Tuesday, April 01, 2008

Some Things To Consider In The Great Depression Of 2008

The Independent has published a report that seeks to compare the economic downturn of 2008 with the Great Depression that gripped the nation, after the Stock Market Crash of 1929.

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.

Now, this is all well and good. And it certainly doesn't diminish the fact that there are more people on food stamps now, than last year. But, some perspective would be nice. If we are going to use data to draw accurate conclusions, we must understand some things:

Note the graph in this NYT article.

Understanding that many would love to use this as some kind of evaluation tool to prove that George W. Bush is the worst President in history, we must consider the trend of the indicator provided in this NYT article.

Supposedly, Clinton gave us the best years of our lives. Yet, in the mid 90s, the number of people on food stamps was near what it is now. Supposedly, Reagan gave us the worst years of our lives. But, if we look at the numbers in the mid 80s, we see that the number of people on food stamps were much lower.

One thing this Independent.com article does not factor into the mix is, the number of people crossing our borders and receiving this government benefit. Non-citizens are using this program too.

I have said before, we are a long way from the poverty and suffering in the Great Depression. One number that stands out is the 25% unemployment rate, during that time. But that seldom-considered piece of data doesn't stop the naysayers, who want to discredit this administration for the specific purpose of empowering themselves. They'll reach for anything, if they think it'll work in their favor.


How ironic this article turns out to be.


Anonymous said...

Most people do not understand the economy. Sadly, as a result of our substandard education system, most people are willing to believe pundits who proclaim the economy is ruined, particularly when that’s all they read in the press for months on end. This is the psychological impact of a liberal press on an uninformed citizenry.

Granted, liberals believe that the president SHOULD control the economy and prefer to have something other than a “free market” system in place. They yearn for a return to the days of FDR who was so economically inept, only a world war could change our direction. Given the qualifications of most politicians, this is really the last thing that should happen.

Fact: Since the year 1900, the stock market has risen steadily to it present level, and while there are some periods when the market has declined, it has always recovered. What goes up eventually comes down; what goes down eventually goes up again later. The sky isn’t falling, the president doesn’t control unemployment, and government interference in such areas as the housing market has serious long-term consequences.

The first rule is, “let the buyer beware.” Every capital investment incurs some risk. The second rule is that long-term growth is preferred over short-term gain. When people “speculate” in the market for a short-term benefit, they incur much higher risks because of market factors, and because the portfolio isn’t diversified. Whoever doesn’t realize this doesn’t belong in the market to begin with. But the fact is that most Americans are not investors (which is probably a good thing), and all they really know is what the press tells them. In my view, the “press” controls too much in this country; and this is particularly true regarding their psychological impact on our morons.

A.C. McCloud said...

Good debunking. The liberal media wants two things right now and wants them badly--more bad news from Iraq and a recession strong enough to bash Bush but not enough to threaten their own jobs. It's obvious as to why.

As to economics, I'm far from an expert but do understand the basics and certainly the concept of "buyer beware", which was drilled into my thick skull by depression-era parents. "Have it now" is the new mantra, and many are paying the piper (notice all these old colloquialisms are fading from use in popular culture due to PC concerns, and the result).

The gov't should not bail out the housing market but judging from the planned restructuring of the Fed there must be more than a few who are worried. This worry seeps into the general population and people, already strapped beyond their means and hurting from 3.50/gal gas, decide to forego buying that new refridge. The media knows this game well and your linked article is a good example of their evil agenda.

Greg said...

AC hit the nail on the head. There isn't enough bad news from Iraq now, so the liberal media (which studies show is virtually the entire cadre of TV & print journalists) has to trumpet something that is bad! I feel compelled to remind everyone that the DNC chair recently declared, without a hint of shame, that peace in Iraq was bad for the Democrats. This is squarely within their M.O.

The funny thing about the economy is that, as Mustang implies, the press can actually control the thing. A constant drumbeat of an impending depression can be a self-fulfilling prophecy, so much the economy is built upon consumer confidence.

Knock on wood, I'm doing better financially than I ever have. Unfortunately, my house is now worth less than I paid for it about 5 years ago, but I can easily pay the mortgage. I don't really know anyone who is going to have to go on food stamps - you?

LASunsett said...

I think all have made great points on this.

When a durable goods industry goes south, there is a ripple effect to other industries. Higher prices, layoffs, and profit losses are always a means of correcting the problem. But the thing that people have to understand is, just as we enjoy and share in the good times, we must all be prepared to deal and cope with the bad.

The American public doesn't understand that concept. They have been conditioned by our elected officials to believe that government is there for them and it is not beyond the authority of the government to step in and keep things from correcting naturally.

I always advise people that when they get an infection, viral or bacterial, a little fever is good. If you can tolerate it, the fever acts as a natural infection fighting agent.

But too many people want to take an anti-pyretic like Tylenol, to ease the symptoms of the fever, or they want to take antibiotics when the natural immune system response can take care of the problem, albeit in a longer amount of time. The result has been a marked increase of super-infections that do not respond to antibiotics.

We can say the same thing about the economy.

Instead of allowing the natural immune system of the market correct these things, we resort to bailing out the system artificially with interest rate cuts so the stocks can stay high. Is the problem corrected then? No. Like Tylenol masks the symptoms of the infection, so do interest rate cuts mask the symptoms of a natural downturn that we are bound to get every now and then.

But in all fairness, it's quite difficult for politicians to allow natural healing, when the naysayers are constantly making every downturn into the Great Depression of the 1930s. (Especially when it is an election year.)

Anonymous said...

We are facing, and have been for the past thirty years, the antithesis of “national leadership.” Politicians KNOW the economy is not in trouble, but rather than standing up to the microphone and giving encouragement to Americans, they perpetuate the media myth because it suits their interests.

I have observed the so-called political strategists (another word for “talking head”) rattling off the DNC talking points and almost to a person, the first bullet is “suffering economy.” None of these people can explain exactly what is lagging, or why, nor have they any clue about the invisible hand of a free market economy. Here, I fault the talk-show hosts for not calling on them to explain (1) how the economy is dropping, and (2) what their candidate wants to do about it. I suspect the reason is that their candidate doesn’t know, either.

The failure of elected officials to assume a leadership position is a deplorable, but voter complacency encourages party hacks to capitalize on the doomsday message. I am trying to think of a term that would adequately describe these spineless worms, but it is difficult to know a word that describes their lower than whale-poop position in the food chain. Certainly, “opportunist” is too lofty, and “traitor” could be too strong. This is where we need the vocabulary skills of Mr. Beamish.

A.C. McCloud said...

The failure of elected officials to assume a leadership position is a deplorable, but voter complacency encourages party hacks to capitalize on the doomsday message. I am trying to think of a term that would adequately describe these spineless worms, but it is difficult to know a word that describes their lower than whale-poop position in the food chain. Certainly, “opportunist” is too lofty, and “traitor” could be too strong. This is where we need the vocabulary skills of Mr. Beamish.

It's just too easy to take the low road in a culture of gotcha. They eventually all listen to their handlers, to our detriment. If only one could rise out of the fog and just take a "do what's right" platform they may end up wildly successful.

kombatrock said...

I have to disagree. It seems to me that this article is on to something, especially considering the foreclosure rate, recent reports of food shortages and fuel inflation. Mustang is right, people dont understand the economy. That's the problem, we've been living with unsustainable debt for far too long and starting to creep up on us.