Another Great Depression

[Lena_Horne]

I've been doing some reading lately about the current state of the economy as well as the affects of our issues with oil. Now I'm not here to start an argument about whether or not we are doing the right thing where that is concerned. But one very grim outcome that was posited by a professor at the University of Michigan by the name of Juan Cole is that (worst possible scenario) it could lead to another Great Depression in the United States. My question is how do you believe the current generation in all of our, er, affluence, could--or wouldn't--adjust if another economic depression equal to that of the 1930s descended upon us?

L_H

 

[farnham54]

I've been hearing of people positing another "great depression" for years now--a study of the last 50 years sees the subject come up whenever the economy does anything unusual (Dot Com crash, the Oil Crisis in the 70s, etc.)

However, one thing we all need to be very aware of is our economy is a paper one--it is mostly floated by an insurmountable pile of debt. Credit rules all, and outright ownership is rare. If anything is going to bring a depression of sorts, I'd say that Debt, not oil, will be the root cause of it.

As far as the character of the people go--I think we look back on the 30's through a biased lense. There were a lot of people who did not simply buckle down and get through it, yet we remember and admire fondly only the ones who did. If the same thing were to happen today, I'd say we'd see the same result--a lot of people wouldn't make it through, COULDN'T make it through, and those that would make it will invariably say "Oh it's not like the good old days".

Fact is, Human Beings are divided into 2 groups--those who survive, and those who do not--juts like every other species on the planet. If another depression should happen, there will be those that survive and be all the better for it (I firmly believe that difficult experiences, if survived, make one stronger) and those who fall.

Cheers
Craig

 

[Baron Kurtz]

The main problem with the economy as it stands today - according to someone writing in the Atlantic - is the volume of government bonds (essentially lent money) owned by foreign powers. He reckons that the Chinese could sink this country by demanding its money back. It is currently politically inexpedient for them to do so, but will that last forever?

bk

edit to answer question: People would adjust well. That's why we (humans) have survived for this long.

 

[Marc Chevalier]

Lena Horne, what's your opinion of the "Song of the South" film?
(See the "It's been 20 Years; release Song of the South" thread in the Moving Picture section.)

 

[ii-5-i]

What Depressions give us?

Utopian political movements with simple solutions and the usual scapegoats.

 

[Big Man]

... Human Beings are divided into 2 groups--those who survive, and those who do not ...

A very true statement! I've been in the Fire/Rescue business for over 25 years, and can personally attest to this observation. Some folks, no matter how desperate the situation, have something special inside that allows them to cope and have, at least, a chance for survival. Others, unfortunately, choke if they get as much as a paper cut and require years of therapy to deal with the stress.

Sometimes you just have to suck it up and deal with it. Those that can will make it, those that cant, well ...

 

[jamespowers]

You can pretty much be assured that a Depression as happened in 1929 will never happen again due to the changes in the laws that followed. Buying on margin 100% is not allowed; pyramid scheme businesses where one business is actually producing something surrounded by empty holding corporations that can sell stock are also prohibited. Banks also insure your deposits for up to $100,000 if you are lucky enough to have that much on deposit and the federal reserve regulates the money supply to keep inflation and devaluation of the currency to a minimum.
That being said, people themselves are now their own worst enemy with the kind of ridiculous financing they use to get a mortgage, credit card debt and spend thriftiness. That is where you will see something happen on the horizon when the first hints of a depression are upon us. If they lose their jobs and thus are not able to pay their bills then the companies involved will be in bad shape. That hits the investment markets and then consumer spending as well. Since GNP is a function of those two factors plus government spending the only thing to take up the slack will be government spending and that is something that we really do not need to increase. Simply by living as our parents did, we can make the economy strong on a case by case basis. If you have credit card debt, concentrate on getting the balance down. If you are upside down in a mortgage situation then it is time to rethink its financing. Selling the property to get out of the debt may be an option before the real estate market goes down and makes your situation worse. Lastly, watch what you spend. Take account of your net worth at least once a year and see where the money is going. Cut down on spending that which you need to pay down credit cards and the like. When they are paid off then you own your money for such luxuries.
These are the ways to keep yourself afloat in the bad times---plan for them. They are going to happen no matter what you do but you don't have to be dragged down with them any worse than is necessary with a little planning. People who survive have saved for that rainy day. It is our responsibility to ourselves and our children---even our parents if they need the help. :cheers1:

Regards to all,

J

P.S. Yes, I do have a degree in Finance but I don't benefit from giving free advice.

 

[Pilgrim]

I don't know about the potential for a depression...but if anything will fuel one, it's the way the US is spending money like crazy while trying to reduce taxes. That is, in my opinion, ridiculous.

If you're going to spend the money, you have to collect the taxes to pay for it. That is the simple truth. No sugar-coating it, that's the way it works. I am extremely upset about the current path of the economy in that regard. If we add enough debt, I believe it will drag the economy down.:rage:

 

[Marc Chevalier]

Utopian political movements with simple solutions and the usual scapegoats.

Hitler's or Roosevelt's? Or both?

 

[Lincsong]

Slicksters

The thing that will mess up certain areas of the economy is variable mortgages. This is what drove up the price of housing. Realtors are really a slime profession. What happened with the Dot-Gone bust was that Greenspan lowered interest rates keep the money supply easy. Let's say that at 9% interest a $230,000 loan was $2300 a month. Most people are on a monthly payment mentality so if they could afford $2300 a month they'd buy the house. Now interest rates dropped to say at 6%, that $230,000 loan is $1600 a month. So some slickster mortgage broker tells the guy to refinance, save $700 a month and lease that Benz. But, the Realtor tells the seller of the previously priced $230,000 house he can get $350,000 for it because now the interest rate is 6% and the $350,000 loan is $2300 a month. Each notch in lower interest rates drops the monthly payment $100 per $100,000 loaned. Rates got to 4% and the price of that $230,000 house is now $550,000 ($2300 a month). But most people don't have 25% down payment cash on $550,000 so the slickster mortgage broker puts them into a no down payment interest only loan for 5 years. The $500,000 mortgage runs that magical $2300 a month telling them that when the five years is up and the mortgage jumps to $3200 a month they can sell the house at a couple hundred grand profit, use that for a downpayment and start the cycle all over again. Moral of the story; live in Houston.