For Those Who Doubt That We're Heading for a Depression

[Yavin4]

Please reconcile these economic facts with your argument:

1. Consumption accounts for 70% of our entire economy.

2. We have had tepid job and wage growth since 2001, and most of the job and wage growth was tied into the housing sector.

3. We have a negative savings rate.

4. Housing prices are declining because of the increased foreclosures and the glut of homes for sale on the market.

5. True inflation, not the govt's fairy tale numbers, is spiraling out of control chiefly because of higher fuel and food prices.

Now, given these facts, please explain how we're not heading into a depression or slow down or correction or whatever Orwellian economic term that you want to use.

[fascisthunter]

1. They Can't... You are Right

this country inhabits too many deluded fools.

[Bobbieo]

3. I predicted a depression last summer which is why I wanted my mortgage paid off ASAP

[fascisthunter]

19. I'm in Pretty Bad Debt Myself

with private student loans.... and no one with fix the interest rate. No one.... I don't lose sleep over it anymore... I used to, but not anymore.

[EmperorHasNoClothes]

2. The sad thing is, if a depression does come,

the pundits and right wingers will find a way to blame it on Democrats.

[doc03]

5. It was that pesky raise in the minimum wage that did it. n/t

[doc03]

4. Don't think of such things I have

a good portion of my 401k and IRAs in the market. I was at the mall today and saw the UPS man delivering a big cart full of boxes (at least 25) every single one said made in China. I don't see what $300 is going to do for our economy if all our products come from China.

[livvy]

6. No doubt here. I've been depressed for about 7 years.

On the serious side, I find myself finding it much harder to make ends meet. My raises have been around 1-2%, so considering inflation, it makes sense. Then considering the rapid increase in goods and services, the difficulties become more pronounced.

I had more spare cash when I was a beginning teacher, in the mid 70's than I do now.

All I can say is it's a good thing we have these wonderful conservatives running things now. They are very good at conserving the wealth for themselves, and the rest of us are surely appreciative!:sarcasm:

[gg55]

11. My teacher's salary isn't keeping up either.

I can only imagine what stresses minimum wage folks are under. :( Food, fuel and utilities are rising monthly, surpassing any $ from my raise.
Funny how these basic necessities aren't even counted.

[AwakeAtLast]

24. Welcome to DU!

I am also a teacher. We actually got a 4% raise this year, which was the largest I've ever had in 10 years of teaching. HOWEVER, when you take out the higher amount we pay for insurance, my checks went up $5 DOLLARS PER PAY PERIOD! Isn't that a kick in the pants?

Hope you get a lot out of this great site - I sure do!

If you get a chance, check out the Education forum if you haven't already.


:hi:

[gg55]

26. Thanks for the welcome!!

And the heads up on the education forum. This place is HUGE!! I joined a forum about being frugal hoping to get some tips. I am cutting the budget to the bone as my raise, 3.5 is jsut cola (with too many bubbles!) See you on the boards! :)

[CK_John]

7. IMO, the problem is not economics but social breakdown when the oil tap runs dry.

As for the economic side we are in a transition period from the balanced check book(bcb) group (over 40) to it's the monthly payment nut(mpn), cost be damned group (under 40).

The bcb group were conned into thinking it was right to save everything for a rainy day, to live within our means and live within your status class, and to work hard and long for a pension. Around this model wall street built a giant ponzi system to use your money to make them wealthy.

The under 40 group figured out the scheme and said screw you give me the money, give me all credit cards you want and the biggest house on the block. If I can't make the monthly nut take your cards and house and stuff it. Wall street now doesn't know what the hell to do, it has nothing but worthless paper.

What to do? Only thing to do is forgive and forget, and design a new model with the under 40 as partners.

It will be different, how it works out is yet to seen.

[Rydz777]

8. Yes, you're right. We're headed for a long period of stagflation -

low/no growth combined with inflation, and whatever they choose to call it, it will feel like depression. The government has been lying about the true inflation numbers for year.

[KG]

9. prudent to plan for a big bad economic thing and it not happening, rather than the opposite.

anybody get that? not sure even i did... :)

[nightrider767]

10. I just bought a shitty, rust infested car...

when the depression comes,,,, I'm buyin the Yukon w leather for pennies on the dollar!

What about my job!?!

Screw that, I'll be livin in my Yukon, in a Yukon down by the river!

:rofl:

[fasttense]

12. Tepid is too mild of an adjective to describe our job growth.

We have had the worst job growth since the Great Depression. (I find it interesting that we have all these economic numbers like the rate of increase in foreclosures, the personal savings rate and devaluation of the dollar that we haven't seen since the last Republican Great Depression, yet people still want to deny we are in a recession.)

"Reflecting the production shortfall from the trade deficits, BLS data show output growth since 2001 is among the weakest since the Depression and the gain in total hours worked (just 0.5 percent) is, by far, the weakest. This is why productivity growth has appeared misleadingly healthy; productivity is a measure of output per hour of labor."

http://www.manufacturingnews.com/news/08/0124/art1.html

[Mendocino]

13. #3 Negative savings rate

On one hand the government wails that we as nation don't save, but then encourage us to spend everything. I know plenty of people who have no real net worth, given what they owe on their homes.

A crash is coming, with what I fear will be world anarchy. Too many fragile systems could topple.

[robcon]

14. None of those facts even suggest a depression.

Calling anyone who disagrees with you Orwellian is a giveaway. You don't know what you're writing about

[Yavin4]

20. Dismissing The Argument Without A Counter

Speaks volumes about my argument

[Strelnikov_]

15. Hammer Hits Nail

Peak oil will result in demand for a price inelastic commodity chasing too little, and eventually declining, supply. Price transients will wreak economic havoc to capitalist economies similar to the 70' shocks. A persistent cycle of recessions will ensue.

The initial damage caused by peak oil will be to our economic system long before any deep energy shortfalls occur. Renewable/alternate energy supplies will probably come on line at a rate that could for a time mitigate the decrease in fossil fuel energy resources. There seem to be a number of viable energy technologies (wind, solar, bio-fuels) that will be marketable as the cost of petroleum and natural gas continues to rise.

However, none have anywhere near the capability to provide the exponential growth in energy supply that the era of cheap petroleum and natural gas provided. The problem is that all of the alternate energy sources seem to have EROEI’s in the 1.5 to 4.5 range, and will never be able to offset the loss of the thermodynamic bounty harvested in petroleum and natural gas.

For the first time since the industrial era began, the exponential growth in energy supplies that modern growth centric industrial economies depend will end upon (US 1950 - 34.6 Qbtu, 2002 - 98.0 Qbtu, average 2.0%/year since 1950). How this will impact highly complex economic systems that are based on growth as a premise can only be speculated, but based on our experience of the 70’s, it does not look good.

It is this thermodynamic aspect of peak oil that will lead to the 2nd Great Depression. As the decline in conventional oil accelerates, EROEI (thermodynamics) will at a minimum severely depress, and probably destroy, capitalist economies.



My position, as of this writing, is:

- We are currently at peak, surfing the plateau.

- The peaking of fossil energy will require a complete reconfiguration of societal and economic models to maintain industrialized civilization in an energy limited future.

- There are no technofixes. The options we have available that are robust (durable, scalable) enough to base an energy infrastructure on are 30 years old or more (wind, PV, solar thermal, nuclear, coal, etc.). Technology will allow us to use these existing sources more efficiently and with less harm, but at a price in complexity/cost.

- The future of sustainable transportation is electric. In an energy limited future the inherent efficiency of electrons as an energy carrier will be mandatory.

- The primary fix we have, related to the above point, is efficiency/conservation. In the USEA that I have proposed "Entropy is the enemy" will be the organizations motto.

- Due to 27 years of insane right-wing policies that began with Reagan, we no longer have time to mitigate without enduring significant economic hardship.

- All of the above leading to my conclusion that collapse of society is probable. Not that we do not have options, as presented above. The problem is that these options will take leadership, sacrifice, and a willingness to change. Qualities that seem to be nearly nonexistent today, just as they have been throughout history. Nothing has yet been written though. The future is in our hands.

..

The scorpion wants to cross a river, but does not see any way across.

He sees a frog sitting by the bank of the stream on the other side of the river, and asks the frog for help getting across the stream.

The frog responds "How do I know that if I try to help you, you won’t try to kill me?". "Because," the scorpion replies, "If I try to kill you, then I would die too, for I cannot swim!"

"Alright then...how do I know you won’t just wait till we get to the other side and then kill me?" said the frog. "Because once you've taken me to the other side of this river, I will be so grateful for your help, that it would hardly be fair to reward you with death, now would it?!" replies the scorpion.

So the frog agrees to take the scorpion across the river.

Halfway across the river, the frog suddenly felt a sharp sting in his back. "You fool!" croaked the frog, "Now we will both die! Why did you do that?" The scorpion shrugged, "I could not help myself. It is my nature."

They then both sink into the muddy waters of the river and drown.

[catmandu57]

16. Wait until peak oil his agriculture

We'll be in a real mess then, when we can't fuel the machinery we need to grow our food, or process it, or make clean water because it takes energy to pump it and sanitize it. We're going to be in a world of hurt then.

[pitohui]

23. peak oil is a meme spread by those who want to inflate the price of oil

don't fall for it, it's a big lie spread by astro-turf in order to make it more acceptable that we should be paying ridiculous, inflationary prices for oil and gas

i'm sorry that so many people fall for it, but so many people fall for anything

the great depression was a deflationary event, what we're seeing is inflation with the threat of hyperinflation -- a world of hurt certainly, and nothing that will be helped by people buying into "peak oil" crap and just standing by without protest as the price of oil is yanked unreasonably high for the profit of a few

exxon mobil is AGAIN reporting historically high profits, this is not a business on the brink, this is a business that has sold a story as to why they should get EVERYTHING in your pocket and the stupid people are buying it

if oil is rare and valuable, riddle me this: why isn't it being immediately nationalized as a natural reasource and being distributed/rationed with care -- instead of being allowed to be traded in the "free market" to the profit of the few

oil and gas are simply not rare resources, they are managed (manipulated) resources

when oil/gas was hard to get and distribute (during ww2) it was rationed, as it should be, IF it was truly rare

it ain't and no one in power thinks it is, they just find it convenient for you to think it is

[neverforget]

27. Peak oil is running out of cheap and easy to get oil, not actually

running out of oil. As with any resource, oil and gas are finite. The US peaked in oil production in the early 1970's and has been falling ever since.

[flashl]

17. Long-term and intentional lexicon of confusion prevents recession/depression definition ...

On Their Own Terms: A Lexicon with an Emphasis on Information-Related Terms Produced by the U.S. Federal Government

...

In his "Glossary of Dispossession," writer Paul de Rooij observes, "words are very
important. Words frame issues, palliate, mollify, exculpate or even hide sordid acts."

Many terms reported in the Lexicon are liquid power, representing a federal language of control that often downplays the significance of government actions, policies, and programs.1 "Burden," "Firstfruits," "National Censorship," "Public Diplomacy," and other terms act to couch questionable policies and practices, and serve to legitimate authority and control over information.

Described by Claus Mueller (1973 :24)2 as "distortion" because "conditions and policies are quite different from their meanings," political language "is designed to make lies sound truthful and murder respectable and to give an appearance of solidity to pure wind" (Orwell 1950: 92).

Another way of saying this is that "language often masks administrative evil (Adams and Balfour 1998: 15).3

---

1 Deborah Tannen (1998: 14) cites Dwight Bolinger’s work in making the point that words matter, that "language is like a loaded gun." Tannen observes that the "terms in which we talk about something shape the way we think about it – even what we see."

2 Mueller powerfully illustrates his concept of distortion by offering examples of "reformulated language," new and redefined terms from the Meyers Lexicon published in the Weimar Republic in 1924 and under National Socialist Germany in 1936, as well as Language
Regulations issued by the Office of the Press (Reichspressant).

3 For example, the Central Intelligence Agency’s term “extraordinary rendition," a term that masks the chilling dimensions of "outsourcing" torture and human rights violations illegal under international law and agreements.

[Greyhound]

18. K & R

I'm certain that the DINOs will be out soon to nitpick your use of the word "Depression", but anybody with eyes and a few synapse still firing, can see where this train is headed.

[LeftCoast]

21. I find it difficult to discuss this because you haven't said what we're heading toward

In your title you argue we're heading for a "depression" but then you end by calling it a 'slow-down, correction, whatever'.

Are you arguing that it's the economic end of the world? A modern Great Depression? A nasty 1970's style recession? What?

:shrug:

[Zynx]

22. As I believe you are addressing my post, I will respond.

A recession, in which the economy contracts for some time and unemployment rises, is fundamentally different than the Great Depression.

The housing correction will cause a slump in consumer spending, no doubt about it. However, a 60% contraction in GDP like during the Great Depression? Not a chance.

Personal debt levels do have to come down somewhat, however, that need not destroy the economy.

Inflation is not as severe as it was during the 1970s. We have seen much worse than this.

Savings rates tend to turn around during recessions. Once again this can happen without catastrophic consequences.

Wage and job growth has been tepid, but it wasn't all due to housing like you suggest. There has been strong growth in international trade and in financial services. Also, job growth has occured in health care and government.

Let me be clear here. I always said we are going into a recession. I also said that a Great Depression with a collapse in GDP of 60% and a rise to 25% unemployment IS NOT GOING TO HAPPEN.

[Yavin4]

25. My Rebuttal

<<A recession, in which the economy contracts for some time and unemployment rises, is fundamentally different than the Great Depression.>>

As I wrote, choose whatever Orwellian term as you like. I argue that the economy has been contracting since 2001, but this contraction was masked by a multi trillion dollar credit bubble.

<<The housing correction will cause a slump in consumer spending, no doubt about it. However, a 60% contraction in GDP like during the Great Depression? Not a chance.>>

Like I wrote, consumption accounts for 70% of GDP, without the credit bubble, tepid job and wage growth, and negative savings where will the mighty U.S. consumer get the money to keep spending? Where?

<<Personal debt levels do have to come down somewhat, however, that need not destroy the economy.>>

Personal debt is what has sustained the economy for this entire decade.

<<Inflation is not as severe as it was during the 1970s. We have seen much worse than this.>>

Do you want to know why? In the 70s, the US workforce was heavily unionized, much, much higher than today. Back then labor had contracts which had automatic cost of living adjustments. Today, we don't have that. So, yes, inflation may be lower than it was
in the 70s, but it's not exactly a good thing. As prices get higher, consumers will cut back even more.

<<Savings rates tend to turn around during recessions. Once again this can happen without catastrophic consequences.>>

The consumer is under water. There's nothing to save.

<<Wage and job growth has been tepid, but it wasn't all due to housing like you suggest. There has been strong growth in international trade and in financial services. Also, job growth has occured in health care and government.>>

I will give you international trade, but that job growth was minimal. Financial services was part of the housing boom, and they're laying off people. Health care growth is largely government spending, and job growth in government is also tied to the housing boom because of higher property taxes.

<<Let me be clear here. I always said we are going into a recession. I also said that a Great Depression with a collapse in GDP of 60% and a rise to 25% unemployment IS NOT GOING TO HAPPEN. >>

Yet, you still have not offered a compelling argument as to why we are NOT going to have a "Depression".