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THERE’S THAT UGLY WORD AGAIN: DEPRESSION

Posted by Tim Bryce on August 23, 2011

The country’s latest round of economic gymnastics has brought up an old concept that strikes fear in both politicians and the public: Depression. The Great Depression of the 20th century was triggered by the market crash of 1929 which led to a period of approximately ten years of high unemployment, poverty, low profits, deflation, and lost opportunities for economic growth. Basically, we lost confidence in ourselves and our economic future. FDR’s social programs of the “New Deal” did not pull us out of it, only war did, specifically WW2.

The comparisons between then and now are glaring. We are already experiencing a higher unemployment rate than just prior to the Great Depression; our Gross Domestic Product is at a snail’s pace; our debt continues to mount, and; nobody has confidence in our government’s ability to control the economy. Although we have been asked to accept “Change we can believe in,” most Americans recognize we have gone from bad to worse.

The recent debt ceiling debate was politicized and resulted in a superficial fix. Government financial institutions, specifically Freddie Mac and Fannie Mae, which were at the epicenter of the financial disaster just four years ago, were bailed out and taken over by the federal government, yet their policies and business practices remain essentially unchanged. Although there were several recommendations for regulatory overhaul of the housing finance industry, nothing of substance ever came of it. Other stimulus bills and bailout programs did nothing to snap the economy out of its doldrums, and Obamacare is still perceived as an ominous threat to our financial well-being. Meanwhile, the country’s credit rating has dropped slightly, housing values still plummet, bankruptcies grow, exports decline, and the Gross Domestic Product (GDP) has flat lined. Our government officials, thereby, give the distinct impression they are incompetent of managing our economy. Frankly, if they couldn’t do it in 1929, why should we believe they can do it now, 82 years later? The reality is, they cannot. Only business can put the country back to work, but if they are inhibited by government policies and regulations, they are less likely to make bold moves.

Some might rationalize the actions in Washington, DC as “business as usual.” It’s not. This is a battle of ideologies, socialism versus capitalism, which will only be broken by the 2012 elections which historians will record as a referendum of the two incompatible economic systems. The elections will represent a game of chicken where voters will be asked to chose the system they prefer: big government versus smaller, a nanny state versus personal initiative and responsibility, excessive spending versus fiscal responsibility. Perhaps never before in our country’s history will the differences be so apparent and the stakes so high. It will be a costly election, both in terms of finances and emotions. Every seat up for election, large or small, will be fiercely contested. Wisconsin and the debt ceiling debate were glimpses into the future. The country will be forced to select one side or the other; a divided federal government, which we currently have, represents gridlock and certainly not an option as should be readily apparent by now.

One thing is for certain, the country is on a collision course politically and economically. Whichever side is the victor in 2012 will incur the wrath and scorn of the loser who will likely not go away quietly. It may even turn violent. Economics has a way of bringing out the worst in people, as anyone who survived the Great Depression can tell you. The only way to avert disaster is to create the proper incentives for business to accelerate production, put people back to work, accelerate the GDP, and curb our government’s finances. However, with only fifteen months remaining until the elections, that is probably too tall of an order to fill.

Keep the Faith!

Note: All trademarks both marked and unmarked belong to their respective companies.

Tim Bryce is a writer and the Managing Director of M. Bryce & Associates (MBA) of Palm Harbor, Florida and has over 30 years of experience in the management consulting field. He can be reached at timb001@phmainstreet.com

For Tim’s columns, see:
http://www.phmainstreet.com/timbryce.htm

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Tune into Tim’s THE BRYCE IS RIGHT! podcast Mondays-Fridays, 7:30am (Eastern).

Copyright © 2011 by Tim Bryce. All rights reserved.

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2 Responses to “THERE’S THAT UGLY WORD AGAIN: DEPRESSION”

  1. I have been an unemployed college graduate for a whole year. The job market stinks. The opportunities are scarce throughout the job spectrum for someone like me. It scares me that things are going to get WORSE at this rate.

    Like

  2. JB said

    Perhaps the economy was collapsed deliberately?

    Apply that rational to the current economic conditions and it explains why “every” possible indicator is in the toilet.

    “Silly middle class – you got too lazy – we shall strip you of luxury and wealth.”

    Now prepare for WW3.

    Like

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