There will be no ‘split’ if you think
‘red’ states will be immune from this depression/recession, think again. We are all in this together. I don’t care how frugal you are if you lose your job and can’t get another, you are toast. Especially when desperate states will raise taxes to get money...even if you own your home outright, you won’t be able to pay the taxes.
During deflation cash becomes very dear. Bartering increases
During the Great Depression lots of property was lost because they couldn't pay the taxes. I heard a good story last week about this
It isn’t a a “red state vs. blue state” thing.
No, it is MUCH more fundamental than politics. It comes down to this:
Is what you do essential?
If you’re in a place like NY, where a huge chunk of their tax revenue is derived from people trading little slips of paper that have now become worthless or undesired (at the very least), then you’re basically screwed. You’ve got a large sector of your economy which has produced nothing of intrinsic value, which is of no fundamental necessity to civilization (ie, we were doing just A-OK before the CDO or other debt instruments were invented, so despite the protests of Wall Street, we could ban then without permanent consequence), and quite frankly, the financial sector had been inflated to three times the historical component of the US economy.
Just like the dot-bomb bubble, the housing bubble and the finance bubble created jobs that are going away... for a long, long time. The jobs from the dot-bomb bubble went away because they were non-essential. No one needed another web site to sell kitty litter to people. No one needed another startup who was going to spend money on their “brand” first and their product/service second. They just went away when the money got tight.
When money gets really tight, as it is getting now, people start asking “Do I need this?” If the answer is “yes” and money keeps getting tighter, people ask “Really?”
If that answer comes back “yes” — then and only then will people spend money.
So if your state’s economy has a large sector of non-discretionary economic activity (eg, farming, mining, oil, natural gas, coal and other fuel production), then this downturn will be merely a recession. It might be a hard recession, but the farming/mining/oil/coal sectors have gone through recessions before - and they’re still here. Those dot-bomb startups doing frivolous nonsense? Gone forever.
Same deal here with the finance sector, the mortgage brokers, the absurd number of real estate agents, the over-built retail sector, the absurd number of lawyers we have — you name it. They’re simply not essential. Those jobs are going away - probably forever.
The thing that the people in cities forget is this: their very existence is completely dependent upon other people in far-away places doing their jobs. The inverse is simply not true. Out here in the rural west, I don’t give a rat’s rear end whether the n-th investment banker shows up to work in the morning. Could not care less how many people Oprah employs, or whether Oprah is even on the air. I don’t give a rat’s rear end what shows are on Broadway, or whether the entire garment industry in NYC shuts down. Doesn’t make an iota of difference to my existence at all. I literally could not care less.
So your area of the country could try the “atlas shrugged” thing to your hearts’ content and you’d find out that only the people in the immediate area (and maybe some breathless op-ed columnists at the NY Times) notice, much less complain.
Ah..... but let’s turn this around, shall we?
The only thing necessary for rural people to do in order to crush the economy of the urban populations is... nothing. Even more tellingly, there is a very small proportion of the US population that, if they wanted to, could bring the rest of the population to their knees.
All they need to do is sit on their hands and do nothing at all. Urban planners know this. The military knows this. Economists know this.
Here in Wyoming, it would take no more than about 15,000 people sitting on their hands for about four to eight weeks... and a huge chunk of the US electrical grid goes dark for a long time, perhaps for two months more after the coal starts flowing again if the people got back to work.
It works like this: No coal, no fire. No fire, no steam. No steam, no whirring noises in the steam turbine. No fast-whizzy whirring noises in the steam turbine means no juice for you guys in cities in huge swathes of the US.
No juice for you... and we’ve already seen what happens when New Yorkers have a black out.
Given those kinds of consequences, you can bet your sweet bippy that the government is going to rob people in cities to make sure that the coal-blackened rednecks in Wyoming keep digging coal out of the ground - and in Kentucky, West Virginia, Montana, Utah... and a host of other places where they don’t turn up their nose at producing products that are absolutely essential.
Understandably, people in cities are going to be pissed off that they’re being taxed to make sure that dirty, grimy rednecks in nasty low-tech jobs without Ivy League educations are kept rolling in dough while award-winning op-ed journalists are laid off, with no hope of finding another job.
That’s the sort of split you’re going to see. People who render a truly essential product or service will be relatively prosperous. It doesn’t mean that they’re going to be driving an Italian V-12 sports car to work - it means that their job won’t be going anywhere. If they’re a good employee, they’ve got a solid job.
Those who have become absurdly specialized in non-essential industries are going to be forced into a very harsh period of change. Most (but not all) of these people are in urban areas. I have not looked at the numbers, but I’d reckon that a majority, but not overwhelming majority, of these people are in blue states. There are plenty of urban people in red states who are about to get a wake-up call too.