PRAY for the POPE and our elected officials, that they do the right thing and not spend us down the toliet
A FUNNY SORT OF DEPRESSION
Are we headed to something like the Great Depression?
There is clearly much to be worried about. Most of America's private retirement 401(k) accounts have significantly decreased in value since last autumn's crash. Home equity has plunged. The unemployment rate is above 7 percent and climbing.
We had negative GDP growth last quarter. Stock prices are the lowest in 10 years. Almost daily some company announces layoffs. Some big banks may be nationalized. The American auto industry will not survive as we have known it for nearly a century.
Abroad, the news is worse. European banks have lost trillions of euros in bad loans to
Given all that news, we are in a funny sort of depression. Our spiraling national deficit is being financed by
Nearly 93 percent of those Americans in the workforce are still employed. The difference between what the banks pay out in interest on depositors' savings and what they charge borrowers for loans is one of the most profitable in recent memory.
The sudden crash in energy prices may be hurting
For the vast majority of Americans with jobs, the fall in prices for almost everything from food to cars has, in real dollars, meant an actual increase in purchasing power. The loss in value of home equity is serious for those who need to relocate for work or want to downsize and move to an apartment or a retirement community. But when averaged over the last decade, real estate still shows a substantial annual increase in value.
Moreover, the vast majority of American homeowners -- well over 90 percent -- meet their mortgage payments. They have no plans to flip their homes for profit. For them, the fact that they have lost paper equity, or even owe more than their homes are currently appraised at, is scary -- but not equivalent to a depression. Most are confident that after a few years their houses will appreciate again. As for now, working young couples have a chance to buy a house that would have been impossible just two years ago.
The same holds true for many retirement accounts whose decline is terrible for those retirees who count on drawing out each month what they put away or must cash out their depleted accounts at vastly reduced value.
But the majority of working Americans are not yet pulling out their sinking retirement funds. Most are still putting away pre-tax money each month, apparently confident that within a few years their portfolios will return to their former value. Some are even consoled that they are now buying mutual funds at rock-bottom prices rather than investing in sky-high investments at the peak of a bull market.
Times are bad for those out of work or those who bought expensive homes with paltry down payments. Yet for those hurting, there is a vast array of government help. Both private companies and public agencies offer all sorts of ways to either walk away from mortgage obligations or have them renegotiated. The same is true for credit-card debt.
Unemployment insurance, welfare, food stamps and even more new social programs on the way have redefined poverty from what our grandparents told us of the Great Depression.
I live in southeastern
So are we in a depression that justifies a vast redefinition of government and a massive takeover of the private sector? Not quite. What we are a witnessing instead is a sharp downturn from the most affluent era in the history of civilization. For the last two decades, we borrowed and spent as if there were no tomorrow. Now we are living in that tomorrow of cutting back and making do.
In relative terms, it is no longer 2005, but that does not mean it is 1932 either. (