Do you think there could be a second Great Depression?

[kamikat]

Exactly. When you're poor, you know what it is to survive on crackers and milk, and feel lucky to have that much. You know what it is to have to decide whether to buy food or pay the oil bill because you can't afford both. There's nothing trendy or hip or exciting about that.

A good friend's husband had a midlife crisis and decided he wanted to quite his high-paying hospital admin job and go to grad school. He kept telling her it would be fun to live like poor college students, that they would just cut back on the extras (like health insurance). She couldn't convince him that a)it was irresponsible to quit a job when you have kids and b) living like poor college kids was never fun. The big difference was that his parents had paid for his undergrad, apartment all his bills while he was in school, while she had worked 2 jobs to afford college and had lived on rice and beans for 4 years. Needless to say, they are no longer together.

 

[kamikat]

Interesting, because recently on the etsy.com blog they featured a "Hobo Chic" wedding that cost $15k, I believe.

I saw that. How incredibly offensive! Hey, let's all dress up like we're poor!

 

[Atticus Finch]

While we've been posting on this thread over the last few days, the national economic news has been getting worse and worse. I despair we've been speculating as to whether or not an event will happen that already has.

AF

 

[V.C. Brunswick]

Personally I don't think it's another depression we have to worry about. It's hyperinflation of the kind that Germany suffered after World War I and what hit countries like Argentina and Brazil in the 1970s that worries me. At the rate we're printing out so much money right now, Monopoly money will be worth more than the dollar.

Make do with what you have and if you can't afford something, you don't need it. The only thing you really need to borrow for is a house, understandable that you cannot pay for a house in one lump sum. A brand new car isn't a necessity, a top of the line appliance isn't a necessity. I think our current situation is going to make people realize that.

We should hope so but I'm not too sure about that. Americans in particular, and probably mankind in general, have never been very good at learning such lessons. Many have attended the School of Hard Knocks but few have graduated.

 

[jamespowers]

While we've been posting on this thread over the last few days, the national economic news has been getting worse and worse. I despair we've been speculating as to whether or not an event will happen that already has.

AF

Pretty astute there. Yes, we are in it about where they were in the 30s. The difference is that back then there was no such thing as unemployment and a few other safety nets. However, those things run out eventually and we are beginning to see that happen. People further move on to food stamps (highest number of people on them in many, many years) and welfare from there. Eventually that runs out as well. If this holds on for a few more years then yes, you will see the 30s style Depression. I hope you are hoarding a bit of gold if you think it will go on that much longer. Silver will do as well.

 

[Atticus Finch]

I do think it is a good time to be as free from debt as possible. For a while, at least, I think it is smart to restrict one’s consumption to that which can be afforded with one's current income. Odd to say such an intuitive thing…as if it was some special insight…but that is certainly is not how most Americans live these days.

AF

 

[sheeplady]

I do think it is a good time to be as free from debt as possible. For a while, at least, I think it is smart to restrict one’s consumption to that which can be afforded with one's current income. Odd to say such an intuitive thing…as if it was some special insight…but that is certainly is not how most Americans live these days.

AF

Actually, if we have massive inflation, that hurts the savers and those who live within their means. Suddenly, the $10,000 in the bank that took you years to save and would buy a decent car, won't pay for a rust bucket. Or, if you have paid off your loan, you paid it off when it was much more expensive to do so. However, the $10,000 you have in debt is essentially no longer such a big deal, because of inflation your money is worth so little. Once your income catches up, essentially you have all these things for very little comparative money than went you went into debt for them.* Massive inflation helps debtors.

There are a couple of ways out of the situation, but I'm willing to bet that those in charge are going to pull the handle for massive inflation. In the US, among those who have massive debts, this is going to be a popular move, as long as incomes catch up relatively quickly.

*I want to clarify that I personally don't like debt and would never condone these types of actions. What I worry about is that incomes won't catch up. I also don't like the idea of screwing people who rely on their savings- mostly older people- and suddenly find that their 401K or bank savings is worthless and they can no longer live on $1,000 a month.

 

[fortworthgal]

Hyperinflation would hurt everyone. Incomes wouldn't catch up - for those who even have jobs at all.

The thing is that living and relying on credit with no means to back it up simply isn't a sustainable system. Whether you're talking about a household deep in debt with low income, or a nation, at some point that system will collapse. It is no way to live.

 

[V.C. Brunswick]

One of the things I recall reading about Brazil during the hyperfinflation of the '70s was that people often had to spend their entire paycheck that same day because tomorrow it wasn't going to be worth as much.

 

[Atticus Finch]

I do think that too many people are dependent still upon their parents (parents who are savers)- like the example fortworthgal mentioned. Once those people are gone, I think the younger generations that are dependent on them are in for a very rude awakening. And I have to admit, this lending of money by parents and grandparents is enabling this type of behavior, and will actually hurt their children/grandchildren more than it helps them. It's not just the younger generations faults'- the elder generations need to learn the words "no, i am not an ATM/ cash machine."

Honestly, I think some of the complaining has to do with the fact that it is in vogue to "be poor." In other words, some people will complain about not meeting the necessicities, because it is "in" to complain about these things. Not everyone who complains is like this (obviously) because there is real poverty out there and some people have tragically been hit very hard too. I am speaking about some of the people who have been given as examples in this thread, who complain about expenses but live relatively lavishly.

Essentially, you've got a bunch of people who have caught on that they can win at the "I've got it tougher than you" game and get a bunch of sympathy but they don't actually want to have it tough. So they complain to be stylish and beat out their neighbors in the "complaining wars." But they don't actually want to live the cut-back lifestyle (and they'll do anything to prevent it), so they spend and spend to prevent themselves from actually living the lifestyle that people on lower incomes live. They want to be able to have everyone feel sorry for them and have the "new glamor" in not having money, but still get the treats, simply because "they're not like poor people."

Which for people who actually are struggling, is kind of like a slap in the face. Not having money to meet your basic needs is not glamorous at all. Not being able to find work is not glamorous.

Not arguing, but I'm pretty sure our economy is contracting, not inflating. Job losses and unemployment, lower GDP, lower consumer spending on durables, sluggish business investment and expansion, tightening credit requirements, historically low interest rates on investments are all counter indicative of economic inflation.

But you are correct. Inflation does benefit debtors and governments (who are often the biggest borrowers).

AF

 

[kamikat]

There's been a lot condescending talk about people not living within their means. We forget that salaries have remained stagnent while cost of living has gone up. For example, my grocery bill had gone up an average of $50 per week for the last 6 months. For a family of 4, using very little prepackaged foods and no organics, now costs $275-280 per week. In contrast, my husband earns 60% of what his salary was during the height of the sitcom era. Most people I know who use credit cards are using th to buy groceries or buy the children shoes and clothing, not frivolous things.

 

[Undertow]

At the least, we're a great group of people with a common-sense approach to life. We on the FL tend to have an eye for simple living. It will likely be up to us to help our neighbors and families get through any tough times on the horizon. I hope we never hit the lows of the Great Depression, and I hope we don't come close. But should we reach that depth, I hope we're all able to help others out of the hole.

 

[V.C. Brunswick]

Essentially, you've got a bunch of people who have caught on that they can win at the "I've got it tougher than you" game and get a bunch of sympathy but they don't actually want to have it tough. So they complain to be stylish and beat out their neighbors in the "complaining wars." But they don't actually want to live the cut-back lifestyle (and they'll do anything to prevent it), so they spend and spend to prevent themselves from actually living the lifestyle that people on lower incomes live. They want to be able to have everyone feel sorry for them and have the "new glamor" in not having money, but still get the treats, simply because "they're not like poor people."

During the last election there was a campaign spot that featured a woman in straitened circumstances who said she couldn't even afford milk. Unfortunately, the campaign's handlers neglected to tell this woman to lose the $25-30 acrylic nails which were plainly visible.

 

[Atticus Finch]

There's been a lot condescending talk about people not living within their means. We forget that salaries have remained stagnent while cost of living has gone up. For example, my grocery bill had gone up an average of $50 per week for the last 6 months. For a family of 4, using very little prepackaged foods and no organics, now costs $275-280 per week. In contrast, my husband earns 60% of what his salary was during the height of the sitcom era. Most people I know who use credit cards are using th to buy groceries or buy the children shoes and clothing, not frivolous things.

I didn't mean to sound condescending, if I did. I just think that over borrowing, especially with credit cards, has gotten many good people into trouble, recently. I believe that credit cards cannot be used to fund a family's existence...at least not in the long run.

I am not trying to be funny...but I'm not sure if I know what the "sitcom era" is.

AF

 

[Bruce Wayne]

The DOW dropped over 500 points today. About 4% loss. As far as I am concerned, until I get a decent job I am in my own personal depression.

 

[fortworthgal]

I didn't mean to sound condescending, if I did. I just think that over borrowing, especially with credit cards, has gotten many good people into trouble, recently. I believe that credit cards cannot be used to fund a family's existence...at least not in the long run.

ITA with this. I do understand that some people are forced to use credit just to survive. However, the majority of those with substantial credit card debt that I know personally have acquired it not through survival, but through things like vacations, dinners out, and extraneous shopping. I'm not saying that anyone who uses credit is living beyond their means, but many do. And either way, it isn't a sustainable system for the long term. It reminds me of food stamps - there are some who use the system to survive, but there are many who abuse it.

I mentioned on another thread that I am a member of another online forum, where there is a lot of discussion regarding fashion and high-end accessories - namely jewelry, handbags, and shoes. Trust me, there are scores of people living on *very* meager salaries who will go into debt for an $800 pair of pumps or a $2K bag just because they want it. I distinctly recall a thread in which a woman's spouse had lost his job and they had to go to charities just to get their utilities paid and keep from losing their home - yet she still refused to sell her very expensive handbags and scarves. Priorities.

 

[sheeplady]

I'm not sure if I'm being clear, but I think that some in the government(s) will see inflation as the *solution* to our economy, which I agree is contracting. There are a lot of people scared of deflation (one of the things that happened in the Great Depression, but not the only thing) and I worry that those in charge who are afraid of deflation will pull the inflation lever to try and solve things. We are not really experiencing deflation right now (where your money can buy more)- more like contracting like AF said. Contracting just means that our economy is shrinking and there is less money flowing around, not that your money is worth more or less. In fact, I believe we have slight inflation.

What those that are proponents of inflation hope is that inflation will also cause people to dump their savings into the economy, rather than holding onto them (because they will be worth a lot less, so "smoke 'em if you got 'em"), which will jump start everything and encourage growth (stopping contraction). The problem with this plan is that people need to have savings in the first place to dump in.

I worry that pulling the lever for inflation will result in massive inflation- like the 1980s in the US, when you saw interest rates and prices go through the roof. If we get into hyperinflation (which is massive inflation many times over), then we are totally up a creek without a paddle, a boat, or a prayer. Then we are looking at starting the ball rolling into a true epic depression. Those in charge don't want hyperinflation, because that is chaos.

I don't think credit is sustainable, but our economies are not built on sustainability- keeping things at an even level. They're built on growth. I don't think that maintaining growth in order to have a good economy is sustainable.

 

[V.C. Brunswick]

I suppose this is why economics has always been known as "The Dismal Science."

 

[kamikat]

I am not trying to be funny...but I'm not sure if I know what the "sitcom era" is.

AF

That was autocorrect. I meant "dotcom era", meaning 1995-2005ish.

 

[Atticus Finch]

I worry that pulling the lever for inflation will result in massive inflation- like the 1980s in the US, when you saw interest rates and prices go through the roof.

Wow! That brings back memories. In 1981, I was twenty-five, I had a brand new MBA and I thought the world would always be my oyster. What a great double-digit-inflation-rate, no-salary-expectation-too-high, winner-take-all economy it was!

AF