Sunday, December 28, 2008

Here is why this downturn will be worst ever

The 86-year-old aunt of a friend of mine spoke of the Great Depression this way: "We had nothing going into it and we had nothing coming out it."

And based on that truth for many Americans back then, the current economic downturn will easily surpass the Great Depression when it comes to the loss of wealth among Americans and loss of confidence in the future.

A lot of Americans who now are losing their jobs, houses and hopes have a lot of things. They were successful economically and initially. Now they're not, because of cruel greed on Wall Street and sometimes in their personal lack of action to save more than spend.

During the Great Depression, many Americans still lived on farms and were able to support and survive off the land. Farmers in Indiana were dumping milk instead if selling it because the price was so poor at the market. It didn't pay to transport it there.

Now, the coming collapse of some MUNIs will be wipe out a new segment of wealth in the United States, this time mostly with the elderly depending on tax free income. Cities and all levels of government are operating under massive deficits and must cut spending somewhere. Debt payments to faceless investors instead of vocal constituents is the easier choice.

The value of homes will continue to decline for another two years. These homes often are the primary asset in many households.

More money of regular households is dangerously in the stock market, where these folks have little experience and too much dependence on brokers and financial analysts who make their money first in getting regular people to invest and then stay in the market.

Then there is the presence of a 24-hour media, which can go anywhere and anytime to show the human misery of this Depression. The psychological impact is devastating.

So the Great Depression of 2008-2011 will be the worst in American history, for these factors and more.

No comments: