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Great Recession or Great Depression?

The U.S. government says the recession ended in June of 2009. The economic gurus of our time parrot this proclamation in complete belief, but how has that recession ended when the unemployment that it caused never improved for those who lost their jobs? How is it that the experts and government officials ALL say the recession that began in 2008 ended when none of the underlying causes of that recession have been corrected? How can we be going into a second recession when this thing that is happening to us right now was all caused by the thing that happened to us back then? How is it not just an extension of the same thing?

The reason the government says the recession ended is that they look at very limited measurements — essentially just GDP. I argue that, if we are in a recession that is defined by the same failures as the “last recession” then it is all one whole. It is one great recession, even it has multiple parts.

This is why I decided to start this blog. We are, in fact, in the same recession we started out with. That’s why some call it “The Great Recession.” When it first began in 2008, I told friends that we were entering a depression. Many didn’t believe me. I syndicated articles to various newspapers and websites, stating how this depression would play out, and it has played out in just that manner and with the very timing that I forecasted.

There are, as I see it, two main reasons people didn’t and still don’t believe this is a depression. The first is that they mistakenly think the Great Depression began with a single large crash and then stayed down for years. It did not. There were many crashes, with one most notable, and that means there were just as many spikes or slow trends. You cannot have more than one crash without high points in between. Yet, all those spikes and valleys graph out as one very long and bumpy depression in the economy.

Depressions are Depressing

The other reason people would not believe we were entering a depression is denial. They don’t want to hear about “depression.”  Those who work on Wall Street don’t want to hear that bull markets are ending. Those who work in government don’t want to hear that they created massive troubles for the world through their economic policies. People on the street would rather not think in such terms as “depression,” for they fear they may lose hope. There is just a lot of inertia toward accepting the term “depression.”

So, to make it easier for you, I’ll go along with those who call this “The Great Recession,” but I do so tongue in cheek. (“Oh, it’s a great one all right. Are you having fun yet?”) I’ll mix what I have to say with humor wherever I can … sort of like my mother used to take baby aspirins when I was ill and crush them up with raspberry jam to help them go down better.

Nevertheless, cutting straight to the truth when you cannot seem to find an objective view anywhere is the reason I decided to write this blog. I think we only deal effectively with things when we gain understanding of what we are going through and when we stop all denial about what is happening. That’s when we finally get serious enough to find the answers, but the getting serious about the answer is made much easer if we can laugh about the problems. We don’t laugh because the problems are not serious. Rather, we find the humor in things to ease our pain along the way. So, this will at many times be a rollicking and irreverent blog.

First, I need to establish my claim as to why this is a depression — or will be seen as such in years to come. The economists of our time — almost to a person — have not had the foresight or courage to see that. I guess, if they were courageous by nature, they would not be economists; they’d be bull-fighters in today’s absurd bull market. So, I need to be clear as to why nearly all economist have been wrong in their statements or have simply failed to predict what we have been going through:

Depressions are only realized and understood after they have been underway for some time. They are, in a sense, proclaimed by historians. People did not say at the beginning of the Great Depression, “We are in a great depression.” Consider how such great trends of the times become labeled by this example: The first world war was called “The Great War” until another global war came along that was even greater. When that happened, that first global war was renamed “World War I,” as the second global war was named “World War II.”

In the same way, it may be appropriate someday to rename the “Great Depression” as “World Depression I” and this depression as “World Depression II.” For right now, we have not looked back at it over time long enough to have a clear perspective on what to call it. Our understanding of it is unfolding, and my aim is to bring greater clarity to what it is we are going through. So, for now, I’ll go along with calling it “The Great Recession.” As recessions go, it is, indeed, great. Yet, it will someday be called a “depression,” and here are the reasons why:

The Difference between a Recession and a Depression

The downturns we previously called “recessions” were the result of speculative bubbles in the marketplace. Markets speculated far above what things were really worth and then plunged below what things were worth in overcorrecting (as usually happens) and finally leveled off to what things are actually worth. So, the “dot-com” bust happened because people got in a buying frenzy, bidding the prices of stocks way beyond any revenue companies were making to justify such bidding. Recession come when certain industry markets fail, usually because stocks in those industries were speculated beyond reason.

This “recession” was nothing like that; it was a collapse of our core financial structures. That is what makes all the difference in the world. A failure of a single primary financial institution is like a crushed vertebrae. It’s spinal failure that is severely debilitating. We had several primary financial institutions collapse. That is the equivalent of several crushed vertebrae resulting from the same incident. At that point, it is a miracle if the patient even lives; and, if he does live, he may wish he hadn’t, for there is a lot of pain ahead.

When this great recession of ours first began, some of the most-frequently quoted financial gurus on U.S. news broadcasts said such things about the banking collapse as, “This is nothing. In the 80’s, we had over 500 savings and loans collapse, and we recovered. This is only a few banks.” That kind of dimwitted statement is why I am writing now. Having 500 credit unions collapse around the economy is like getting all of your fingers crushed. Bad as that is, I’d rather have all my fingers crushed than have a single vertebrae crushed, much less five or six vertebrae. The savings-and-loan crisis that was part of a recession was a collapse around the periphery of our economy. The present collapse has been due to nearly complete spinal breakdown.

While there was a huge bubble involved in all of this that I’ll address in my next couple of posts, this collapse was a central failure with certain global impact — a far graver concern than a mere market correction. This is something that requires rebuilding our financial system at its foundational level, and that requires reassessing the financial principles (the soil) we built our last foundation upon.

Since few people are talking about this “recession” at that level, it’s time for someone to play tackle in the economic playpen of our government, to poke the eyes of our blind economists, to punch the bellies of our fat CEOs, and to disrobe our feeble politicians, who are only scantly clad to begin with because they are making love with the fat CEOs. My goal is to accomplish that with clear objectivity, pointed criticism and sharp wit.

Just call me Knave Dave.

 

More reading on the Great Depression and the Great Recession:

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