The Media Just Loves A Great Depression Story

The media has its memes and isn't willing to stray from them for even an instant. They believe that the world is coming to an end and that the economy is going to completely implode into a Great Depression. These kinds of stories continue to circulate on a near daily basis, and the fact is that the media has been getting soundbites from the ill informed and just plain clueless claiming that we were already in a depression months ago.

The Record ran this story today about how some folks who lived through the real Great Depression are wondering if we're heading into another depression.

Economists are pretty much unanimous that we are now in a recession. Unemployment has hit levels not seen in 25 years. Social services are stretched to the limit, conjuring up memories of the Great Depression.

People are now looking back to the nation's history 80 years ago and wondering, could it happen again?

One thing's for sure: Talking to people who were alive during the 1930s won't necessarily make you feel better. In interviews conducted with Passaic County residents last week, people over the age of 80 said conditions during the Great Depression were often grim but that life was manageable. They had mixed feelings on whether today's conditions are as bad — or could get as bad.

Unemployment is still below historical averages and yet we're supposed to believe that the Dust Bowl and Grapes of Wrath are just over the horizon?

At the same time, we've got numerous reports suggesting that retailers did pretty good for the opening weekend of the holiday season. In fact, they were claiming that sales were up slightly over last year. If this was truly the depression the so-called experts claimed, wouldn't sales have dropped off precipitously from last year and people would not be spending even if there was pent up demand for all manner of items? In fact, why is it that people are still rushing out to buy large LCD and plasma screen televisions that cost upwards of $750? It's not like they need them. If times are so tough, where are they getting the money to do this stuff, especially when credit is supposed to be much harder to get?

Look, the toxic paper crisis is indeed a mess and the government got us into it as a result of lousy economic, fiscal and social policies that claimed that affordable housing was a top priority. Increasing the number of homeowners was considered all important, ignoring the ability of those people to ever repay their obligations. When the real estate markets began their correction, all the assumptions got thrown out the window and exposed real weaknesses in the affordable housing manta - including that there was no oversight of Fannie Mae and Freddie Mac, Congress abdicated its oversight and pushed for more subprime borrowing even though those people lacked the capacity to repay the moment interest rates adjusted upwards. The cost for this mess is still being tabulated, but it's in to the trillions of dollars.

That's anything but affordable.

Trying to unfreeze the credit markets will help get the markets going and improve consumer confidence, but the government pushing the markets in unnatural directions will only further distort the marketplace and delay the recovery as industry after industry considers that they are due for a bailout as well, allowing them to gain a piece of taxpayer dollars despite their own multiple failures of business judgment.

Pushing for higher taxes and increased government spending will not solve the economic problems. Reducing government spending and letting taxpayers keep more of their own money so that they can spend it as they see fit is the only real solution to this mess.

UPDATE:
One outfit says that we've been in a recession since December 2007. That's possible, but not according to government data, which requires two consecutive quarters of negative growth - not merely declining growth.

The GDP contracted by 0.2 percent at an annual rate in the fourth quarter of 2007, but that that drop was followed growth in the first two quarters of this year, partially boosted by the distribution of millions of economic stimulus payments.

However, employment, one of the measurements tracked by the NBER, has been falling since January.

The NBER decision means that the economic expansion lasted from November 2001 until December 2007. Economic expansions peak and recessions begin in the same month, according to the NBER's dating methods. Founded in 1920, the NBER has more than 1,000 university professors and researchers who act as bureau associates, studying how the economy works.

So, NBER is saying that we have to ignore the fact that there were two quarters of intervening growth between 4Q 2007 and 3Q 2008 in order to reach their conclusion that we've been in a recession since 2007. That's playing with statistics and distorting the definitions of recession. Maintaining a rigorous definition of recession would mean that we have not yet even entered a recession, although if the numbers for the fourth quarter of 2008 show a downturn, it would finally show that the recession has been underway not since 2007, but since mid 2008. Perhaps some will call this a distinction without a difference, but facts matter. All too frequently the media and so-called experts have sought to distort the picture of the state of the economy and the news doesn't exactly match with what the facts show.