Skip to comments.Are we really headed into another Great Depression?
Posted on 01/04/2009 3:26:57 PM PST by Clive
Are we really headed into another Great Depression?
Here's my Op-Ed in today's National Post arguing that no, we're not:
So we’re in for another Great Depression, are we? Don’t believe it.
Now that the epic U.S. presidential race is over, a caffeinated press corps is in withdrawal, so hyperventilating about a new Depression is their new fix. Just to pick one newspaper at random, Toronto’s Globe and Mail used the phrase “Great Depression” over 300 times in December alone — or about a dozen times each edition. And that’s restrained compared to U.S. cable news shows.
It’s not just bored reporters exhibiting their twin traits of hyperbole and economic illiteracy. There’s a dose of wishful thinking at work, too. When the U.S. stock market started to tumble last fall, European commentators — who had yet to have their own stock markets pulled into the undertow — cackled with glee that it marked the end of U.S. economic supremacy. Igor Panarin, the dean of Russia’s academy for diplomats, even opined that America would disintegrate into six different countries, with the mid-West falling under Canadian “influence.”
Even to U.S. pundits, a failing economy is a useful story — it’s the mainstream media’s preferred choice for George W. Bush’s presidential legacy, as opposed to liberating and pacifying Iraq. And for Barack Obama, who once gave a speech suggesting his presidency would mark the “moment when the rise of the oceans began to slow and our planet began to heal,” lowering messianic expectations of him, by exaggerating the economic troubles he’s inheriting, is a political priority.
Of course, there are real problems in the U.S. economy, the most significant of which is the subprime mortgage fiasco. Hundreds of billions of dollars of “ninja” mortgages have been issued — “no income, no job, no assets,” with no down payment. That worked well enough when real estate prices kept going up — which also allowed the ninjas to keep refinancing their homes at higher values. When the bubble finally burst, U.S. banks were left holding overpriced homes.
That’s a real problem for the financial industry, which has since had its worthless assets backstopped by taxpayers. And the U.S. real estate bubble, while small compared to that in Europe, has been popped. But a Great Depression?
True, unemployment in the United States is ticking up, approaching 7%, and some economists think the figure might crest at 8%. For the millions of people this affects, that’s bad news — but it’s hardly comparable to the Great Depression of the 1930s, when more than 25% were unemployed, over 50% in some regions. If 8% unemployment is considered a Great Depression, then Canada has been in a Great Depression for most of the last 30 years.
The IMF predicts that U.S. GDP will dip by 0.7% in 2009. Again, not good news. But a Great Depression? The U.S. economy shrank 12% in 1930, another 16% in 1931, a whopping 23% in 1932 and another 4% in 1933. That’s a Great Depression. A 0.7% dip is America taking its foot off the gas for a moment.
Speaking of cars, the apocalyptic cries of the auto industry represent an opportunistic piling on. The decline of North American auto makers isn’t a sudden crisis. It’s the free market doing what it should: penalizing companies that pay domestic auto-workers six-figure incomes to do what Japanese automakers do for five figures. Canada’s Big Three have 27,000 unionized autoworkers building cars — and 40,000 more retirees collecting pensions. That’s why they’re in trouble.
The Great Depression just isn’t here. In fact, the recession we do have is already remedying itself. The decline in the cost of oil, from a high of US$147 a barrel to US$40, represents a massive stimulus to oil-consuming countries such as the United States; and though it takes the sparkle off Canada’s oil patch, that sector was doing just fine with oil in the US$30s, where it was until 2004. (On the other hand, countries such as Russia and Venezuela, where oil exports account for 50% of the government’s revenues, and Iran, where they make up 80%, are in for big recessions. That’s actually good news — it’ll be tougher for them to finance their rogue foreign-policy schemes.)
Canada will do just fine. We’re entering 2009 with nearly the lowest unemployment rate in 30 years, with lower debt, no structural deficit and an enormous stimulus in the form of tax cuts already working through the economy. The real threat is fear-mongering politicians looking to grow government, and opportunistic businesses happy for a new excuse to ask for handouts.<.blockquote>
Our Congress is spending us into third-world status and my vote has been rendered meaningless.
0bama and his policies will make the depression of the ‘30s seem like “The Lesser Depression”.
This editorial is one of the oddest pieces I’ve ever read. First it asks if we’re “heading” into a Depression, then uses a current data comparison to the last Depression.
It’s like asking, “Will the boy grow into a man?” And then answer, “No, because the child is much too small.”
It would take a miracle of economic prudence to prevent it, and, as I believe in miracles, I remain open to the possibility. But I have no reason to bet on anything, so far apart from the utter mismanagment of the current perilous predicament by the powers-elect.
>> “True, unemployment in the United States is ticking up, approaching 7%, and some economists think the figure might crest at 8%. For the millions of people this affects, thats bad news but its hardly comparable to the Great Depression of the 1930s, when more than 25% were unemployed, over 50% in some regions. If 8% unemployment is considered a Great Depression, then Canada has been in a Great Depression for most of the last 30 years.”
To get a better understanding of the great “depression”, the figures dwarf the chicken-little mentality of today’s society. Betcha the word “recession” or “depression” will disappear once Big Ears gets into office.
You've got that right. I expect the Obamedia to start telling us what a bombing economy we have starting on 01-21-09. Look for rainbows, teddy bears, butterflies and unicorns.
Wasn't WWI called "The Great War" for a few decades?
With one crucial difference: After WWI, Germany, a country that had embraced socialism and was rampant with hyperinflation, elected a radical who led them to ultimate ruin, whereas we in in America.....um never mind.
Most business people I have talked with are very concerned about the next 2 - 4 years.
Inflation. Taxes. What will the Jan 1 rise in the Missouri minimum wage do to small business since it does nothing to increase productivity?
Energy costs? I would be afraid to invest in utilities like new coal fired power plants. A widening scale of the Israeli ass kicking of their problem neighbors could make oil shieks mad and they might shut down oil production.
While we hope things will not collapse, most small businesses are gearing for the worst. Same for individuals.
Fear and uncertainty are running the course of economics.
People have lost confidence in our government because they continuously reward failure and brush off corruption.
Frankly, it is pretty much out of our hands. For Obama, capitalist economics are definitely above his pay grade.
Ahem, Erza. Look at this chart of unemployment during the Great Depression:
Notice that unemployment in late 1929 and early 1930 wasn't too bad. Unemployment didn't peak until 1934, and didn't fall below double digits until 1941, the start of World War II for the United States.
To make a historical comparison, we are currently in January of 1930.
We will only be in a depression as long as it takes the Chinese or Muzzies to take us over.
Can you really use stats comparing unemployment in the 1930s to that of today. The economies are totally different and tracking methods are vastly superior today.
So our industrial production in the only output for our economy?
Seems some people revel in misery and want the bottom to fall out.
As long as we keep printing money, giving it away, sending out stimulus checks and spending the money on services and products from China and Japan, we will remain in an economic crisis.
Few may have noticed, but we hardly make ANYTHING here.
Try finding and buying a gold .10 oz coin. IF you can find one the price has gone up about $20 in the last month.
My guess is that by 2011 gold will be nearly $2,000 an ounce. And this is if you are allowed to own it any longer.
“Few may have noticed, but we hardly make ANYTHING here.”
Actually I read a story a couple days ago that manufacturing has increased recently. The US still manufactures a lot of stuff. Not enough though.
Spending is out of control and has been for 20 years. Its not going to get any better but the tax increases should stabilize the problem. :/
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