Tuesday, January 22, 2008

Recession 1928 vs 2008

Recession 1928 vs. 2008

In 1928 the country was in desperate shape. Social Security did not exist, there were few programs in effect to alleviate real hunger, and unemployment was rampant. Farmers lost their farms; most city dwellers lived in apartments and could not afford the rent. By today’s standards most Americans would be classified as poor. The banks quit issuing loans. Factories were shut down. Even if they could operate there were no customers for their products. For several years people lived in desperation just to exist. There were few who could afford to improve their standard of living. This existed until FDR became President in 1932 and immediately enacted the New Deal. One of his first actions was to close the banks and reopen them one at a time when they could assure their viability. Depositor’s savings and checking accounts were federally insured to protect the average citizen. Jobs were created in construction and in the CCC which took men into the wilderness areas to build trails and huts among other things. Welfare was made available but the key to FDR’s programs was that he wanted American men to go to work doing anything. He did not want to grant handouts while those receiving them stayed idle.
Now let’s compare that era to the present “crisis” in 2008. The average home sells for over $230,000. Credit card debt is at an all time high, the restrictions that were supposed to be in place somehow were ignored allowing people to purchase larger homes than they could reasonably be able to afford. Personal assets and job security were not a requirement to purchase. Houses were sold with interest payments only on the mistaken belief that they would increase in value over time without ever dropping in value. Equity was taken out of home assets and used to fulfill other perceived needs or wants. Millions of manufacturing jobs were relocated to China and other nations which could provide cheap labor. Millions of service jobs have also left the country. Our government provides substantial income to those who lose their jobs allowing them to look for work but not be required to take a job below their perceived worth. It also provides retraining programs in the mistaken belief that there will be jobs in the computer field and others areas all the while jobs are being exported at an ever accelerating rate.
The federal government and all of the so-called presidential candidates are calling for a massive hand out program estimated to cost $150 billion dollars to “stimulate” the economy. A prudent person in debt would take the handout graciously and use it to pay down his debt but the government is wise enough to realize that they will instead do exactly as asked and go out and spend it quickly and wait for the next handout which will surely come as soon as it is apparent that $150 billion dollars is not enough. The money for the most part will certainly stimulate the economy of China and the other cheap labor countries but will do little to restore our own.
Our national debt exceeds $9 trillion dollars. In Arizona the State is facing a shortfall of $1 billion dollars. Most other States are in the same situation. In the meantime we continue to throw funds approaching $1 trillion dollars to support wars in Afghanistan and Iraq while at the same time threatening Iran and other Middle Eastern nations. Our military has been depleted to where drastic rebuilding of all types of weaponry is required. Over 1/3 of all the Air Forces planes are out of service.
We continue our reckless squandering of our grandchildren’s future while determined to live beyond our means. When I was starting out as a young married man there was no such thing as credit cards. We waited until we had accumulated funds and then paid cash for every stick of furniture we wanted.
The Piper will be paid, if not today then tomorrow. With trillions of U.S. bonds in the hands of foreigners we are approaching catastrophe. They are buying up American assets and are beginning to purchase Euros instead of Dollars. They may pull the plug altogether and refuse to support our lavish life style. When that happens no stimulus package will have a positive effect.
So what do I propose? Let the chips fall where they may. Let the housing market seek its true value not the outlandish values in place today. Stop frivolous household purchases of Flat screen TVs, cell phones that take pictures and devices that hold thousands of musical songs. Each and all are deemed necessary. I am one of the holdouts. I have none nor do I intend to purchase any. I didn’t “need” them before and I don’t need them now. Take the hit and live frugally. The government should do likewise. They could start by banning earmarks added to every piece of legislation passed. Stop the wars, bring the troops and what’s left of their hardware home and rebuild for when they are truly needed. Make balancing the budget and then reducing the national debt the number one priority. The list is endless on what should be done but won’t because of opposition and the feeling that we are special and are ordained by God to live as if we were God’s chosen people. How sad.

Jack B. Walters
3961 N. Hillwood Circle
Tucson, AZ 85750
(520) 722-2958
January 22, 2007