The economic times are as rough as we have seen in many years here in America, and from all indications they are getting worse very quickly. The talking heads on television are going crazy trying to predict just how bad this downturn will be. We are hearing all kinds of opinions ranging from a simple economic slowdown (these people a small minority now), to a massive far reaching economic depression that hasn't been seen since the Great Depression. 
While there is no real way to know just how much damage will be done to the American economy as well as the global economy from this downturn, there is one thing that bothers me when I hear these talking heads constantly utter it. "Things are different now, there simply cannot be another Great Depression." Why not? Sure the conditions wouldn't be exactly the same, and there probably wouldn't be another dustbowl, but there is simply no reason to think that a depression of this magnitude could happen again.
While there is lots of debate surrounding what exactly caused the Great Depression, most economists believe that overspending and not enough saving as well as a lot of pure speculation in the stock market played a major part. These are certainly areas that are problems today. We have before mentioned the alarmingly terrible personal savings numbers that continue to be released and the record amount of debt that Americans are pulled down by. This applies not only to individuals, but the American government as well, which is deeper in debt now than it has been in many years. Stock market speculation now is very rampant, with many buying and selling with no rhyme or reason other than momentum trading.
My point in this post is not to predict another Great Depression in the coming years. My point is that there is simply no way that anyone can say definitively that this kind of massive recession will never happen again. Sure, the economy has changed a lot since then and things have modernized a great deal, but even the modern economy could come to a grinding halt one of these days. Don't let anyone tell you that a major depression could never happen again, because that simply is not the case.
What do you think? Do you think a severe depression could ever occur again?
Realm of possibility, certainly anything is possible. Likely, I think not. Technology, the advances of society, and financial safeguards would prevent it I think.
A hard hard down turn, more plausible.
My opinion, is that this downturn clears by next Sept-Dec when the pres election is up and buying season is in full swinng.
US govt debt and citizen debt scare me the most. The govt needs to lead by example to show all of the growing kids AND adults, that you can lead a successful path while not being in debt. I am lucky(skilled?) to have no debt besides house ownership, yet I hear the woes of so many others that do not have financial control of themselves. If the govt does not change its ways and decrease debt drastically, AND policies to remain debt free, I fear for the US as the leading superpower of the world. Foreign banks are going to catch on sooner or later and figure out that we are just asking for more and more loans of money and not paying as much back. They will stop lending, US govt will go into basically a bankruptcy panic, spending will be cut, economy will spiral down... it would take decades to rebuild.
I think that the above scenario would only play out over a few decades IF the US debt policies (or lack there of) stays at present course.
Posted by: Nick Yeates | March 27, 2008 6:36 AM | Permalink to Comment