Boston Globe: What Would a 2009 Depression Look Like?

As negative as I am, I am not on the bandwagon for a "Depression" - while I think unemployment is mightily understated by our government [Nov 7: October's Unemployment Rate Reaches "6.5%"] and probably will reach levels (in real terms, not government terms) that will be debilitating in the next 18 months, it is hard to take much credence in the 1930s figures because how accurate was "25% unemployment" then? Many women were also not in the work force so it is very hard to make comparisons. But the 2 keys on how bad this is going to be are (a) availability of credit and (b) availability of jobs.

I do think there are some very serious structural changes that have been going on quietly under the surface that "good times" (i.e. cheap credit) of the past 7-10 years were masking, and now as the tide rolls out we're being shown to be naked. [Do the Bottom 80% of Americans Stand a Chance?] Much has to do with an increasingly flat world where laborers are competing globally, and our country's absence of recognition of these new realties. Many scoff at social safety nets from those "socialists" in Europe but my long term prediction is the US moves more in that direction as more and more people begin to suffer in our "highly flexible" form of capitalism where the worker bee is a discarded piece of cardboard when need be. [Feb 18: Economic Woes Reveal a Long-Felt Unease & Denmark is the Happiest Place on Earth?]

Many will question what a 1st world society should provide as its basis - are massive gulfs between have and have nots true progress? When more and more here are unable to achieve those basics - as those in other 1st world countries - people will really begin to question the American form of capitalism - when a very few at the top amass historic wealth but great swathes of working poor and middle class cannot get healthcare, afford to send kids to college, live in a world of crumbling infrastructure, and losing services from the state... well let's just say, this is usually how 2nd/3rd world countries work. But that may still take a decade or two to play out as the "sheep" are very slow to catch on here - they know something is wrong but many times idealogy prevents them from assessing what the true causes are. So instead they will attack convenient foes/issues that those in power use as distraction - it's worked for the past few decades, so we'll see how much longer that can work.

So instead of Depression, I think more along the lines of a "new normal" - but the poorest now are still far better off in many ways than some in middle class in the 20s or 30s. It is all relative. That said, I could be wrong and our definition of "Depression" could be different than it was then. Thanks to reader Steve who via his blog, has this article from the Boston Globe- I'll post a link to the full article but do length I'm actually going to copy the summary from Steve himself. Many of these themes have appeared in our blog long ago - as usual we're early - in fact I'd say this writer must be reading the website... it all sounds quite... familiar ;)

If you want a more shall we say... colorful take on 30 Reasons We'll be in Great Depression 2 run over to the #1 story on CBSMarketwatch by the ever flamboyant Paul Farrell

Oh yes... good morning. ;)

(1.) “Unlike the 1930s, when food and clothing were far more expensive, today we spend much of our money on healthcare, child care, and education, and we'd see uncomfortable changes in those parts of our lives.”

(2.) “The lines wouldn't be outside soup kitchens but at emergency rooms, and rather than itinerant farmers we could see waves of laid-off office workers leaving homes to foreclosure and heading for areas of the country where there's more work - or just a relative with a free room over the garage.”

(3.) “Already hollowed-out manufacturing cities could be all but deserted, and suburban neighborhoods left checkerboarded, with abandoned houses next to overcrowded ones.”

(4.) “And above all, a depression circa 2009 might be a less visible and more isolating experience... Instead of dusty farm families, the icon of a modern-day depression might be something as subtle as the flickering glow of millions of televisions glimpsed through living room windows… the cheapest form of distraction available.”

(5.) “To be worthy of the name, a depression needs to be more than a few years long - far longer than the eight-month average of our recent recessions - and it needs to put a lot of people out of work.”

(6.) “The Great Depression lasted a decade by some measures, and at its worst, one in four American workers was out of a job. (By comparison, unemployment now is at a 14-year high of 6.5 percent.)” (I hate when articles cite the official government unemployment rates considering what a farce they are - and comparing them to previous periods when government numbers were actually "trying" to represent reality)

(7.) “In a modern depression, the swelling ranks of the unemployed would likely change the landscape of the country, uprooting people who would rather stay where they are and trapping people who want to move.” (look to Detroit for an example the past half decade of this)

(8.) “Renting an apartment - perhaps in a city, where commuting costs are lower - might be more tempting.”

(9.) “Many suburban areas have already seen upticks in crime in recent years, which would only get worse as tax-poor towns spent less money on policing and public services.” (this is a big theme of ours - the potential for social unrest will increase sharply)

(10.) “young families moving back to their hometowns to live with the grandparents when they can no longer afford to live on their own, parents moving in with their adult children when their postretirement fixed incomes can no longer support them.” (I believe this will be a long term trend in America, especially parents moving in with their adult children as our "ownership society" that is systematically destroying social nets simply creates havoc for many)

(11.) “Lean times might kill off much of the taboo around buying hand-me-downs, and with modern distribution networks - and a push from the reduce-reuse-recycle mind-set of environmentalism - we might see the development of nationwide used-clothing chains.”

(12.) “New technology would grow less seductive, basic reliability more important… The neighborhood appliance shop could reappear in a new form - unlicensed, with hacked cellphones and rebuilt computers.”

(13.) “specialty and organic food - which drove the success of chains like Whole Foods - would seem pointlessly expensive.” [May 14: Whole Food Markets CEO at a Loss at Why Sales are Slowing]

(14.) “Among the green lawns of suburbia, kitchen gardens would spring up. And it might go well beyond just growing your own tomatoes: early last month, the English bookstore chain Waterstone's reported a 200 percent increase in the sales of books on keeping chickens.”

(15.) There will be more demand for “meals like packaged macaroni and cheese and drive-through fast food.” Basically, “cheaper, easier calories.” (We tout McDonald's every other week as a Pooring of America play)

(16.) “Dropping health insurance would be an immediate way for families to save hundreds of dollars per month.” Emergency rooms will see increased demand and longer waits at least in part from the increasing numbers of uninsured as well as consolidation of ERs. That means even longer waits at ERs, which are even now overtaxed in many places, and a growing financial drain on hospitals that already struggle to pay for the care they give uninsured people. And if, as is likely, this coincided with cuts in money for hospitals coming from cash-strapped state and local governments, there's a very real possibility that many hospitals would have to close, only further increasing the burden on those that remain open. [we talk about this one often - Sep 24: As Economy Gets Tough, Americans Begin to Cut out "Extras" - Like Healthcare]

(17.) “In their place people could rely more on federally-funded health centers, or the growing number of drugstore clinics, like the MinuteClinics in CVS branches, for vaccines, physicals, strep throat tests, and other basic medical care.”

(18.) “Students unable to afford private universities would opt for public universities, students unable to afford four-year colleges would opt for community colleges, and students unable to afford community college wouldn't go at all. With fewer applicants, admissions standards would drop, with spots that once would have been filled by more qualified, poorer students going instead to wealthier applicants who before would not have made the cut.” (we talk about this one a lot as well - college costs have reached a point that for many it's going to make more sense to just go to work directly out of high school and not exit as a 22 year old with $50K in debt)

(19.) “A depression would last too long for unemployed college graduates to ride out the downturn in business or law school, so people would have to change career plans entirely.”

(20.) There will be an “uptick in applications and interest is government work” (sure, the one employer who never fires anyone and adds job every day, every week, every month - at least at the federal level)

(21.) “The Depression was, famously, a boom time for movies - people flocked to cheap double features to escape the dreariness of their everyday poverty. Today, however, movies are no longer cheap. Nor is a day at the ballpark.” (we pointed out sports as one of the surprise areas to suffer as we move forward into this recession)

(22.) “Much of a modern depression would unfold in the domestic sphere: people driving less, shopping less, and eating in their houses more. They would watch television at home; unemployed parents would watch over their own kids instead of taking them to day care. With online banking, it would even be possible to have a bank run in which no one leaves the comfort of their home.”

(23.) “Depression, unsurprisingly, is higher in economically distressed households; so is domestic violence. Suicide rates go up in tough times, marriage rates and birthrates go down. And while divorce rates usually rise in recessions, they dropped during the Great Depression, in part because unhappy couples found they simply couldn't afford separation.” (social acrimony)