Sunday, November 30, 2008

It's Not The Depression

Faithful readers will note that this isn't the first post to rail on traditional media's fear tactics in comparing the current economy to the Great Depression. I must commend the Free Lance-Star for the article in today's paper about how the city of Fredericksburg made it through the Great Depression.

On November 14th, one of the wisest men that I knew passed away, my grandfather. This is the man that spend numerous hours taking my brother and me fishing, hunting, or just spending time telling stories about his childhood. One of the things he didn't talk much about was the Great Depression. However, when he did, you knew to listen closely. It's the story about why he owned the family farm, since he was the oldest son, and when the depression hit, he returned from college to help make ends meet. There was no extra money for college. The family raised what they could, and saved wherever possible. He spent time as an organizer for the CCC, which resulted in many public works projects in their rural area. It wasn't a time when they thought much about what they wanted to be, but rather took what work was available.

I've been thinking about how to write this post for a while. My first thought was how disgusted my grandfather must be that our generation is even thinking about comparing the current economic stumbles to that of the Great Depression. Even compared to the Gas rationing in the 70's, this doesn't come close. Maybe there are a few comparisons the real estate crash in the 80's, but I haven't seen much in the papers. In general, a large proportion of American (and world) society is more impacted by the negativity in the papers than anything else. Many of us have seen losses in the market, and are experiencing reduced values in our homes, but there is still food on the table, we still have our cell phones, and cable TV.

Lets look at how the blow has been softened. The good 'ol gov't has upped the saving deposit insurance to $250k, so that your bank account (and your business's) are safe. They have stepped in to bail out a number of reinsurers and certain large financial institutions to ensure continuing coverages and services. They have extended certain unemployment benefits, so that if you get let go at work you can draw unemployment for a longer time. At the same time, the market has finally started showing that bad business plans don't need funding, as evidence by the tightening credit market. Real estate mortgage rates are still at historic lows, and all those foreclosures are bringing back 'affordable housing'. Softening the blow even more is the return of $1.50 a gallon gas prices. Break out the Hummer!

Jeremy Siegal at Kiplinger has a great column in the Dec '08 issue, "It's Not a Depression:
We are better off today as we confront the current credit crisis".

Is this our spring cleaning for the economy? Having been employed through the 'dot com' bubble and bust, lets just say that back then we pointed out how stupid it was to finance invest in companies that had no plan for profitability.

So in a tilt of the had to my grandfather (who would also tell me we had it easy compared to taking the 'cart' to school in the snow), I completely agree that we have it easy compared to the Great Depression.

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