Listen to most evening news reports or the opinions of many of the pundits on cable, and you’d think we Americans are on the doorstep of a second Great Depression.
Turns out, much of this commentary is more fear mongering than fact.
According to Bradley R. Schiller, author of The Economy Today, these are the facts:
- Stock values today have taken a terrible beating (and undermined the retirement plans of a whole generation in the process); they were down some 34% in 2008. In the Great Depression, stocks lost 90% of their value. If you invested $100 in 1929, you had a lousy 10 bucks left in 1930.
- Millions of Americans have lost their jobs (and are struggling to find another one), bringing the unemployment rate to 7.6 percent. As awful as that is, it doesn’t even come close to the 25.2% unemployment rate in 1932.
- A couple of dozen banks have failed in the past year, but not a single depositor lost a penny. In the Great Depression, over 10,000 banks failed, and there was no Federal Deposit Insurance Corporation to protect our money. It was simply gone.
- The U.S. Gross Domestic Product (GDP) actually grew last year despite a terrible fourth quarter; experts predict a 2% decline in the GDP in 2009. In the Great Depression, GDP sank 9% in 1930, another 8% in 1931, and collapsed a gut wrenching 13% in 1932.
- And for the deaf, dumb and blind executives in Detroit who are wailing about the 25% decline in auto production in 2008 (and offering up a choice between more government bailout money or bankruptcy), consider this: auto production in 1932 sank a staggering 90% and still the companies survived.
So, is the economy in bad shape? You bet it is. It’s put millions of Americans out of work and threatens the employment of millions more.
But today is not a repeat of the Great Depression. Not even close. It’s a bad time, to be sure, but it’s important that we Americans know the facts. Because if we understand the true nature of the problem, we can comprehend its solution. We can regain our sure sense that Americans—more than any other people on the planet—know how to rise above a storm. It’s in the DNA of our culture. But it also has to be in our heads.
So, the next time you turn on the tube, log onto your computer or open up a newspaper and see some “expert” predicting the end of the American Dream, focus instead on the wise words of a former president (with just a bit of updating by me): the only thing we have to fear is fear mongering itself.
Thanks for reading,