swift.

  10. rkka

    Could be worse. Could be Latvia. The Latvian statistical service just released vital statistics for 2010. Deaths exceed births by nearly 50% (Yes, fifty. Five. Zero.)

    http://unity.lv/en/news/218418/

    Unfortunately, facts like this didn’t make it into the WSJ’s glowing article about “The Latvian Way” out of a depression.

  11. Lilguy

    This article by George Washington is useless–even if it has a large element of truth. All he has done is rack up all the negative information (of which there is no dearth) about the economy. Someone else could do the opposite with equal, but opposite, effect (& still useless).

    The issue is how we can improve our well-known weaknesses while preserving the areas that have improved.

    Washington’s act is getting more than a little old! Yves–A lot less of this guy would serve you better.

    1. chad

      Good observation.

      btw, where’s those mercenaries hired by BP on the LA coast hiding the oil from the Deep Horizon blow out? Remember the pics? Oh right, they never existed.

      Less Washington would be a good thing.

    2. lambert strether

      lilguy writes:

      “Someone else could do the opposite…”

      No doubt, so:

      1. Why don’t you do it?, or

      2. If it’s all that easy, there’s probably some cheerleader for the “free market” who has already done it. There’s no shortage of demand for work of that kind, after all.

      Absent any real value add from you, either way, one has to conclude that Washington is right, based on the preponderance of the evidence.

      Shorter lilguy: LA LA LA I CAN’T HEAR YOU!!!

      1. Lilguy

        For cheerleaders, try Obama, Geithner, Summers, & almost anyone else associated with the Administration. Others can be found in the business sector–even the financial sector!

        My point is that this listing of quotes is a waste of time, whether cheerleader or jeerleader. Let’s get on with some reasonable solutions (no, not Krugman) that can fix both our current recession (or coming out of recession) and our debt/deficit situation.

        Washington offers no help in this–and never has nor will.

        1. Terry Mock

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          By delivering the “holy grail of sustainable decision making” – a universal geometrical algorithm that balances the needs of people, planet and profit – The SLDI Code™

          The 21st century will overturn many of our previously-held assumptions about civilization. The challenges and opportunities land development stakeholders now face – to fulfill the needs of society and achieve a favorable return on investment without harming the environment – have vast implications on the sustainability of our communities around the world… http://www.triplepundit.com/author/sldi/

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          http://www.triplepundit.com/2010/12/designing-big-wheel-civilization/

  12. b9

    Whether WWII “cured” the Great Depression is debatable, but what is not, according to Emmanuel Saez’ data on income inequality, is that the war cured income inequality almost overnight (in 1942). Or at least it dropped during the war dramatically. Hence within the beltway persists the thought that we need an “enemy” to function… although 9-11, the “Pearl Harbor of the 21st century,” and the Iraq/Afghanistan war(s) don’t seem to have done the trick….

  13. Mickey Marzick in Akron, Ohio

    I don’t know if such “statistical” comparisons between current conditions and those back in the Great Depression are really that useful because there were such significant differences. Draw all the parallels you want it but it is the latter that matter.

    For example, the depression was largely confined to agriculture and manufacturing with unemployment in both sectors most acute. It signified that the transition from agriculture to manufacturing [machinofacture] was complete. The current depression signifies that the transition from manufacture that began in the late 60s-early 70s in most advanced capitalist political economies to “services” is complete. Whereas there was a dearth of foodstuffs and goods accompanied by starvation/famine there does not appear to be either this time around. If anything, there is a surfeit of goods [postscarcity] with insufficient aggregate demand and “excess capacity” absent free-flowing credit. Income maintenance schemes – unemployment insurance benefits, foodstamps/WIC, and Social Security Outlays – have done much to mitigate the worst effects of this downturn. At least for now. Iron-heeled AUSTERITY may replace the velvet-gloved one in the near future but that remains to be seen. The deflation witnessed during the Great Depression has been replaced with inflation – the quantity/volume purchased has decreased while prices have remained the same. Indeed, price increases in some industries have occurred and consumers are paying more – not less. Have any bankers jumped out of windows this time around or accepted responsibility for doing God’s work on earth?

    What really seems to be missing this time around is the outlet for investment – the engine of growth. We are bludgeoned with statistics that corporate America is sitting on piles of cash and that the fortunes amassed by the upper 5% are sidelined as well. Blame uncertainty if you like but the “outlet” for investment simply isn’t there… The great investment boom in renewable energy has yet to occur? Why? The writing has been on the wall since 1973!! The days of cheap oil, if not peak oil, are gone. This country was certainly more energy independent back in 1932 then it is now. Coal, of course, figured more prominently in the economy/society than oil. The great energy/auto/housing/suburban boom had yet to occur. Such a confluence of forces does not appear on the horizon. Perhaps they are there but I don’t see them. If anyone else does please enlighten me.

    Equally lacking and even more obvious is the lack of forceful leadership. FDR may have had his shortcomings but compared to what has passed for leadership for much of my adult life [1970-2010], there is no comparison. Even if “history” has embellished the accomplishments of the Roosevelt years, Ronald Reagan will NOT be treated kindly by historians in the years to come – unless the “market totalitarian” impetus triumphs and does a complete rewrite. And absent Raygun, no other figure comes to mind. Carter may receive more favorable treatment as time wears on, but his inability to move the country toward energy independence cannot be overlooked. No, sadly, what passes for leadership is sycophancy, bootlicking, and mouthing the party line, irrespective of its leftist or rightist posture.
    Lacking also is a viable opposition. Communists and Socialists to the left of Roosevelt were in the forefront of rent strikes and labor organizing efforts that made New Deal Reforms, however limited, more palatable to reactionary elites. Strategic default and walking away from upside down mortgages appear more isolated instances of protest, if not rational self-interest, rather than any coherent, organized opposition. And the banks even appear reluctant to pursue foreclosure vigorously…

    Since I wasn’t there during the Great Depression I can’t say how peoples’ perceptions differed from ours, if they did. But clearly, one senses that this country’s best days are behind it – not yet to come despite the cacophony from our leaders to the contrary. But is this “negativity trap” more perceptual than factual, intended to paralyze rather than mobilize? While the energy conundrum is daunting it is not insurmountable. The deficit is not nearly as serious as the austerians would have us believe, especially if you measure it against the total wealth [private and public] of this country instead of annual GDP – a useless statistic if there ever was one. Most households would measure current debt in light of total income and accrued assets over time not just annual income, etc. We are still a very wealthy country with abundant resources – natural and human. Statistical comparisons may be useful but if they reinforce the “negativity trap” and function to paralyze they are counterproductive. Nor does this mean we can sit on our asses and wait for the Great Awakening and/or the Great Collapse.

    This Second Great Depression can also be a time of Great Learning… It need not become the opening act to the despair and carnage that followed its predecessor. The end of American Exceptionalism holds much more promise for the entire planet than any empire ever could, no matter how benevolent we would like to think our turn at the imperial wheel has been. Just remember…

    It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only. [Charles Dickens, A Tale of Two Cities]

    Happy New Year!

  14. Brian Longley

    It appears ( to my limited powers of observation) that we could just as easily do what we did in the 1930′s, and rebuild without giving the money away as we are now. It appears it would be no more costly than it ever was, and it might actually work as opposed to what we have now, which is no work.
    We have no solutions because those earning (or skimming) have no incentive to create a solution to something that is paying them so much.
    Which will be first, a war fluffed up by jingo to distract us, and keep the troops from coming home, or the lynching of the profiteers? Which will be first, the recall of all our soldiers to become police, or the disassembly of the society?
    The status quo will remain until that percentage of the population is moved to action. Something every corrupt government on this planet fears. Something so terrifying to them they spend all their time spying on their own.
    Us.

  15. Ishmael

    inequality, social injustice
    ————————————–
    I reached that point in your post and got so teary eyed I could not read any more. You must be a refuge from Fire Dig Lake. Another Communist/Socialist who wants the govt to solve everything.

    Whaa, whaa whaa. If you have not figured it out the socialists have controlled this country over most of the last 65 years. They pushed through medicare as well as all sorts of changes resulting in an enormous unfunded liability. They passed unionization of govt workes resulting in another unfunded liability. They open the doors of the US resulting in the sons and daughters of the people who fought and died for this country not being able to find jobs. They defend a mass army of foreign aliens to pour across this country like a plague of locust. Expanded the police state into every area of our lives.

    With the communist/socialist govt it never big enough and we should ever expand it to take care of us.

    You will never learn!

    1. Hugh

      Republican Presidents held office for 36 of those 65 years. Two of the biggest expanders of government and debt were Ronald Reagan and George Bush. If Obama is a socialist, then I suppose George Bush must be one too. Obama is after all continuing virtually all of his policies. Explain to me also how real wages have remained flat for the last 30 years under all of these Communists and Socialists while wealth inequality has mushroomed to Gilded Age and pre-1929 levels. Or no, don’t bother. If you are so divorced from reality as your rant indicates you are, any reply would be just more of the same, lots of polemics with nary a fact to sustain them.

      1. Charles Kiting

        There is no reason to believe Republicans aren’t socialists. Military socialism versus price-control socialism is merely a quibble about methods of plunder; Reagan slid rather easily from one to the other.

    2. Doug Terpstra

      “They open the doors of the US resulting in the sons and daughters of the people who fought and died for this country not being able to find jobs. They defend a mass army of foreign aliens to pour across this country like a plague of locust. Expanded the police state into every area of our lives.”

      What planet are you from, Ishmael? Please explain how these policies and other travesties of rigged-market military capitalism are even remotely communist/socialist—and not fascist/corporatist. Have you been in a coma the last few years?

      Your take on reality is as muddled as a tea-bagger, revealing gaping ignorance of socioeconomic constructs in support of the very crony capitalists you so admire that have completely captured the US government.

      Yes, government is the problem, but it is precisely because the reaganite neoliberals have finally achieved their Contra-democracy coup. Wall Street money-changers and the MIC merchants of death now own our government lock, stock and barrel—all of its branches and major media too; and they are now in the process of privatizing the commonwealth, looting the public treasury, and inflicting the shock doctrine on the people.

      This is the very antithesis of socialism. Splash some cold water on your face, man, turn off wing-nut radio, and maybe do some serious reading. Your tribal worldview is utterly bass-ackwards and dangerously uneducated.

  16. KJMClark

    Sent this to Mish a year ago:
    “A comment at Economist’s View made me finish a bit of research I started a few months ago. The question was, what was the unemployment rate in the Depression, and how does it compare to today?

    My first hint was a reference that Paul Krugman put up a few months ago. This is “Labor in the Twentieth Century” by John Thomas Dunlop and Walter Galenson, by the Academic Press, 1978. The authors of the first essay, titled “America” are Walter Galenson and Robert S. Smith. There are two important points here. First, they say (p 26), “In the United States, the unemployment rate is defined as the ratio of those who want and are seeking work, but are without any sort of job, to all those in the labor force.” Second, on p 27, they have Table 1.12, “Unemployment Rates, Civilian Labor Force over 14 Years of Age, 1900-1976″. This shows the peak Depression unemployment rate as 24.9% in 1933. They cite Stanley Lebergott, “Annual Estimates of Unemployment in the United States, 1900-1950,” in “The Measurement and Behavior of Unemployment”, NBER Special Committee Conference Series no. 8 (Princeton, 1957), pp. 213-239 as their reference for the 1900-1950 unemployment rates.

    This reference is available online. The full book is at the NBER website, http://www.nber.org/books/univ57-1. (It might not be available to everyone.) The relevant chapter is a separate pdf, http://www.nber.org/chapters/c2644.pdf.

    This work doesn’t seem to have a handy definition of unemployment, but Table 1, on page 215, is very interesting. This is the table that shows the unemployment rate from 1900-1954. It’s titled “Unemployment, Annual Average, 1900-1954 (number in thousands of persons 14 years old and over)”. It also shows a peak unemployment rate in 1933 of 24.9%, under “Per Cent of Civilian Labor Force”.

    That suggests to me that the peak unemployment rate everyone cites for the Great Depression, 25%, isn’t really comparable to U-3. First, if Galenson and Smith are right, we make it much harder to qualify as unemployed, since we require someone to be “actively” seeking employment, as opposed to just “seeking” employment as in the past. Second, the earlier source makes it clear that unemployment included 14 and 15 year olds who were seeking work and couldn’t find it. I’m not positive, but it seems as though we start our statistics at 16 years old. This table at the BLS, http://www.bls.gov/news.release/empsit.t01.htm, seems to indicate that.”

    And, yes, one of the changes we made to labor laws during the Great Depression was to change the minimum working age to 16. In the 20s and 30s (and before), lots of 14 and 15-year olds had jobs. Imagine what their unemployment rate must have been.

    1. Charles Kiting

      Another thing that happened post-war was a campaign to convince women NOT to work. That only succeeded for about one generation or so. But it took a lot of people out of the job market very quickly and the reintroduction of women into the workforce took almost another generation so the economy was able to absorb them without shock.

  17. Hugh

    Worse than the Great Depression? Probably not yet, but there are a lot of similarities, the pre-cursor Ponzi economics, governmental bungling, strong deflationary characteristics. We even have some of the same players, like Goldman Sachs, for instance.

    We need to split this into two phases. In 1929, there was the Great Crash, followed a few years later by the Great Depression. We have had the housing bubble burst in 2007 and the meltdown in 2008. But we likely have another crash in the offing within US markets and one in international markets that could either set off the crash in our markets or follow the detonation of ours. Meanwhile the deteriorating fundamentals: housing/foreclosuregate, debt, high unemployment, even higher disemployment, and state budget shortfalls, as well as criminally bad, kleptocratic political, financial, media, and academic leadership, all indicate the conditions for another Great Depression are in place even before the crashes have completely played themselves out.

    One of the great drivers for major reform during the Great Depression was fear on the part of our elites that anything less would result in their being swept away by the growing revolutionary fervor in the country. Compare that to today. There is no real opposition in the country to the kleptocrats even after 30 years of their depredations. The elites don’t feel threatened and are arguably at a point where even if such a threat arose they would be incapable of reforming in the face of it.

    Indeed it is difficult to express how destructive, even self-destructive they have become. You could consider them like a horde of locusts. They will eat everything in sight until there is nothing left to eat. Then they will move on, and if there is nowhere else with food, then they will die. Now you could argue with locusts that it would serve their own interests and survival to be less voracious but this overlooks an essential fact. They are locusts. It is their nature to consume until there is nothing left.

    This brings me back to what I call my paradox of common sense. Our economy and virtually all of our public institutions are facing massive, systemic problems. If the people in power had the common sense to fix even some of the problems we now have they would have had the common sense not to let those problems multiply and exacerbate as they have. We cannot expect the people who created these problems to fix them, and, so long as they are left in power, we can only expect those problems to get worse.

    So if you say it makes no sense to destroy American jobs, blow wealth destroying bubbles, attack the social safety net, allow the nation’s infrastructure to deteriorate, or the health and education of its population to suffer, well, you would be right, but try explaining that to a locust.

    1. Doug Terpstra

      Excellent, Hugh. But of course we can forgive a horde of locusts for they know not what they do, but these perps are guilty without excuse and must be held accountable for grievious crimes. Attempter is correct that the fraud, theft and violence are far worse than GD1 because hindsight makes this disaster entirely foreseeable and preventable. These crimes are magnified by their duration and by malice aforethought. Unlike a plague of locusts these villains have wicked intent.

      But also as you suggest, we ain’t seen nuthin’ yet in terms of impact, where all the indicators are dire. The “fire-suppression” and denial are more effective and better coordinated, thereby ensuring a greater conflagration and backdraft at the next ignition event, consuming even the old-growth giants. Also, the means of repression, including intense propaganda and massive violence, are more sophisticated as well, making the next phase of this Greatest Depression far more dangerous.

      This will be painful and tragic, but I like Jason Rines perspective. This grand cycle event may be so profound that its aftermath could force a major shift in socio-economics and a leap in human evolution. Maybe we can finally drive the money-changers out of the civic temples and beat our swords into plowshares.

  18. Stevie b.

    The developed economies have borrowed from the future to maintain an illusory lifestyle and now inevitably the chickens are coming home etc and of course we don’t like it. Eventually some technology or other will triumph and off we’ll go on another merry-go-round. Simple.

  19. Frank Williamson

    This is 666% worse…

    The beast was just starting to regain it’s power back then…

    Now, with it’s power welling up again, this MANufactured DEPRESSION has the NEW WORLD ORDER-ONE WORLD GOVERNMENT to take the place of
    DEMOCRACY… FREEDOM…LIBERTY…LIFE…and
    THE PUSUIT OF HAPPINESS.

    1. Pangolin

      This will be known as “The Greater Depression” due to several factors. Foreign trade continues to push for a global “race to the bottom” on manufacturing wages and benefits. Automation, like this computer, eliminates more jobs than it creates. Peak Oil, (see the IEA 2010 World Energy Outlook) will eliminate the energy resources needed to convert the economy to a new system. Climate Change effects, (New Orleans, Moscow, Nashville, Pakistan), will destroy resources at an increasing rate. Financial Fraud, Wall Street, US Federal Reserve printing money to buy Treasury bonds, will destroy trade relationships faster than goods flows can adjust.

      The only economist that’s making any sense lately is Marx. He said the rentier class would loot the world into paralysis and it has.

  20. Jeff Turner

    We are in a “Great” depression. During the Great Depression people went to bread lines to get food. What is the difference today? We have over 43 million people on food stamps. With 140 million tax payers and 43 million people on food stamps what is the difference? Only a difference of circumstance and time. Pretty astounding real statistics if you look at the numbers.

  21. Corrupt Defense Contractor

    Meanwhile, the national corporate media, itself viciously anti-union, continue to skew news coverage to portray unions as corrupt and greedy, so that the 90 percent of American workers who are not in a union don’t even realize that any pay gains or benefits they get are because employers are trying to avoid unionization of their workforce. – Dave Lindorff

  22. Michael H

    In Rio De Janeiro the gap between rich and poor has reached such an extreme level that authorities have begun building walls to separate the slums and shantytowns from the wealthy area of the city. In this way they criminalize poverty by putting a gate around the poor.

    A number of years ago there was sheer panic in the wealthy parts of Rio, when all of a sudden crowds descended from the favelas and into the rich part, where they began looting and setting buildings on fire.

    Newspaper accounts described this event as if the violence came from nowhere, as if it was completely unexpected.

    Almost like a divine punishment that strikes from nowhere, when least expected.

    In his speech where he demanded the execution of Louis XVI,
    Robespierre put it like this:

    “Peoples do not judge in the same way as courts of law; they do not hand down sentences, they throw thunderbolts; they do not condemn kings, they drop them back into the void; and this justice is worth just as much as that of the courts.”

    In the United States, those of us who are paying attention have observed an enormous number of crimes take place over the past few years. But we have yet to see the least sign of justice. Nothing. The criminals are still walking around free, flaunting their crimes, rubbing it in our faces.

    We’re still waiting…..

    Perhaps justice will not from the courts, but from the people themselves. Perhaps it will be left up to crowds to deliver the punishment that these criminals deserve; in which case it will be like divine violence, coming from out of nowhere, on the day when they least expect it.

  23. Tim Goswell

    The following might seem off-topic, but this is what’s really going on “underneath the Happy Talk”, and it’s also related to why things in the USA are bad, and unlikely to get better…….

    from exiledonline:

    “America criticizes Russia’s conviction of a notorious corporate criminal who planned on selling his country’s energy infrastructure to a Western oil cartel as undemocratic… White House is “deeply concerned”… That’s right, real democracies like America don’t convict treasonous corporate criminals! They bail them out! Duh!”

    http://www.bbc.co.uk/news/world-europe-12083773

    1. Doug Terpstra

      This fits exactly with Michael’s comment above, that justice is ultimately pivotal to this mess.

      Hillary Clinton said the conviction “raises serious questions about selective prosecution.” How rich. What the elitists are concerned about is seeing untouchable plutocrats subjected to the rule of law, but mostly that this case may slow “modernisation”, i.e. cheap privatization of Russia’s commonwealth ocurring since the 90′s.

      “This and similar cases have a negative impact on Russia’s reputation for fulfilling its international human rights obligations and improving its investment climate,” Clinton said. Human rights (vs oligarchs’) clearly do not concern this admin at all, so this is all about and only about the “investment climate”—by US tycoons who had hoped (until 2003) to buy Russia’s oil resources cheap. Damn, we were that close!

      “In the months before his arrest in 2003, Khodorkovsky was reportedly negotiating to sell a significant interest in Yukos to the American oil giants Chevron and Exxon, and to build a private pipeline network in competition with the state-run system, both actions that the Kremlin evidently regarded as threats to national sovereignty.”

      http://www.wsws.org/articles/2010/dec2010/khod-d29.shtml

      Oh, and speaking of “selective justice”, I wonder how US Minister of Justice Eric Holder is comng on the persecution of Julian Assange, as well as keeping Gitmo open indefinitely — without any pesky trials at all, selective or otherwise.

  24. M. LaRowe

    Mr. Washington,

    Thanks for a great post confirming what I already felt. To heck with “Happy Talk” anyway. We can save our positive spin to help us through the next 10 (I hope) years. But only after we get a real sense of what is actually going on so that at least some of us can get on the same page.

    When I see a (minority)woman waiting for a bus in the bitter snowy cold with a baby in the stroller and a little boy in a wheelchair with a few bags of clothes because they had to go to the local Charity (Newsies) to get the free clothes then I know that we are damn well in a Depression.

    I’m done with the lies. I’m done with the Happy Talk (which I mostly hear from my local realtors who somehow think they are going to brainwash everyone into buying and selling again as if that were the problem. Good grief.

    Give it to me straight, rip off the bandaid or whatever else you want to say. I know my people hate to hear me speak negatively about where it’s headed but I think we need to self-protect our families and our communities and in order to do that we have to “know” what is going on.

    Thank you again for your post.

  25. XRM

    Dystopia from Wikipedia: Dystopian literature has underlying cautionary tones, warning society that if we continue to live how we do, this will be the consequence. A dystopia, thus, is regarded as a sort of negative utopia and is often characterized by an authoritarian or totalitarian form of government. Dystopias usually feature different kinds of repressive social control systems, a lack or total absence of individual freedoms and expressions and constant states of warfare or violence. Dystopias often explore the concept of technology going “too far” and how humans individually and en masse use technology. A dystopian society is also often characterized by mass poverty for most of its inhabitants and a large military-like police force.

    Keeping the US safe is a reverse technique.

    In order to put even more people on the 4,000-plus terror watch list, officials say they have made it easier to add individuals’ names to a terrorist watch list and improved the government’s ability to thwart an attack in the United States.
    As this fright of terror escalates, there’s only one ending to the story.

    Chris Hedges at truthdig has a must-read commentary on the developing survelliance state of the US.
    This country is entering a brave new world encouraged by big brother.
    Hedges compares Orwell and Huxley at the brink of 2011.
    A few snippets:

    We have been gradually disempowered by a corporate state that, as Huxley foresaw, seduced and manipulated us through sensual gratification, cheap mass-produced goods, boundless credit, political theater and amusement.
    While we were entertained, the regulations that once kept predatory corporate power in check were dismantled, the laws that once protected us were rewritten and we were impoverished.
    Now that credit is drying up, good jobs for the working class are gone forever and mass-produced goods are unaffordable, we find ourselves transported from “Brave New World” to “1984.”
    The state, crippled by massive deficits, endless war and corporate malfeasance, is sliding toward bankruptcy.
    It is time for Big Brother to take over from Huxley’s feelies, the orgy-porgy and the centrifugal bumble-puppy.
    We are moving from a society where we are skillfully manipulated by lies and illusions to one where we are overtly controlled.

    Those who do not comply with the dictates of the war on terror, a war which, as Orwell noted, is endless, are brutally silenced.
    The draconian security measures used to cripple protests at the G-20 gatherings in Pittsburgh and Toronto were wildly disproportionate for the level of street activity.
    But they sent a clear message—DO NOT TRY THIS.
    The FBI’s targeting of antiwar and Palestinian activists, which in late September saw agents raid homes in Minneapolis and Chicago, is a harbinger of what is to come for all who dare defy the state’s official Newspeak.
    The agents — our Thought Police — seized phones, computers, documents and other personal belongings.
    Subpoenas to appear before a grand jury have since been served on 26 people.
    The subpoenas cite federal law prohibiting “providing material support or resources to designated foreign terrorist organizations.”
    Terror, even for those who have nothing to do with terror, becomes the blunt instrument used by Big Brother to protect us from ourselves.

  26. PeonInChief

    One of the factors keeping unemployment lower than it was during the Great Depression is the much larger percentage of the population employed by the government–either directly or as contractors. And while some people want to lay off large numbers of government employees, the relative stability of the state sector is a good thing.

  27. LaDelle

    Thank you for this well linked analysis. I wish every grown up I know would read this, especially as it is presented soi very clearly. People like you, doing analysis like this, are just about the only thing that give me hope that my children will have the same opportunity that I’ve had to lead a halfway decent life. Thank you again and again.

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