How Would America React to Another Depression?

American culture, politics and values have changed dramatically since the "great generation" went through the Great Depression. Americans have become more materialistic, less engaged, less educated, more dogmatically religious and more entitled than ever. The fourth estate is in shambles. Our constitution, privacy, ethos and freedoms are under continual attack by the executive and judicial branches. The tentacles of a bloated bureaucracy impede progress almost everywhere while oversight within our government is almost non-existent.

The near term economic outlook is not good. Our national debt is near nine trillion (a record $29,700 for every US citizen) with China increasingly holding the purse strings. In 2006, over 406 billion was spent on interest payments on this debt alone. Our infrastructure is slowly eroding and cronyism and corruption runs rampant. Corporations, driven as they are entirely by an insatiable need for bigger profits, have become beholden to short term results and temporary capital investment strategies. Higher paying jobs are following blue collar jobs overseas. Our dependence on foreign oil and cheap debt weaken our ability to react to economic shifts. Many economists are alarmed.

Maybe after so many years of Bush "leadership" and the predictable, mindless mob mentality he both choreographed and commanded in the wake of 911, I've become cynical about how America would react to an economic collapse. instead of electing real leadership to bring the country and world together, our society's reaction to 911 was to give up liberties for "protection" and turning to the socially dividing, fear mongering neocons. What would happen, then, if the entire middle class was thrust into poverty?

Not the type of recession where the middle class needs to cut back on vacations or keep the family car a few more years, but the kind of poverty where it is impossible to get work, even a McJob. And forget about trying to pay the mortgage, it's a struggle just keep the heat and electricity on and put food on the table. The entire United States could turn into the Rust Belt, but worse.

Many of us have never lived through such an economic calamity and think we are immune during these modern, prosperous times. Can Americans -- saddled with a corrupted political system and autocratic corporations -- rise to the occasion and pull us out of a depression? Can we bring back the "can do," problem solving, innovative, hard working values that used to make America strong?

In our current political environment, what would fill this economic vacuum? A Bush monarchy? Totalitarianism? A sweep of Christian fundamentalism? Who would Americans turn to for leadership? Would the United States become one giant New Orleans type catastrophe? Will we be willing to give up even more freedoms and competent leadership in exchange for safety and comfort?

An optimistic view is that we can still rally this divided nation through innovation, resolve and visionary leadership to overcome seemingly insurmountable obstacles. America, albeit sometimes reluctantly, has risen to the occasion to lead the world in the past.

After going through this type of economic fire, America could emerge truly changed with a new responsible corporate structure, honest and humanistic leadership and a cooperative world outlook. Maybe we would even change how money and greed corrupt our political, business, environmental and person domains. Instead of life serving money, have money serve life. We may not have long until we find out.

Do you think we are heading for another depression? And, if so, how do you think the country would react? What would our political, business and personal lives look like? I'd love to hear your comments :-)

Comments

[1will]

America would react very badly in another Great Depression.
Unlike the 1930's there is very little farm work today. In the past many poor people could at least feed themselves from their own crops. That is not as likely today. More Americans are in the service industry and their jobs would quickly disappear. Foreign goods would outsell American made goods due to the lower price thus driving more American businesses under.
Most Americans are only a paycheck or two from poverty. We carry a ton of debt and save little. On top of that there is a sense of entitlement in this country. Everyone believes they are owed something by government, society, The Man, etc. It is doubtful many would willingly tighten their belts and make do with less (until made to do so).
The jobs programs of Roosevelt would be much harder to do today. There would be 20 levels of beauracracy involved in any job. OSHA, EPA, Civil Rights Administration, etc. and whether or not some 3 toed frog is harmed would stop many jobs. Lawyers and frivolous lawsuits would also cut these job programs.
In conclusion I'd like to point out that all of the New Deal busy work programs and government controls did not pull America out of the Great Depression (despite what the left would think). It was WWII that pulled America out of it's economic catastrophe. I would hate to think we ever be in the same situation again. America has lost the 'Can Do' spirit of the past. Too many Americans today embrace the victim mentality and lack the fortitude to survive under presure.

[Sundialsvc4]

It is wise to look neither for a white-donkey nor a white-elephant for salvation (or much of anything), because both of them can stomp you flat and just keep right on going.

"The magic money machine" flooded the valley with dollar-bills. On Tuesday when CountryWide Mortgage ran into insolvency, the guv'mint simply uncorked a bottle containing $2 billion that had not existed a moment ago. BofA "borrowed" it, "bought" a stake of CountryWide with it, and there was Much Rejoicing. But what ACTUALLY happened?

The Fed walked in with a bottle of leprechaun cash and enabled CountryWide to continue selling predatory loans. It did not pay a thin dime to any one of the homeowners who still(!) stand to lose their homes. All they really did was to prop-up a bunch of extremely un-sound investments for a few more days or weeks.

Look, if you want to stop a Depression, the first thing to realize is that WE ARE ALREADY IN ONE. If you drained-away that lake of leprechaun dollars, there would be nothing below it. You will not see factories going tooth-and-tong doing much of anything except supplying odd-parts for the Military. Even your underwear comes to this country on a great big ship.

So, instead of trying to fix the EFFECT (the bum-up on Wall Street), how about focusing on the CAUSE? Make things a little bit better for the more than 320 million people who reside in this country .. not by charity hand-outs but by restarting the true economic machine. Even a very small thing that you do will be magnified 320 million times.

You cannot build a strong nation "at the expense of" the 'little' people. You build a strong nation, and along with it your own strong personal fortune, by genuinely helping them. They provide the energy themselves. They don't merely want your leprechaun dollars.

[Trevor51181]

I'd love to think we can do it. I'm a pretty idealistic person, but there's no possible way, with our current level of apathy, to tell how we'd respond to such a challenge.

I'd hope it wouldn't take such extreme measures to get people involved.

[YellowDogInRedCounty]

I do believe we are approaching a financial calamity. However, we have had deep financial problems before and grew out of them. The mess is usually caused by a Republican and solved by a Democrat.

Step One to fix the problem: Elect a Democrat in 2008, along with a strong Democrat majority in both houses.

Step Two: Embrace the need to find alternative sources of energy such as hydrogen and use this determination to start a new Green economy that would put us at the top of the 'food chain' by using our technical expertise to lead the world in this new technology that would have the combined benefits of helping to save our environment AND establishing new industries.

Step Three: END NAFTA AND ALL OTHER SO-CALLED FREE TRADE AGREEMENTS!!! This is critical. There is no way we can fix this mess while all of our jobs are going overseas. An integral part of this is to also disincentivize corporations from moving overseas. Make their tax burden greater than any benefit they would get from moving jobs out of the US. Return to the days when we had tarrifs on foreign goods that ensured they would have to sell for the same price as American made goods. This would have the added benefit of removing Wal-Mart as an economic force.

Step Four: Strengthen our education system. As much as this will be anathema to most of my fellow liberals, it's time to accept that part of improving our schools is to make our teachers prove their abilities on a regular basis by skills testing. This is NOT the main problem with schools, (NCLB is by far the biggest culprit) but it would help.

Step Five: Undo the Bush tax cuts.

Step Six: End the war in Iraq. This should actually be Step One but until we get a Democrat in office it will never happen. This war has destroyed our economy with costs approaching one trillion dollars. Keep in mind that a trillion dollars is a MILLION MILLION!

Just my two-cents worth!

[1will]

Um...NAFTA was Clinton's baby.

[nunzia]

Not even Clinton, as smart as he is, could predict that there would be enough idiots voting for Bush, twice, resulting in election results close enough for the Bushies to cheat/fake/steal a win. Had Clinton been followed by Gore, even NAFTA wouldn't have gotten us into this deep a mess.

[Jason357]

Yes. I think we're heading for a depression. US politics has defeated reason and sound judgment. Bernanke is going to create an even worse mess if he continues down the failed path of Greenspan, which I think he will.

It's basic economics, you can't spend more than you produce. I kept asking myself who in hell could afford these $400,000 homes in rural areas where the average income is $40,000 a year. I got my answer, very few. In addition tho that, the quality of the homes is dismal.

[AFCOL]

I asked myself the same thing as I watched first time buyers out buying huge homes in California for grossly inflated prices. The whole thing was an illogical feeding frenzy where the sheep lined up for the slaughter. And then there were the home improvement/flipping shows that suggested $100 improvement would bring $5000 in immediate return. So many Americans acted spoiled and greedy yet were amazingly ignorant in personal finance. But there is no free lunch and a lot of folks are now figuring that out the hard way. And of course, many will have their hands out, say they were "done" wrong, and expect to be bailed out. Personal responsibility is a long lost value.

[Sundialsvc4]

"Unfit to rule."

All of us recall the famous words of Marie Antoinette: "Then let them eat cake." But what many people do not understand is that she was not being cruel; she was merely being clueless.

Marie was a plutocrat. She had no idea what "hunger" could be. There was always a plentitude of bread and of cake, and if you ran out of one it was no matter: just pick up a cake, instead.

In January of 1961, the departing President "Ike" Eisenhower gave a farewell address to the nation in which he coined the word "military industrial complex." He warned us that it would consume everything, and like a swarm of locusts it has done so.

What we have is like a hand-grenade on the end of a string, being twirled around and around, until it wraps itself around a pole. Faster and faster it spins, closer and closer to the coming oblivion, until ... boom. But that's not the end of it. Those who did not survive the blast are merely the fortunate ones.

The system of government that our forefathers and foremothers left to us is a good one. But when they crafted that system of government on that little piece of vellum, they expected their elaborately devised system to be used as it had been architected, in ALL respects. The system would adjust itself, and it would police itself.

The mere fact that a relatively-small gang of hooligans has rigged the system and looted the treasury does not mean that this nation must continue to endure it. Nor does it mean that the system is flawed. What it DOES mean is, for example, "impeachment is a DUTY." It means that when you take that Oath of Office, if you subsequently break it you have Broken the Law and for that you will be Expelled .. and will not be eligible for Pardon.

It's a shrewdly-written document. All we must do is ... use it, care for it, and enforce it.

[zjr909]

Let's be clear about something: the free market is "free" in name only. Every economic system is essentially a slave system with tighter or looser chains. If you think slavery ended with the Emancipation Proclaimation, re-visit Edward R Murrow's great documentary "Harvest of Shame." The life of the migrant workers (greatly improved since the 60's thanks to the much maligned Cesar Chavez) fits almost a textbook definition of slavery. The "best and brightest" rise to the top in ANY system, no matter what you call it - especially when inheritance enters the picture. Were the slave owners bigger, stronger and smarter than their slaves? No, just wealthier. But it wasn't the slave owners who kept the system going; it was the average Joe, who profited just enough from the system to keep supporting it. The great magic word that keeps every economic system alive is not wealth but JOBS. Provide enough people with enough jobs and they'll conveniently overlook anything you want to do. When free market supporters speak of personal responsibility, they speak with a forked tongue. Because the ONLY true personal responsibility is growing your own food, making your own clothes, and building your own home. Something like the Native Americans did before the merchantile class destroyed their way of life for a "much better" system. Who knows? America may yet return to its roots.

[kozy]

Mike, it seems to me that a nation like ours that sends its manufacturing base to foreign lands, controls inflation through negative wage pressure and interest rates (rather than government spending discipline), has a negative savings rate, encourages zero down mortgages, credit cards for anyone with a pulse, crony government/business relations, a casino playground for the super rich called hedge funds and derivatives, and general government and corporate corruption, is likely headed for a downturn. Add to that mix, a less than fully competent president and lobby-controlled congress, and the odds of a disaster go up. And, when all of this is obvious even to a conservative like myself, the odds amy be even still higher for freefall. I hope it doesn't happen, but there are many scary writings on the economic wall that are becoming clearer by the week.

[NarutoUzimaki]

In America we have socialism for the rich and capitalism for the poor....government bailouts for uncompetitive corporations that are run into the ground by their CEOs...price controls on certain goods(food) to lock out competition...subsidies for fantasticly wealty industries(oil)..all good socialist policies... But if yo are poor there is only the "free market"..you are free to fail in business unlike your counterparts in the top 1%. No free money if you are poor, no bailouts, no health care, no welfare for you...we call this capitalism.

[l.blissett]

excellent point naruto...kudos

[WorkingClass]

The money aint gonna be no good and there aint gonna be no work. Is that a depression? Shit will just grind to a halt. Folks will suffer for real sort of like the people in Iraq suffer now. There aint gonna be no new deal. The government will stop pretending to be anything but a police state. But the government will be unable to even provide security, much less exercise control. A deadly chaos of massive internal migrations across a lawless land. Sort of like Iraq.

[curiousasheck]

The system in it's current form is obviously unraveling. Know one knows what in the hell they are doing or who owes who what. Industrial Capitalism as we've known it is in late terminal stage of decay.

Just a matter of time till something gives.

[toomuchtolose]

Wow.I hope you are correct in expecting the FDIC to protect our bank accounts. I'm terrified that's been compromised. A few months ago my CHECKING ACCOUNT statement had a message attached that said effective immediately all checking accounts would be reconfigured into subchecking/subsavings accounts. Not to worry though; it's just to streamline their tracking system. Made no sense to me. A checking account is NOT a savings account. I spent hours online until I came across some info that the Federal Reserve Bank agreed to let banks reduce the amount of funds on deposit with the Federal Reserve, allowing banks to claim availability of more funds at the banks, allowing those banks to make more loans. That scares me. We're told Americans don't save; live paycheck-to-paycheck; and buy basic necessities on credit. Banks are using checking account money to justify loans they make. Less money is on deposit with the Fed Reserve. How can FDIC cover bad bank loans made from phantom money? They do say they only use the checking account money until there have been 6 withdrawals and then they accurately identify it as checking account funds not savings account funds. I do not find that reassuring.

[l.blissett]

toomuch,

in a fiat money system, ALL money is phantom money. as long as federal reserve can continue to export inflation successfully, the FDIC (through the printing of more $ by the fed) can cover anything they need...up to a critical mass of course.

question is: what is the critical mass?

you better believe the fed has an estimate. now whether they have the ability to keep the wealth engine goin just a tiny bit faster than the debt monster, that's the 64 trillion dollar question.

u might wanna watch this:
http://video.google.com/videoplay?docid=-9050474362583451279
it's good stuff.

[Sundialsvc4]

We have been in a Depression for a very long time. Probably for the last twenty years.

We're not going to see a repeat of 1929 simply because the Great Magic Money Machine has been creating Dollars out of Thin Air to the tune of "more than $1 million A MINUTE, 24/7," for dozens of years now.

But what do you call it when Wal-Mart is reporting a loss of customer revenue? What do you call it when millions of Americans cannot get health insurance, and so are just accident away from bankruptcy? What do you call it when the Communists that we used to oppose are now "Most Favored Nation?"

I think that we have all been standing around waiting for 1929 and, not seeing it, have pretended that all was well. But this country is not even a ghost of what it used to be a mere fifty years ago. And by the way, there are a lot of people from that era who are still very much alive: and a whole lot more who are spinning in their graves.

Take 1929 (or worse), and flood it with a sea of invented-from-thin-air money, and you've got what we have today.

[kujo76]

You're right, the FDIC is not really a solvent entity. It's presence is merely psychological. If people believe that their deposits are insured, they are less likely to make a run on the banks in a panic. Most don't realize that it doesn't matter that some quantity of dollars are insured if the basic monetary unit cannot be insured. Since the Federal Reserve has come into existence, the dollar has lost 96% of it's purchasing power, and that is with what most would call relatively modest levels of inflation. If the Fed loses control of the dollar, no amount of insurance will save anybody from poverty.

[SteveL]

You can bet a depression would sure change people"s priorities. The hot button issues would no longer work in politics and bread and butter issues would take precedence. Now someone tell me what economic system calls for a country to give tax breaks to move jobs overseas. The neo-con system for destroying the middle class?

[SidneyStillInLove]

It would be incredibly worse simply because poor people couldn't rely on farming to get by not with all the stucco tract homes and lack of agriculture. No more living off the land.
Also the population is much greater than it was then. We would see a massive state of homelessness and violent crime. I think the FDIC was created to keep people from losing thier asses in a meltdown like the 1930's . We are now insured for the funds we keep in the bank. Hopefully off setting massive failure.

[kujo76]

The FDIC isn't funded enough to bailout even one large financial institution, let alone a systemic financial crisis. The Fed would have to fund the FDIC with new debt, and presumably debt will be one of the major causes of the problem. Moreover, the FDIC only covers $100,000 per account, and if the dollar collapses and hyper inflation ensues, $100,000 won't get you very far.