A Great Depression or a mild case of the blues?

April 1, 2008 by 16 Comments

A British newspaper has a frontpage story proclaiming, with some glee, that the United States has entered a new Great Depression.

This is a silly exaggeration, it seems to me. (The paper bases its conclusion on a small uptick of the number of Americans on foodstamps, which was primarily caused, the paper itself admits, by an advertising effort to get eligible people to sign up for them!) But certainly many Americans are going through hard times. I read somewhere that, though by most measures the economy has been booming, the soaring prices of food and fuel have hit average families really hard, impacting them in concrete ways and making them feel the pain despite what the abstract overall numbers say. Now the big financiers are also feeling the hurt.

I worry about the economy, but I also worry about what seem like draconian plans for the government to regulate it all. (If you really want to get scared, read this, about how the Fed is studying how the Nordic states nationalized their banks.) It is as if free markets are fine as long as everybody is making money, but once the free market creates its losers, as it has to, politicians become Keynsians again. Imagine, with this going on in a Republican administration, what a Democratic victory will do. Statist liberalism will be back. With a vengeance. And might socialism come back into vogue?

Or do I overstate the case? Are we depressed over a Depression, or do we just have the blues?

Filed Under: Economics 16 Comments

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • Bruce

    I think what is understated is the proclivity of the American public to go to its government–not with its hat in its hand–but with ferocious demands to bail us out of any hurtin’ we have brought upon ourselves.

  • Bruce

    I think what is understated is the proclivity of the American public to go to its government–not with its hat in its hand–but with ferocious demands to bail us out of any hurtin’ we have brought upon ourselves.

  • Eric

    I read a great comment about Wall Street yesterday. I have to remember where. Basically he said Wall Street believes in “Private Profits” and “Socialized Losses.” I will try to go and find the full quote.

    Justin Fox the econ writer at Time has several Blog entries about the Nordic rescue. Specifically Sweden. It seems they actually did some thing that many commentators here want. All the bad actors where whipped out. The Stockholders (owners) got nothing for there shares. The Financial group’s managements where booted without golden parachutes.

    The Government organization that took over all the assets, re-priced the assets and sold them back into the market place. Sweden took a GDP hit of 6% that first year, but got it all back just a few years later.

    Are we in a new great depression? Many commentators with more education and experience then I say this is the greatest financial threat we face since the late 20′s. Just as then, what we do now will determine how bad this will be. We stand at a precipice, we will know in under 5 years if we have fallen in.

  • Eric

    I read a great comment about Wall Street yesterday. I have to remember where. Basically he said Wall Street believes in “Private Profits” and “Socialized Losses.” I will try to go and find the full quote.

    Justin Fox the econ writer at Time has several Blog entries about the Nordic rescue. Specifically Sweden. It seems they actually did some thing that many commentators here want. All the bad actors where whipped out. The Stockholders (owners) got nothing for there shares. The Financial group’s managements where booted without golden parachutes.

    The Government organization that took over all the assets, re-priced the assets and sold them back into the market place. Sweden took a GDP hit of 6% that first year, but got it all back just a few years later.

    Are we in a new great depression? Many commentators with more education and experience then I say this is the greatest financial threat we face since the late 20′s. Just as then, what we do now will determine how bad this will be. We stand at a precipice, we will know in under 5 years if we have fallen in.

  • allen

    What I wonder about is the chaps who precipitated the crisis by taking insane risks, reckoning that they were “too big” for the Fed to let go under (like what Eric said about private profits and socialized losses). If no law has been broken, then certainly “retroactive justice” is out of the question. But don’t these geniuses have to be certified in public accountancy to exercise fiduciary responsibility? I wonder if the American Institute of Certified Public Accountants has any procedures for revoking their certificates in such cases.

  • allen

    What I wonder about is the chaps who precipitated the crisis by taking insane risks, reckoning that they were “too big” for the Fed to let go under (like what Eric said about private profits and socialized losses). If no law has been broken, then certainly “retroactive justice” is out of the question. But don’t these geniuses have to be certified in public accountancy to exercise fiduciary responsibility? I wonder if the American Institute of Certified Public Accountants has any procedures for revoking their certificates in such cases.

  • Joe

    The part I have a problem with is that the stock holders got nothing – this can’t be done here. We have that pesky 5th Amendment that requires the we get paid for any property the gov’t seizes.

  • Joe

    The part I have a problem with is that the stock holders got nothing – this can’t be done here. We have that pesky 5th Amendment that requires the we get paid for any property the gov’t seizes.

  • Greg

    Well Joe, since the stock holders are responsible for the destructive antics of their employees than perhaps it could be consistant with the fifth amendment to take their property as a punishment for their destructive management of thier property. After all, the courts uphold asset forfeiture in drug cases.

  • Greg

    Well Joe, since the stock holders are responsible for the destructive antics of their employees than perhaps it could be consistant with the fifth amendment to take their property as a punishment for their destructive management of thier property. After all, the courts uphold asset forfeiture in drug cases.

  • Greg

    As to the economy being in a depression..the fed would not be doing what it is doing nor would there be talk about expanding its powers unless the whole house of cards was set to collapse. We are not in a depression yet, but the economy must be near collapse since the Fed seems to be panicked.

  • Greg

    As to the economy being in a depression..the fed would not be doing what it is doing nor would there be talk about expanding its powers unless the whole house of cards was set to collapse. We are not in a depression yet, but the economy must be near collapse since the Fed seems to be panicked.

  • Reg Schofield

    As a Canadian , living in the great white north , I can’t really comment with any certainty about the US but I do know the working dollars that my wife and I bring in, has suffered real shrinkage over the last 5 years . I do think we are headed towards a real struggle that will see many families struggle to supply adequate housing and food for their families. But I say what better time to show the love of Christ and share the gospel as we reach out with more than just our lips , but with our pocket books. As James reads , it starts with the house of God and then to the greater world !!

  • Reg Schofield

    As a Canadian , living in the great white north , I can’t really comment with any certainty about the US but I do know the working dollars that my wife and I bring in, has suffered real shrinkage over the last 5 years . I do think we are headed towards a real struggle that will see many families struggle to supply adequate housing and food for their families. But I say what better time to show the love of Christ and share the gospel as we reach out with more than just our lips , but with our pocket books. As James reads , it starts with the house of God and then to the greater world !!

  • Don S

    Reg, you have it exactly right. First of all, I think the whole notion of economic collapse is vastly overblown. We are going through a normal down cycle which is correcting a very speculative period during which real estate was driven wildly upwardly because of easy money created by the invention of subprime mortgage securities. This correction needed to happen, will greatly reduce distortions in the economy caused by out-of-whack real estate prices, and will enable many of our children, previously priced out of the market, to be able to afford a home.

    Secondly, as you say, and as I posted a few weeks ago on an earlier thread, we have grown to fear any suffering or discomfort. This fear is a tool of Satan, because he knows that we grow spiritually during tough times, and become complacent during the good times. He is putting us in a spiritual sleep by encouraging us, in the name of “social justice”, to put our trust in government rather than in God.

    Let us use these challenging times to minister to those around us, meeting both the physical and spiritual needs of our neighbors ourselves, in thte Lord’s strength, rather than clamoring for the government to “do something”!

  • Don S

    Reg, you have it exactly right. First of all, I think the whole notion of economic collapse is vastly overblown. We are going through a normal down cycle which is correcting a very speculative period during which real estate was driven wildly upwardly because of easy money created by the invention of subprime mortgage securities. This correction needed to happen, will greatly reduce distortions in the economy caused by out-of-whack real estate prices, and will enable many of our children, previously priced out of the market, to be able to afford a home.

    Secondly, as you say, and as I posted a few weeks ago on an earlier thread, we have grown to fear any suffering or discomfort. This fear is a tool of Satan, because he knows that we grow spiritually during tough times, and become complacent during the good times. He is putting us in a spiritual sleep by encouraging us, in the name of “social justice”, to put our trust in government rather than in God.

    Let us use these challenging times to minister to those around us, meeting both the physical and spiritual needs of our neighbors ourselves, in thte Lord’s strength, rather than clamoring for the government to “do something”!


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