A Depression in Full Technicolor

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Stocks ended Friday trading not much higher than where they began. Gold rose $3. Oil is trading over $80 a barrel this morning. And stocks in Asia are “recovering” from the Fed’s discount rate increase of last week.

If the market wanted to crash, it would have plenty of reasons to do so. China is tightening bank lending rules. Here in the US, there is the aforementioned Fed discount rate increase. In Europe, Greece is going back to the marketplace to raise more money. And in the Mideast, today’s news tells us that many Kuwaiti could be wiped out by the latest downturn in their multi-billion dollar investment industry.

Many things could go wrong; something will.

If no panic comes it is because the market is just not ready to panic. Still, we leave our “Crash Alert” flag flying…and stand clear. There is just more downside to this market than upside. Markets are always discovering what things are worth. We don’t want to be holding a lot of stocks when the market discovers that they’re worth only half what we paid for them. So, the flag stays up…until prices come down.

Gradually, people are coming to two contradictory realizations. On the one hand, there really does seem to be a kind of economic renaissance going on…or, at least that is what you might think if you read the business and investment news. On the other hand, people are also coming to realize that we’re in a depression.

We’ll leave it to the mainstream press to describe the rebound, such as it is. We’ll focus on the depression.

“Millions of Unemployed Face Years Without Jobs,” says The New York Times.

Readers may wonder what kind of economic renaissance fails to produce jobs. Answer: a depression.

As we’ve opined many times in the past, a depression is not just a time when people stand in line to get bowls of soup or sell apples on street corners. It’s a time of adjustment…when mistakes of the previous boom are corrected…and a new economic model is found for going forward. This doesn’t happen overnight, no matter how much federal money is put to work helping it. In fact, the government money just gets in the way…distorting the picture and delaying the necessary changes.

Those black-and-white depression days of the ’30s are gone. Now, we have a depression in full Technicolor…with plenty of shades of gray, too.

More people today get food handouts than ever got them in the ’30s. We call our soup lines the Food Stamp Program. More people are out of work too….

…but here you have to look carefully at the figures to understand it. In the ’30s, there was no public safety net. No unemployment compensation…no severance packages…and no government welfare. People didn’t give up looking for a job; they had no alternative. They kept looking until they found something. Either you were working…or you were jobless. If we reported the numbers the same way they did in the ’30s…the number would already be up near Great Depression levels…at about 15% to 18% joblessness.

But there’s something else. Now, there are more people per household working. Back in the ’30s, the man of the house was the one that had a job. Typically, the family relied upon him, and him alone, as the breadwinner.

And guess what? If you look at the men of the house…men 25-54…what you see is that one out of every 5 of them is out of work.

For men…this is clearly a Depression…no, it’s worse. Not only are they unemployed. They’re going to stay unemployed for a long time. Because it takes times for a depression to do its work. And when it is over – maybe five or ten years…or 20 years ahead – not only won’t they find their old jobs again…they may never work again. And they won’t have wives or families either.

Men’s jobs are disappearing – jobs in manufacturing and building. As the NY Times explains, they probably aren’t coming back any time soon. What’s more, studies show that the longer a person stays unemployed the harder it is to get back into the workforce. Employers don’t like to take a chance on someone who’s been out of the job market for a long time. They’re afraid they’ve lost the habit of work…or that there’s some other reason why they have been out of work for so long.

Women’s jobs…in information and services…are doing relatively well. So, men not only lose their incomes…they lose their places in the family, and in the world. What woman wants to marry a guy without a job and without income? Not many. During the Great Depression, marriage and family were almost automatic. People got married. Then, for better or for worse, they lived in families.

Even before the depression began, marriage had become optional. Women get more college degrees than men. They typically don’t like “marrying down.” They delay marriage while developing their careers…and then, when they are ready to marry, it’s hard to find a suitable man.

Result? Well, we don’t know where this leads. But it doesn’t look good for the beer-swilling, football loving X chromosome half of the population.

Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
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67 Comments on "A Depression in Full Technicolor"

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Christina
Guest

Those unemployed men could start on online business from home. Or from the free computers at libraries and internet cafes if they don’t have a computer

Bryon
Guest

Christina–the consumers who will make purchases from those online businesses will come from where?

Sambo
Guest

Christina has been reading too much Robert Kiyosaki

Mike
Guest

Christina is right.

You might not create a successful business, but you create a successful “resume enhancer” that shows your initative.

If I was out of work, I would choose a subject, get a free WordPress blog, study the living crap out of the subject, and blog every day about that subject until I found a job in that sector.

The best way to predict the future is to create it.

Christina is right.

Dan
Guest

People with enough initiative and intelligence to do what you say, Mike, are not going to be unemployed for long any way (no matter what advice we give them), but other people are not as flexible and the shock of unemployment frequently paralyses them from taking real initiative. It’s much better to be getting into such activity well before job-loss hits.

Lachlan
Guest

selfsufficiency.com

89peterg
Guest
oh sure, if all the dole bludgers just did x, y or z then there would be full employment… and then we can see the “help wanted” posters go up all over the shop windows and employers will be dreaming of the good old days when they had a pool of desperados to pick from .dream on, and keep on blame gaming. x = race to the bottom on wages to coolie levels. (no racism intended) y = ignore any health warnings, and work yourself into an early grave. z = get multiple educational qualifications to outcompete those with only… Read more »
Biker Pete
Guest

Y’reckon busking might be a better proposition, peterg?

89peterg
Guest

bike pete .. maybe, but I am (or was) looking forward to bungy jumping from office towers (with no safety nets?) … we’ll see, but again, maybe.

Lachlan
Guest

It will be interesting to see how and also how much people can use the net in a very depressed enonomy if one arrives.

Rob
Guest
This article sums up quite well what’s been written in the following article/blog: http://hubpages.com/hub/Gold–Silver-and-the-Specter-of-Economic-Depression Seems that this is a bit of a depression judging from the extended unemployment. Yes, the reason you’re not seeing the bread lines and soup lines of the 1930’s is because of Food Stamps, Welfare and Unemployment insurance. Having said that, even in the Great Depression some businesses did well. Efficiency becomes the name of the game, and if you can provide a service, good or solve a problem for someone you will find work. It’s not easy, you have to look harder and it’s not… Read more »
Biker Pete
Guest

Like Lachlan, I think I’d consider the net, peterg.. ! ;)

Freddie
Guest
I think I’ll brush up on my street performing skills. I used to be quite the juggler and musician in my younger years. A depression is the perfect vehicle to purge the bloat from the system. People will starve and die, demand will reduce to real demand, not credit demand. Real competitiveness, imaginiation and innovation will return, not innovation just for the sake of it like adding a clock to a blender. My father lived in Germany in the 40’s and in those days a good, hardworking German worked himself to death by around 35 years old. They had to… Read more »
Biker Pete
Guest

Freddie: “Real competitiveness, imaginiation(sic) and innovation will return, not innovation just for the sake of it like adding a clock to a blender.”

Why stop there, Frederick? Let’s bring back eugenics! Just think… “…reduced risk of neurological defects. Reduced health care in general..”
And post-natal birth control. None of that primitive ’40s stuff.
Think of the benefits though: “Minimal pensions, no glut of aging people to look after.”

Why wait for a capital D Depression? A new 4th Millennium is coming… and to a beer hall near you, soon… !!~ ;)

Ned S
Guest

Maybe we can offer a Nobel Peace prize for the first geneticist who manages to cross the common cold virus with ebola?

Dan
Guest

“Maybe we can offer a Nobel Peace prize for the first geneticist who manages to cross the common cold virus with ebola? ” .. well there’s certainly enough scientists working on just such a thing, and enough crazy idealists who are half hoping they succeed.

Edward
Guest
Bill. Please stop writing or offering any sort of investment advice, cancel all of your pay news letters and do not offer any insight to people other than negatives. That way you will not contradict yourself like all of the other guys at the DR and MM news letters. I once thought you all were for the common man pointing out how the shysters were ripping us all off.Alas you are all shysters as well! what a shame as you have some very pertinent points, Aussie housing etcetera. It has taken me a while to realize this but all you… Read more »
89peterg
Guest
Edward, I think you are much too unkind. These guys at TDR are always qualifying their commentaries with self doubt and acknowledgment of limitations. my main and only gripe really is the lack of, indeed contempt for, “social” sensibility, sacrificed on the alter of the almighty individual (they hate social securty and government intervention of any sort it would appear) . I’ll even level that charge against the good folk in the above commentaries, so ok, an individual might go on the net and do ok (remember that 90% of small businesses fail – so its a bit of a… Read more »
Lachlan
Guest
I believe Bill Bonner comes here and tells people what he honestly thinks about money and wordly affairs. He admits regularly he may be wrong. I dont agree with every single thing he says of course. Neither Bill nor anyone knows the “absolute truth” about everything and more likely very few things. Whats important for progressive discussion is that people are sharing honest thoughts not absolute truth. The only other road is censorship and then dysfunction. Censorship is administered by whom? Somebody who knows the absolute truth? Where are they? The world will never be perfect, but outside of a… Read more »
89peterg
Guest

lachlan, I agree, and only add that there is one thing possibly worse than slavery, and that is a slave mentality with no leadership… I am thinking here of the movie “idiocracy”, where everything has been so dumbed down by 2300 that nobody has a clue, or could care less. rings a few bells for my understanding of contemporary politics. as for increasing prosperity, it must be sustainable and, in my view, allow for the natural world to prosper too (as it almost always has). prosperity should also include non-material (eg happiness). live long and… prosper.

Ozzie
Guest
Bill has done what i have never seen any economist do, he spoke about the human element of the GFC. Everyone is so focused on when the next rise or fall in the market will be or when China will fall. Do you think the god folks of Pheonix Arizona give 2 hoots about any oif that crap. The harsh raelity is if China explodes, their lives will remain as crap today as it will tomorrow. They just need to wade through it unitl someone puts them in a hole. It sickens me that as a nation American taxpayers (low… Read more »
Lachlan
Guest
Yep I agree very strongly your comment Peter. To say that “money can make a person happy” is fair considering the effect a win on lotto has to many people. I wouldn’t demonise their joy of money. Its an honest reaction to the receiving of their new toy. But the way they relate to their money and to those around them in regard to that money exposes how free they are or how enslaved (to their fear of loss) they may be. Which has outcomes in their happiness. You can lose so much and yet still find contentment and then… Read more »
Rob
Guest
Hello, I have to tell you all, that there was quite a bit of snobbery in America during the (fake) boom years. It was a culture of artificially high expectations – “you mean you’re just a mere RENTER?, Why don’t you OWN a house?” as if you were somehow subhuman if you didn’t buy a house. Now many of those same people have walked away from those homes unable to pay. You can’t give the damn houses away here in the Southwest USA (Phoenix, AZ, Riverside, CA, Las Vegas, NV etc.)!!! Here is an Australian news story (which many of… Read more »
Don
Guest

I enjoy Bill’s articles as well. You get to see events from someone else’s view point. Yes that could be wrong and he readily admits that could be the case, however the important thing is that although you may not agree with his interpretation, it helps you with your own understanding of the way things work. Seriously, if we don’t like it we should just ask for our money back :) Oh, wait DRA is free :) !

Biker Pete
Guest
Old news as you say, Rob: “Mortgage Meltdown” was originally broadcast on 17 September, 2007. Since then much has happened in Australia to demonstrate that a number of factors, including growth in China and government intervention in Australia, have spared us the worst of the GFC. Yes, some of our more foolish shire councils bought the ‘sliced and diced repackage’ of US debt… and cost ratepayers millions. That too has passed… Not sure you’re right about ‘renters’ (‘tenants’ in Australia). Tenants here are often quite _proud_ of the fact that they’re not tied to really long mortgages… and can invest… Read more »
Claytonator
Guest

Excellent link Rob. Highlights the power and damage of speculation and the lack of appreciation for repetition of history. Well worth watching.

Ned S
Guest

Following what the Yanks are up to can damage an Aussie’s finances. I watched their stuff real diligently and had bailed on stocks by about 2005 and on a nice house by 2006. Reckon following their BS (AND getting it largely right!) cost me $200k. Bugger American financial advisors – For Aussies – For mine.

Lachlan
Guest
I watched your video Rob and it was a very good recap on events. Good to see the human face of things in US too. I cant help but think though how will people look back on this in history. Here we are back in 07 and we’re watching the beginning of the world economy explode. Its obvious from the video people understood the what and why of the situation….and what did we do about it? Pump up the credit man! In true US style if we’re going to have an explosion it better be the biggest and best ever… Read more »
Biker Pete
Guest
Lachlan: “…if we’re going to have an explosion it better be the biggest and best ever eh.” Hmmmm…. . Elsewhere, Lachlan: “…the way they relate to their money and to those around them in regard to that money exposes how free they are or how enslaved (to their fear of loss) they may be. Which has outcomes in their happiness. You can lose so much and yet still find contentment and then be happier than previously.” Hard to reconcile these two opposing philosophical positions, Lachlan. Ever see any conflict in holding two utterly extreme, diametrically-opposed ethical viewpoints? Extraordinary to see… Read more »
Lachlan
Guest
Just mellowing out on pumpkins and cucumbers in my old age Biker. In the first quote I was just pretending to talk like Ben Benanke or similar (as per Bens explosion of gov.debt). In the second quote well I could tell you Ive lost a lot of things (much more than assets) over the last few years. And it just never seems to stop even just now. At one stage I lost much of my assetts so I took risky bets because I was fearful of falling behind. Of course I lost more. But Ive recognised my true problem is… Read more »
Christina
Guest
Hello folks :-) To answer your questions about who you would sell stuff to if you were unemployed and you started an internet business. Well, in any depression not everyone in the world is affected by it. Only some people are, the rest carry on as normal. Even in the depths of the 1930’s great depression, there were still posh restaurants around doing a roaring trade, they still had big flashy parties, they still went on holidays, they still went shopping and they still had balls and parties. Sure 70%- 80% of people in the world might be broke but… Read more »
Lachlan
Guest

Wow Christina you have real flair. I hope you do well for yourself if things do get rough.

Biker Pete
Guest

Christina: “…they still had big flashy parties, they still went on holidays, they still went shopping and they still had balls… ”

Definitely what’s needed in tough times…

Biker Pete
Guest

Parties, I mean…

Justin
Guest

Christina….any idea how much my complete collection of ‘The Fabulous Furry Freak Brothers’ comics might fetch me, in case I need to sell them during the depression? They’re a bit dog eared, but very funny.

I also have several of ‘The Adventures of Fat Freddy’s Cat’ & a couple of Wonder Wart-Hog, including issue #1 ‘Hog of Steel’.

john
Guest

isn’t the internet a ‘peak civilsation’ thing?… I think i’ll brush up on my hunting and gathering skills.

Jim A
Guest
IMHO… one of the reasons that we have ‘depressions’, is the specialisation of work. True, when it runs as it should, it allows society to produce goods and services more efficiently; but it has left people conditioned to not do anything for themselves, but to wait for ‘orders from above’. They’ll sit around doing nothing, watching daytime TV and feeling sorry for themselves, just because no-one will pay them money for turning up to a factory/office for 40 hours a week, money that they can then swap for food, beer, cigarettes, etc. Surely the obvious and simple solution to ‘unemployment’… Read more »
Christina
Guest
When I say they still had parties during the great depression, I’m not saying that during a depression all the rich people do is sit around and party while others starve. I am making a point that you don’t listen to the media who try and tell you that the whole world is broke during a depression, they aren’t, just some people are, so instead of laying down and giving up in life, you should start an online business. Would you rather you and your family starve? And in case you think that all the rich do during a depression… Read more »
Demolition Man
Guest
As Celente (and numerous other experts) has already said, the USA is on a totally unavoidable one-way downhill slide into prolonged economic depression. Obama, Bernanke et-al have no idea and just live in La-La land. The US people are slowly waking up to reality, but it’s way too late. Here in Oz, we have the *potential* to be well off and largely avoid the crash that the rest of the world is about to experience, BUT…we need extremely switched-on political leaders who can direct Oz GDP towards domestic production and consumption over export to protect us against the inevitable overseas… Read more »
Biker
Guest

“Everyone’s best bet is to develop multiple income streams BUT go for high demand products and services, like food, health, affordable alternative energy etc. Even in tough times, people need the essentials, regardless of their income bracket !”

That’s our call, too.

Ross
Guest
BP yours was the basis of my thought that lower geared low income housing where the govt would likely pick up the chit was a better bet going into a deflationary episode than medium-high geared high income housing (no I haven’t invested). For the post GFC years as you may have gathered my equity investments have been circa 50+% consumer staples(agriculture), 5% health, 15% energy-resources(now only refining), 20+% energy/resource/engineering services. You can graph the indexes on the ASX website (XSJ,XHJ,XEJ). The residual assets after taking profits earlier this year are only bouncing around break even and the risk is they… Read more »
Biker
Guest
Appreciate your position, Ross. Despite media claims to the contrary, our view is that our capital appreciation in the last two years has been flat. Rental returns have been great, primarily due to low interest costs. Your portfolio sounds pretty healthy to me! You’re sufficiently diversified and your breadth of knowledge gives you an edge most of us don’t have. I’m a little stunned to realise one of our sons easily outperformed us last year, in indexed funds (unusual strategies I don’t pretend to really understand) and in cash. Trying to remember a period in the past similar to this…… Read more »
Bearamundi
Guest

Small fry money but some of DR may be interested. I put a 1KW solar array on roof (Max rebate for the size) and got my first quarterly bill: $189 credit, nothing to pay. During a very wet/overcast winter too. I haven’t put on the Gross meter yet which will double returns, and I’m putting another KW on in early Sept. System will pay itself off in 3 years or so.
Considering the tax implications here, in a few years I can see myself getting interested in an electric vehicle of some description to min tax exposure.

Biker
Guest

Interesting, Bear. We’re getting paid 47c per unit from the grid (WA).
What’s your rate?

Bearamundi
Guest
Biker, 68c in NSW (some say 60c but our Energy Australia provider states former). Gee, we have to get up early to be ahead of you!! We were away for 6 weeks mind you but then we only get paid on nett production. Once the gross meter gets installed ($460 fitted) we get 68c every KWh produced, and then pay for our power usage @16c per KW. We’ll be ahead. Another guy at work has 1KW panels as well but all his kids are grown-up, suck power, and mooch at home. For the year he has used 2KWh so his… Read more »
Biker
Guest

We’re installing them on rentals, Bear: 1.5 kW and 1.7 kW. Cost to us is $2.5K and $4K per house.

Our main property will get 5 kW, to serve the house and guest chalet.
Cost after rebates is $19K, but we’ll be getting cash payments from the grid.
We figure it will pay itself off in a decade; even less if Synergy payments back to us rise above 47c.

At 16c per kW, you’re _buying_ very cheap power. In WA it’s as high as 40c.

bearamundi
Guest

Wow, I thought you were putting them on to rentals, improving tenancies and eventual capital gain. Muchos kudos!!
5 KW is huge power, you’ll have that EV too eventually and be cruising. Maybe you started out with a ‘bad hand’ as they say, but boy, you have sure overcome that (if it were ever true)!!

Biker
Guest
“Maybe you started out with a ‘bad hand’ as they say…” Never thought of it that way, to be fair, Bear. I was born with all parts working, good health, average intelligence, in a free country. I had a good education, encouragement from good people; and met and married a patient, highly-intelligent adventurer. The fact that I couldn’t afford a home in Perth was one of those things most U30s simply accepted. I could afford a home in a regional centre and owned one outright by thirty. Never complained about it… simply accepted that I didn’t want to _rent_ in… Read more »
Ned S
Guest

Bear, Biker: Just reading your stuff, I get the impression that if one has gas cooking and solar HWS maybe(?), 1.5 kW minimum in other panels is needed to keep ‘the lights’ on??? – Where ‘the lights’ run to a fair bit more than that of course! (Although I wouldn’t expect to run a welder! :) )

Do you know of any site where I can get details on the real basic maths? (Rebates and grid buybacks and tax depreciations being potential bonuses from my perspective; But not stuff I especially want to factor in as part of the initial sums.)

Ned S
Guest

Just checked my last 4 electricty bills – Seems I run at about 360 kWh per quarter – That’s all electric – Including cooking and HWS – What I need to know is what solar ?.? kW panels I might need to provide that and a bit more – Because at that I’ve had to watch my consumption.

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