I am increasingly anxious about the state of the US economy.
In February, I wrote about it, certain that we were dipping our toes into the waters of recession.
Our economic free fall has been so swift and sure since spring that it’s defied all attempts to reverse the decline. Now, with:
- the failure of so many major banks (Seattle-area giant WaMu was seized, shut down and sold today)
- the proposed (and unraveling) bailout of Fannie Mae and Freddie Mac
- steadily climbing unemployment rates – 6% in Washington for September
- the rapidly falling housing markets – new permits down 42% and sales down 12%
- the downward spiral of the stock market
All this brings to mind another question. I wonder what defines an economic depression? Per about.com:
A depression is a severe economic downturn that lasts several years. The Great Depression of 1929 lasted ten years. The GDP growth rates were of a magnitude not seen since:
- 1930 -8.6%
- 1931 -6.4%
- 1932 -13%
- 1933 -1.3%.
During the Depression, unemployment was 25% and wages (for those who still had jobs) fell 42%. Total U.S. economic output fell from $103 to $55 billion and world trade plummeted 65% as measured in dollars.
Well, we’re not at that point yet, thank goodness.
An aptly titled book I read long ago, The Coming Economic Earthquake, seems to be pointing to where we are right now. The author, Larry Burkett, talks about the risk of demand-centered economic policies, growing federal deficits and debt, increasing use of debt by business and households, and government regulation gone wrong. He predicts severe consequences. He also has suggestions for minimizing personal catastrophe, like eliminating indebtedness, maintaining local, liquid funds, holding non-cash assets and more.
I hope we’re not anywhere near there, and that I’m just being paranoid. Still, I’ll keep my credit card balances at zero.
Please tell me why I’m wrong.