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References to Great Depression warp perception

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Tuesday, Oct 14, 2008 - 12:43:55 am CDT

On Monday when the Dow jumped 936 points, a worried world finally heard an encouraging reference to the Great Depression.

Turns out that was the biggest spike in the Dow Jones industrial average since 1933. At 11 percent, the jump was the fourth highest in history.

It’s about time that the Depression was invoked for positive effect.

Story Photo

The steady drum beat of comparison to the Depression the previous week as stock averages eroded was threatening to warp perception.

No one can deny the wealth-dissolving impact of the recent massive sell off, but current economic conditions would have to worsen by a factor of three- or four-fold to even approach those of the 1930s.

References to the Depression are handy, attention grabbing and likely to continue.

So it behooves us to have at least few basic facts at hand to put that era into proper perspective.

In the Depression unemployment rose to about 25 percent.

By comparison, in September unemployment was 6.1 percent, still far below the previous post-World War II high of 10.8 percent.

At the height of the Depression about one in 10 homes had been taken over by banks due to foreclosure.

Currently banks own far fewer than one in 100 homes due to foreclosure.

In the Depression about one out of three banks failed. Depositors lost about $21 billion, adjusted for inflation.

In the current meltdown only 15 banks have failed. No depositors have lost money.

In the Great Depression the U.S. economy shrank for four consecutive years.

So far the U.S. economy is still growing. In the last quarter growth was 2.8 percent at an annualized rate. Most analysts are predicting a downturn, but it hasn’t happened yet.

The stomach-churning gyrations in the stock probably are not over yet. There may be darker days ahead. Not all analysts are convinced that the stock market averages have found a bottom.

Nebraskans have their own reasons for economic distress. Prices for grain that were high only mere weeks ago have plummeted. Some farmers may have locked in prices on futures contracts, but the recent rosy predictions of record farm income for the state presumably will be adjusted.

Still, pegging historical references to actual facts should have a steadying effect on emotions.

By the standards of the Depression, average Americans are amazingly well to do.

There’s a bit cheer of in that perspective, just as there is in finding joy in gas prices that have dipped below $3 a gallon. A sense of well-being, as researchers tell us, is relative.


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whatever wrote on October 14, 2008 4:08 am:
" I don't think the comparisons to the Depression are meant to describe the situation today, but rather 6 months to 12 months from now. "

 Turnabout wrote on October 14, 2008 7:27 am:
" I'm just waiting for the LJS to have a Sound Off question that asks "What are you doing with all of that extra money since gas prices have dropped?"

Of course, the first response would be "Paying off taxes in this Tax Me to Death State." The more things change the more they stay the same... "

 Macy wrote on October 14, 2008 8:49 am:
" Thanks for this article - so many people view our current times as so much like the depression. That line of thought proves that they don't know their history! "

 yea right wrote on October 14, 2008 10:05 am:
" Depression? We are not even close, what about a recession did we go from a bump in the economy to a great depression?
Give me a break, I have to go to starbucks for my $5 Latte.
We are not even close to what it was like then.

People would not even have a clue what people had to endure during those times, we are a spoiled society "

 income gap wrote on October 14, 2008 10:18 am:
" So how does the income gap today compare with 1929? Oh that's right, there is a greater disparity between the top and the bottom now than there was then. Wonder why the economy is bogging down; maybe it has to do with the fact that people don't enough money to purchase durable goods. "

 depressing wrote on October 14, 2008 10:36 am:
" A depression is/was a distinct possibility. The fed and world banks MAY have taken it off the table. Maybe not. You gotta get your head outside of Nebraska to see the reality of the economy. "

 Jon wrote on October 14, 2008 11:03 am:
" Of course its not the depression all over again...we don't have unemployment above 10%, much less 20-30% they had back then. The vast majority of us are not living in tents in 'Hoovervilles', most of us are still driving the same cars, most of us are still watching cable TV, most of us still have enough food on the table, etc... Yes things are tight for a lot of people right now but the panic and reactions of some are definitely overblown. The media is doing a great job of stocking the fires as well. Once again, I am not saying things are great because they are not for a lot of people. But the majority of people are making changes and pushing through this. Not the case during the depression. Of course, most Americans are clueless about history so that word can be used and it scares a lot of people. "

 Surprise wrote on October 14, 2008 12:21 pm:
" "Depressing" is right. Ya gotta get out of Nebraska to know about a
depression or recession. Talked to a friend yesterday in another state,
that said the newspaper was page after page after page of forclosed homes.
And since there is little business and industry in Nebraska they wouldn't
know about all the unemployment. During the depression, living on the
farm, we didn't have to stand in long long soup lines like they did in
cities. On the farm we planted gardens and raised chickens & of course
cattle & hogs, and dry land we had failed crops. I remember my dad going
to town to shovel coal out of a car train, and he and I would go down on
a dry creek and cut dead trees, what there was, for the furnace and used
corn cobs in the furnace to heat the house. And the cold winter nights
when the fire went out, you didn't have ANY heat, but piles and piles of
blankets and conforters!!!! Yeah a drepression doesn't make an appointment when it is coming generally!! "

 ogre wrote on October 14, 2008 1:15 pm:
" we also don't have to contend with the dust bowl eating all of our crops. "

 Relax wrote on October 14, 2008 6:23 pm:
" Only a few more months of Bush and then Preident Obama will get us fixed in no time. We just have to put all of our faith in Him and He will show us the way to elightenment "

 Cavalier wrote on October 14, 2008 7:32 pm:
" If we are still well-to-do as your editorial claims, it is because the bills have not yet arrived for the untold usury we have been foisting on future generations. Most Americans do not have savings, they have debt. Our country owes trillions to foreign powers. The wealthy put their money in foreign banks to hide it from Uncle Sam while demanding ordinary Americans tighten our belts. But also, we are pumping pollution into the air and using scarce and increasingly expensive natural resources that our children and grandchildren will be paying for in higher prices, lower expectations, and poorer health. Our generation wipes our hands with antibacterial soaps making germs hardier for those who will be sick tomorrow. We get fat on bad, convenient foods and expect someone else to pay for our health issues. We are lazy, short-sighted, and short-changed and the only way we will allow ourselves to see it is if there really IS another great depression. Our bills ought to be paid now, rather than "on time" by future generations. "

 The Omega Man wrote on October 14, 2008 8:20 pm:
" "..Americans are amazingly well to do..."? By what measure? We owe more money than we can count. We are completely dependent on foreign money and foreign energy for our lifestyle. "Cavalier" is correct on many counts. Things may seem "just fine" right now but the bills must be paid and that comes with a great cost. At one time National Health Care was on the table and likely to happen. It won't now. Social Security and Medicare are also on the table. Whether we make formal cuts to these programs or flood the system with money to "devalue" our obligations the cuts are coming. The Journal Star seems to be caught up in the here and now and not using the long term thinking required when an analysis is needed. Revisit this editorial next summer when unemployment should be in double digits and "offical inflation" is also in double digits. Inflation and unemployment are both necessary consequences of the actions just taken by the government. And the Journal Star article regarding volatile corn/bean prices have farmers not asking what price will I get, but will anyone buy anything at all. When was the last time that happened? And this world of "just in time inventory" means there won't be a "backlog" of stocks of goods to fall back on when factories and food producers shut their doors. The "product" will be gone at the snap of a finger. And because so many American producers of goods are now gone forever and with it the expertise who will replace them? Business and lending practices have changed dramatically over the past 2 decades. Now lending practices have gone back to a 1950's model. At least 20 to 30 percent of your potential homebuyers of 3 years ago are COMPLETELY out of the game. I don't know any business that can sustain itself when 30 percent of it's customer base is gone forever. Journal Star, don't get caught up in "pie in the sky" outlooks. That's enough for today. "

 Out of resolve wrote on October 14, 2008 10:20 pm:
" I read these comments by the "sky is falling" crowd and it sickens me. Yes, things are bad and will likely get worse. Our grandparents made it through a depression and a world war. Todays generation wants to whine and complain about how bad it is but no one wants to do anything about it. How about we all quit griping for once, hunker down, and start making a better life for ourselves and our kids? The way most of you talk you would think there is no point to go on living. Makes me SICK! "

 Aaron wrote on October 14, 2008 10:41 pm:
" Didn't the great depression last until the early 1940's? Years after the New Deal. "

 JT wrote on October 14, 2008 11:11 pm:
" Remember Journal Star, the Depression didn't begin until several months after the 1929 crash. "

 The Omega Man wrote on October 15, 2008 5:50 am:
" Many of us saw this coming years ago. It isn't a matter of "not doing anything", many of us have and are still doing something. It's the blind assumption that everything will automatically be alright and the distortion of what is happening that is disturbing and precludes action. Our leaders and the media are almost always behind the curve on developments such as what is going on now. And "puff" pieces like this that totally misrepresent the challenges before us preempt many from taking the actions necessary to protect themselves and their family. The illness that permeates our society that doesn't allow any discussion unless it involves a "sunny day" is sickening. "

 Lindsay wrote on October 15, 2008 9:18 am:
" Depression or not, I think to myself that if my grandparents were able to survive (and in much more impoverished conditions) I can too. I think we are just a lot more spoiled than they were. My grandparents were poor to begin with, and so they were used to going without. The main difference between their generation and mine is that we are ill equipped to deal with surviving on bare bones. I think it will be a difficult adjustment if it gets really bad. "

 Nick Walter wrote on October 15, 2008 11:02 am:
" I think it's sad that the media is missing the most interesting angle on this current financial crisis. Not that it's as bad as 1929, because in terms of stock market damage and bank damage it is certainly in the same league, but that our safeguards built into the system way back then do prevent another depression seem to be working. Panicky media reports aside, the average American is not facing any immediate depression level crisis. No matter how bad off their bank, their deposits are secure. No local banks are experiencing runs. The conomy continues to function and we aren't seeing mass bankruptcies as bad banks explode the economy.

In large part, the safeguards are working. This is a testament to the power and necessity of good regulation for banks. We can certainly improve the regulation even further, which seem inevitable in light of the current problems, but it's quite gratifying to take a look at the big picture and realize just how atrocious hings could be today if the banks were completely unregulated. "

 Aaron wrote on October 15, 2008 11:07 am:
" I believe the effects of the depression lasted until Dec 7, 1941, if that tells us anything, although much of its effect was lessened for Nebraskans when seasonal rains again took place. The sky is not falling, as some fear, but I expect chunks of it to fall intermittently over the next several months, no matter who becomes president, no matter what 'cures' our lawmakers take. Too much damage was done in too short a time to not expect continuing fallout. If we all, as a federal government, as a state, as individuals, would give up greed and practice frugality, that would result in the quickest remedy possible. The doubt is, are we willing to do that for the common good? "

 MomsHugs aka Eve wrote on October 16, 2008 10:50 am:
" Comparing 2008 global economies with those of 1929 is nonsense. Look at more recent events like the 1987 market crash (lost 50% w/in months) or better when the failure of global hedge fund, Long-Term Capital Management, almost took out global banks in 1998. Our economic growth continued unabated.

Refinancing On Global Scale: The Brits Are Leading
http://momshugs.blogspot.com/2008/10/refinancing-on-global-scale-brits-are.html

MomsHugs (aka Eve - Old Nebraska Gal) " "

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