The 2nd Great Depression

[pbrower2a]

(05-28-2020, 10:35 AM)Mickey123 Wrote: The unemployment rate in the U.S. is now at its highest level since the Great Depression.  It's somewhere in the neighborhood of 25% by this point.

And there is no end in sight for any of this.  Nothing can return to normal while the virus still spreads, and it isn't going to stop until we have a vaccine, which is 6 months or a year or two away (or possibly even never).  By the time the virus is behind us and we can try to return to normal, we're going to find that we can't.

It's easy to drop a glass on the floor and shatter it, and vastly more difficult to somehow put all the pieces back together.  Once you have enough people out of work, and enough people who've lost confidence in the economy and who have stopped spending and are saving everything, how do you reverse this?  People aren't spending, businesses aren't hiring because they don't have the sales to support new hires, large numbers of people are out of work and have no jobs they could possibly get.  With so many people not working and not producing anything, society is much poorer than it was.

The government, which is tasked with fixing all this, is much poorer than it was, as its tax revenue is considerably lower than it once was.  It doesn't have the money to just hire 25% of the population and pay them all to do who knows what.

The last Great Depression didn't end until World War II.  When will this one end?

The Great Depression was a severe meltdown followed by slow growth out of it. Government played its role in big projects that hired large numbers of construction workers who would otherwise have been out of work. The 1930's were the time of Boulder Dam, the Tennessee Valley Authority, the building of such bridges as the George Washington Bridge and the Golden Gate Bridge, and some of the first American expressways (the Pasadena Freeway and the Ramona Parkway (the latter now part of the course of the San Bernardino Freeway in Greater Los Angeles) and just before the start of World War II the Detroit Industrial Freeway, the divided US 66 (some of it up to modern freeway standards) between Chicago and St. Louis, and the original section of the Pennsylvania Turnpike. More subtly, the Great Depression was a good time for starting a small business because 

(1) many people had no viable alternatives
(2) labor was cheap and reliable
(3) real estate was cheap
(4) raw materials and inventories were cheap -- fire-sale prices without the smell of smoke
(5) customer loyalty was a reality.

There was no easy money. The 1920's dangled the prospect of getting rich quick by investing in speculative activities instead of in job-creating plant and equipment. In the 1930's just about everyone recognized how precarious life could be when the economy melted down, and if one ran a grocery store and hired someone not in one's own family as a clerk one could reasonably expect the extended family of that clerk to be reliable customers.  Do you see that today? Of course not. 

I might as well remind you -- about ten years after the Great Stock Market Crash of 1929, things were better for most Americans than then in material terms -- more cars, radios, telephones, and appliances; more people were on the electric grid. Industrial wages were higher because of strong unions. America was growing its way out of a nasty economic meltdown. The good times of the following 1T had portents in the late 1930's. Of course something would get in the way: the aggression of the demonic Axis powers would transform the consumer society into a war economy. 

.......

I may have more optimism about the resilience of human nature than you have. A 4T compels people to adapt because of the prospect of ruin or mass death. COVID-19 is killing like a mismanaged war. Yes, Donald Trump is a horrible leader, the near-antithesis of the most admired Crisis-era leaders of all time (Lincoln, FDR, Churchill)... but just look at him as a proposition of everything wrong. He sees himself as a repudiation of Barack Obama, who ironically has most of the characteristics of of a great leader in a Crisis. Oh, Obama could not convince people who were his political antithesis to go along with him? Maybe the problem was with his political antitheses, the American economic elites who believe that everyone else owes everything to those elites and must suffer so that 'we' can enjoy the benefit of an economic order as inequitable as a plantation in the ante-bellum South. The Republican Party now melds the heritage of the plantation with the managerial ethos in commerce and industry of the vile boss Henry Clay Frick. 

Of course we do not put back together the shattered glass that we dropped on the tile floor. We sweep it up and discard the shreds of a glass that could be put together again only by melting it down and forging it anew as another glass. Or, as most of us do, we go to the store and get another glass or get one out of storage that we bought earlier. 

I am tempted to believe that, unlike the meltdown that led to the Great Depression, this one is the result of a horrible medical crisis that will itself pass -- after killing who knows how many Americans. People still believe in the consumer economy and, as soon as participating in such is safe again, people will. We are going to change our ways. Maybe we will need appointments to go to the bank or the car dealership for a few months. We will order stuff on line only to pick it up at the store instead of getting to see the merchandise for ourselves. This will make buying something like high-fidelity equipment tricky because a $2000 set of stereo speakers and a $200 set of stereo speakers can look much alike. If you have the funds and the ear you might be able to tell that the difference of $1800 can be well worth it.  But -- you must first hear the difference. Likewise, a $200 men's suit can look much like a $2000 men's suit...

That's not to say that we don't have some underlying problems to resolve. The 2007-2009 meltdown had much the same cause and much the same severity as the first year and a half of the three-year economic meltdown beginning in the autumn of 1929. We basically went from the 1929 peak to the equivalent of early 1931, when the Obama Administration backed the financial sector. The problem? Once the entities deemed "too big to fail" got rescued, the economic elites had the means with which to lavish funds on politicians willing to do their bidding. That meant the politicians who most fully believe that no human suffering can ever be in excess so long as it turns, enhances, or enforces a profit for the economic elites. Maybe our elites didn't go so far as to sponsor the rise of an Adolf Hitler, but they certainly sponsored an anti-human, pseudo-populist ideology that manifests itself in Donald Trump.  

Technology will allow people to do fine dining again -- at a higher price. We are finding that the low prices in box stores come with a high price to workers here (who either lose their jobs or end up working in dangerous working conditions) and that a reliable supply and solid pay are both  more desirable than low prices. Much of what we consider prosperity depends upon mindless expenditures that many of us can give up without losing much. The 24/7 economy that we have come to take for granted probably is no more. Do you really need to go to Wal*Mart for cold cuts, bread, and beer at 2 AM?  We will adjust. Can we afford meat that costs less than vegetables but that requires conditions out of Upton Sinclair's The Jungle make them so cheap? The people who make that possible by working in such places are particularly vulnerable to COVID-19, and economic reality will stop that. Much of the profitability of the retail sector of brick-and-mortar stores depends upon impulse shopping in which people buy stuff that they do not need. If the stores are closed, then such is impossible. 

Many of us are finding out what we most cherish and what we can do without. We are all deep into the stage of diminishing returns for happiness through consumerism. As people working at home have discovered, we may not need to live in New York City to work for an entity in New York City. Getting NYC pay while living in low-cost Scranton, Pennsylvania might be the best of both worlds for many.