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Apr
1
The Great Depression
Filed Under economy
I wish I could say the headline was an April Fools Day joke — maybe it is — but the UK’s Independent declares a Great Depression for the United States complete with a photo of sad looking people lined up waiting for assistance in New York. Later in the story, reporter David Usborne details how Michigan’s recession — brought on by its taxation policy — has 1 out of every 8 resident resorting to food stamps.
It’s dark days in America, according to the European news media. Everyone in America is living in a van by the river after having lost their home. Look at all those poor yanks lined up waiting for welfare handouts because they can’t even afford food.
We knew things were bad on Wall Street, but on Main Street it may be worse. Startling official statistics show that as a new economic recession stalks the United States, a record number of Americans will shortly be depending on food stamps just to feed themselves and their families.
Dismal projections by the Congressional Budget Office in Washington suggest that in the fiscal year starting in October, 28 million people in the US will be using government food stamps to buy essential groceries, the highest level since the food assistance programme was introduced in the 1960s.
The increase – from 26.5 million in 2007 – is due partly to recent efforts to increase public awareness of the programme and also a switch from paper coupons to electronic debit cards. But above all it is the pressures being exerted on ordinary Americans by an economy that is suddenly beset by troubles. Housing foreclosures, accelerating jobs losses and fast-rising prices all add to the squeeze.
Emblematic of the downturn until now has been the parades of houses seized in foreclosure all across the country, and myriad families separated from their homes. But now the crisis is starting to hit the country in its gut. Getting food on the table is a challenge many Americans are finding harder to meet. As a barometer of the country’s economic health, food stamp usage may not be perfect, but can certainly tell a story.
I see the Independent’s story and I look at the April 1, 2008 dateline and wonder if it isn’t an April Fools prank.
While there are some signs that the economy has been affected by real estate speculation — wasn’t everyone buying up properties during the 2000s after watching HGTV’s housing flipping shows? — not everyone is queued up waiting for government cheese because their equity has fallen and their homes have gone into foreclosure. I still see people are buying houses. Even Barack Obama’s pastor, Rev. Jeremiah Wright, is building a $1 million retirement house in the Chicago suburbs.
Didn’t we go through something similar at the end of the century when the dot com boom burst and people stopped throwing money at any business launched on the internet because all they cared about were instant returns, even if nobody could figure out how the business worked.
The markets are becoming wiser and people are figuring out that there is money to be made, but it isn’t as simple as throwing money at a hot internet start up or buying a house using an interest only mortgage, then flipping it for a 100% profit to the next person hoping to make a 100% profit.
Markets correct when prices rise to the highest level the market will support. There had to have been a point when people would say housing prices were too high and we’ve reached that point in the formerly hot housing markets where bi levels that would sell for $100,000 in Northwest Indiana were going for $600,000 or more in California.
Buy-sell-buy-sell couldn’t go on forever. It’s logical to think that there had to be a high point in the market where everyone would say the prices were too much to consider.
Personally, I’m looking forward to a strengthening economy in the coming months as we clear the November elections and as uncertainty about the future is reduced — news of poorly performing economies and recessions always appear right around election time in recent years, look back to 1992, 2000, and now 2008.
Luckily for us, Gov. Mitch Daniels isn’t following Michigan and Illinois in raising taxes so high that it causes businesses to fold and more citizen pain as jobs are lost and people are forced to move to states with lower taxes.
Look for all of the talk of a Great Depression to cease in 2009, if not sooner, especially if a Democrat wins the White House.
There’s already good news on the horizon, so don’t jump out of a window just yet.
CNBC is reporting that the worst might be over as European Banks report their writedowns:
U.S. stock index futures pointed to a higher open for Wall Street on Tuesday as battered financials continued to try to claw their way out of the credit crunch.
News of more write downs from European banks were taken as a signal that an end to the sector’s woes was in sight, and Lehman Brothers benefited from an announcement that it will raise $3 billion to shore up its balance sheet.
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3 Responses to “The Great Depression”
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The British papers have been overhyping the recession for some time now. This is not a new sentiment at the Independent.
Hi Buzz,
The Europeans always like to tear down America in their media. My wife has two sisters living in Germany and they always tell us about all of the crazy things that German TV says about the U.S. — we’re all fat and lazy and just like the watch TV is the gist of their coverage. The media elites are just jealous.
Of course, they always regular Germans love to come to America — especially now that the Euro is so much stronger than the dollar because they can afford to go shopping and eat out — things that are more difficult back at home because taxes and the cost of living are so much higher. We don’t have a huge VAT tax and regulations against earning too much money that hold back the German economy.
Hey, did you read that the picture in that article is from 2005?