The Next Great Depression

I don’t understand much about the functioning of the “market,” but in observing its cyclical chaos, apparently no one else does either. I’ve always thought that money was something to save, not spend, but despite devotion to saving, I’ve lost my meager little pennies several times over my life.

I was raised by Depression-scarred parents – how many times did my dad say he daily had to choose between taking the incline to school or buying lunch; and how many times did my mother talk about making curtains out of her wedding dress or was it the other way around? Then there was the aftershock of the Holocaust tainting my childhood as I played with children of survivors. No wonder that to this day I have food secreted in every drawer and money folded into every pocket. Just in case.

But you don’t learn about how the economy mucks with your everyday life until you live through a national crisis that sucks your own little pocketbook dry. When I was living in Israel I had my first experience of being robbed by the market. I ran my own business there – a Tae Kwon Do institute, so I bought into the government-sponsored retirement fund. The right-wing Likud party was in power for the first time and they swiftly did what right-wingers always seem to do: they perpetuated wars and they ruined the economy.

This was in the 80s and inflation was reaching astronomical heights – 600% by conservative government estimates if I recall. That means that if milk is $1.50 in the morning it will be like $1.65 in the evening and $1.80 the next morning. Keeping money in the bank was dumb – it was losing value every moment. Being in debt was smart – interest rates couldn’t keep up with inflation. People stock-piled every essential, since it would cost more the next day.

One day we woke up to a government announcement that we were no longer using our hyper-inflated “lira” currency but were being switched to the new “shekels.” All those of us with small, astronomically overtaxed businesses had a secret, illegal cash-stash under the mattress or in the freezer. We had a short window in which to turn in all lira in exchange for shekels or lose them altogether. We were between a rock and a hard place.

A few months later I went to the bank to check on my retirement fund’s health and was assured by the manager that it was rock solid. The next day we woke up to a government announcement that the fund was compromised and that we could either take cash out at $0.60 on the originally invested dollar (ie, without all that guaranteed high interest we had accumulated over years) or leave it in to an uncertain future. Everything I had saved for a decade was lost.

I had a similar experience when American high-tech stock bottomed out and I never recovered any of those losses. Saving has been a losing strategy for me, although I haven’t figured out an alternative.

Now the people who believed that housing was the safest place to put their life savings are in trouble. I know several people who have failed to sell their apartments for a year or three. We know only a hint of the extent of foreclosures. For Boomers and elders, this is simply disastrous.

The signs around us are dire. According to the Commerce Department, the American rate of savings is the lowest since the last Depression. Twenty-five percent of Americans have no savings at all. While in 2000 one in five people between ages 65 - 74 were still working, in 2005 it was up to nearly one in four.

Oil and gas companies are making the hugest profits in history and no one is rioting, despite the impact of oil costs on the rest of the world’s economies. Wanda Sykes told a bittersweet joke on TV the other day about people getting busted. “We don’t even have car chases anymore. If they see a cop in the rear-view mirror, they say, I’ll do 4 years, at least then I won’t have to fill up anymore.”

I shop at a local butchery known for its fresh inexpensive meat and produce. There I had one of those little conversations that can serve as a metaphor for life as we are now getting to know it. At the deli counter, I asked for the shredded chicken I often buy at $2.99/lb to make chicken salad. It’s now $3.49. What’s happening, I asked the guy behind the counter.

The mayonnaise they buy for their salads has gone up from $8.99 a case to $18.00. The plastic deli containers have gone from 7 cents to $0.18. Meat, he said, is up 48% since March and chicken is projected to be up by 70% soon.

That’s just one little corner of one store, but multiply those changes by just about every other segment of the “market” and perhaps you’ll agree with my sense that disaster looms. They’re saying that flying is going to return to being a luxury item for the wealthy or when the company is paying. Artists are finding that buyers are reluctant to part with cash. Rents are sky-high because nobody is buying, putting unusual pressure on the rental “market.”

I know this because I’ve been searching for a rental apartment lately. I found a newly-renovated two-bedroom pearl in a more residential area just a few blocks from where I’m living now. I filled out the application and gave a check to the realtors, but decided to cruise by it later that night, after dark. When I returned to that block I found a number of freshly broken windshields and a lot of unhappy, even bitter-looking people hanging out. I asked to rescind my application and for my check back.

As I drove around that and several other working class areas, I saw increasingly numbers of people on the streets with nowhere to go. They looked depressed, hopeless. No wonder that in the last AP poll, fully 76% of Americans said the country is headed in the wrong direction. That’s the highest number since AP started polling on this question.

Makes you wonder how badly the oil people are stressing out about the price of gas…

 

Comments

[Gema Gray]

Great post Katz - and how awful to lose evertyhing like that.

My husband and I were talking about all of this the other day and he stunned me with the apocalyptic "It's he end of the world as we know it." This is a very sanguine man so I asked for clarification...

He predicts that transportation costs will have us all going back to eating locally grown produce, with only the ultra-rich being able to afford items brought from another region or around the world. We will buy more of our food fresh and unprepared because plastic packaging is made from oil (hence the price hike that your butcher quoted).

Already this week I have read two articles online about farmers in Vermont and Maine switching their land use to grow crops normally associated with the midwest, in order to capitalize on the shortage of grains and meet local demand.

People will begin to migrate back towards the cities to use public transportation (such as it is!) and avoid the car commute. Young people will live with their parents longer (already happening) and go to local colleges and universities, rather than explore new places.

We will, in his estimation, go back to a "simpler" way of life, driven by the rhythms of local climate and extended family needs - not far removed from the lives our parents and grandparents lived as they raised us, but cushioned by modern conveniences and techologies.

Now, that doesn't sound so bad, does it? Maybe we have overstretched the rubber band of human existence to the point where it is ready to snap, and so a contraction is necessary to avoid catastrophe. The resources available to us from the planet are insufficient to meet our greedy needs. We have tipped the balance too far in the name of progress.

Maybe, this Next Great Depression, as you call it, will be a readjustment of society that will place us back in balance and allow us to continue our evolution in a less destructive direction. Maybe our sons and daughters and their children and grandchildren will have a better understanding and will forge humanity's path forward with a restraint and forethought that has been lacking in recent generations.

The readjustment will be painful for sure, but perhaps - just perhaps - humanity will learn from it and we will move on without the hubris and recklessness we have so far displayed.

I choose to be hopeful...

[Sue Katz]

Well, that's putting a positive spin on things indeed, Gema. But ultimately, poverty is never pretty or positive or welcome. You gotta have an income to buy that local produce. Certain people make big bucks when everyone else is being impoverished: and I think the combo of the gazillionaires being made in the almost private-market conduct of this war in Iraq and the oil companies are doing the rest of us in.

[Lynda]

If I could believe we were just going back to simpler times as Gema is hopeful for I could live with that. Unfortunately I haven't her hopefulness. The whole thing is just too depressing to even contemplate. Where I see us going is NOT a pretty picture at all.

And people wonder why I have NO desire to live to be 100.......LOL

[Sue Katz]

Yes, Lynda, I agree. The thing is that as I looked through images of the last great depression, I could find no evidence of "simpler times" - just worst times.

[Lynda]

Sue,

Simpler times would be going back to the 50's. Unfortunately, I see us going back to medieval times and THAT scares me the most.

The latest "witch hunts" (smokers, obese people, drinkers, etc) seem to be escalating rather than dying out.

The tactics being used today in the name of "public health" are the same tactics Hitler used in trying to create his "pure" race. That no one makes the connection shows how little history people remember or even know.

And THAT is that scariest thing of all.

[Gema Gray]

In taking the "big picture", long-term view, I did not intend to dismiss the effect of poverty and hardship that, I agree with you Ladies, is almost inevitable. It will be incumbent on those with the means (government, the rich) and compassion (all of us) to attempt to ease the burden on those suffering the brunt of the readjustment.

[Mattilda Bernstein Sycamore]

Thanks for this great analysis, Sue. There's another great post, on a similar topic here:

http://www.beyondchron.org/news/index.php?itemid=5698