Fear and Loathing at the Fed

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:

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.

9 Responses to “Fear and Loathing at the Fed”

  1. Janiece Says:

    I dearly wish I could tell you why you’re wrong, but I don’t think you are. I’m starting to get a bit anxious myself.

    Even though I know we’ve done what we’re supposed to do in order to minimize our risk (minimal debt, 6 months worth of expenses in the bank, only one car payment that’s almost over, etc.), I’m still having those middle of the night anxiety attacks.

    Scary times!

  2. Random Michelle K Says:

    When that jerk was speaking to America the other night, I found myself yelling things like, “We’ve BEEN in a recession moron!” and “If you hadn’t deregulated everything we wouldn’t BE in this mess!”

    As my grandmother was watching with us, I managed to strangle any naughty words before they came out.

  3. Bryan Says:

    I’m sorry, Michelle, the blame’s not on Bush, the blame is on us. All of us. As long as American consumers act like drunken sailors on leave, and the “smart guys” that hand out the money keep letting us have it, stuff like this will happen every few years. It’s a cultural problem.

  4. Random Michelle K Says:

    I strenuously disagree. :)

    Bush is our leader, and has chosen to lead the country not into responsibility but into economic hedonism.

    His spend and borrow attitude has set the tone for the entire country. When he should have been calling us to sacrifice for our troops and our country, we were instead encouraged to buy buy buy. Want a bigger car? Go for it. Want a bigger house? You can do it!

    The Laissez-faire attitude of this administration lead to spend spend spend without any thought of the tomorrow’s consequences.

    It’s like Reagan all over again, except that Bush has gotten us into two wars, neither of which he has the balls to fight to win. His unrealistic attitude about the way the world works has molded this administration into little more than a bunch of enablers.

    Spend more than we have? Go for it! Burdening future generations with billions and trillions in debt? Great idea! Poo on the constitution? Sure thing!

    I forget who made the analogy of the country to a ship, but Bush has been the captain of this ship for the last seven plus years, and he lead us full speed into the shoals.

  5. Jeri Says:

    Peacemaker me – and logical me – says you’re both right.

    It took poor leadership at the government and corporate level, as well as poor individual choice to get us where we are today. The choices related to the federal budget, deficit spending and bailout on a national and international scale, are a leadership issue. The choices related to business finance, lending risk and corruption are a corporate governance issue. The individual choices related to personal spending, taking on more debt that can possibly be supported, are on a personal level. They mirror each other, but I’m not sure there’s a cause/effect relationship, it’s an interdependent downward spiral.

  6. Michelle K Says:

    Wah!

    I wanna blame it all on Bush! ;)

  7. Holy Says:

    I stopped blogging about the fall of the American Empire some time ago….it’s just been so bloody apparent for so long on so many levels, the least of which was economic awhile back.

    The first bad gut-feeling sign I had was last summer when my mortgage broker buddy friend was explaining the virtues of holding a mortgage here in the U.S. That you didn’t have to have any money and it would all get piggyback invested by Wall Street. As though monies just magically appeared. Of course, this was all sub-prime but I remember thinking, who in his/her right mind buys a house that way? Apparently a lot of people.

    And then when the Canadian dollar came to be at par last summer/fall, then I knew for sure that something was rotten in the District of Columbia, not to mention Wall Street and elsewhere.

    I feel so bad for anyone looking to yank their investments for imminent retirement next week. Yikes.

    Let’s hope everyone can weather this without your kids and their kids and so on having to pay huge debtloads.

    What a mess. We picked a schmidty time to emigrate here…egads.

  8. Jeri Says:

    Holy, you know we Yanks always joke about “If so-and-so wins the election” or whatever other adverse event occurs, “I’m moving to Canada!”

    I think Canadian immigration rules are a little too strict for random moves north to occur on a whim – although based on your experiences and those of others I know, not nearly so draconian as American immigration law.

    Yeah, I’m very glad I’m not retiring right now, it’d be painful. I do hope that we can weather this successfully and that things rebound fairly quickly.

    I’ve actually been thinking of the Holy Hub lately – how’s things treating him during the strike, any signs of insecurity?

  9. Holy Says:

    Holy Hub is hanging on OK, despite being a contractor – they’re always the first to go although in his shop, that would be sad because he’s one of the few busting his butt. But the good news with the strike is that his o/t has been cut back – first time in 3 years he’s had weekends off. We’re all very happy around here – he was working way too much, way too long.

    It’s the impending SPEEA (engineering) strike that will prove scary for him – their contract is up early December and if they strike, he’s hooped as a contractor because he wouldn’t be able to cross the picket line or get paid, since he’s a contractor. Fingers crossed they work things out.