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Stay away from the Depression Word                                                                                    

Posted at: Mar/25/2009 : Posted by: mel

Related Category: Economics,

Okay, so times are pretty tough. The stock market has lost a lot of value in the past 18 months, some banks are failing, many more people are out of work than in decades, and people are losing their home. Hey, this sounds a whole lot like that thing all of us studied in school years ago…The Great Depression. For all of the aforementioned reasons and many more it is really easy to jump to that conclusion. I firmly believe that we are experiencing an economic down turn of a scale not seen in many decades, but comparing this downturn to the Depression of the thirties I believe is wrong. If you make the comparison, then it would be easy and logical to draw the same conclusions for the long term impact and scale of personal loss.

We are a country that allows and encourages innovation. As a result of the innovation we try things without always having sufficient vision for the ultimate outcome. When things go sour, we react with changes and provisions that hopefully prevent many of the same things from happening for the same reasons again. When Banks failed in the thirties, people lost their savings and their mortgages without any recourse. While you can lose money and many have on investments, your personal bank accounts are now federally insured. So if you saved, your savings have not disappeared. In the thirties, if you lost your job, you either moved back to the family farm or stood in line at an inner city soup kitchen. Now we have unemployment insurance, food-stamps, medi-cal, medi-cade, and a host of other programs. I know, these are expensive programs, but they provide that needy segment of our society some basic subsistence that is intended to be a “soft landing” as opposed to the hardships of 80 years ago. 80 years ago unemployment peaked at roughly 25%. Despite small regional or demographic pockets that may approach that level, unemployment is currently hovering around 10-11% nationally and is not likely to grow more than a percentage point or two above the current levels.

There is little doubt that this is a financial tragedy for many people. Using the D-word, “Depression” simply conjurers up the wrong image. We now have insured savings, safety net social programs, and an unemployment level that is less than half what was seen in the depression of the thirties. Let’s stop the comparisons and start rebuilding our economy.

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