The Great Depression . . . Part 2?

There is a growing trend in this country called “Tent Cities“, where groups of people are setting up tents and living in them because they have lost their homes – many because of the housing crisis.  When I read this, I immediately thought of the Great Depression of the 1930s.  I can’t help but wonder if this is just another sign that there is going to be another Great Depression.

The thing about the current economic crisis is that, at a basic level (or maybe more complex), it shows a level of similarity that should be terrifying to anyone who can comprehend what it may mean.  The last few years have been defined by a sense of entitlement held by the American public, stretching from the lower middle class to the highest echelons of society.  It cannot be denied, especially considering the damning evidence, that people were (and still are) all too willing to purchase things they cannot afford.  I will be the first to admit that I have fallen into this trap myself – I think the major difference is that I don’t expect the government to bail me out.  The problem is, with sub-prime lending and an interesting phenomenon called “Interest-Only Loans”, America cannot afford to work it’s way out of the hole that it dug.  We are definitely on the brink of global economic collapse because of our actions.  The global economy is so dependent on our success that if we fail, they also fail.  I firmly believe that, had AIG not been saved by the Fed, we would have seen another Depression as bad as that of the 1930s – worthy of the capital “d”.

The “Roaring Twenties” has been characterized as a time period of great wealth and a great lack of responsibility.  I challenge you to ask yourselves – what is the difference between then and now?  How many people do you know/have heard of who had loans they couldn’t possibly pay off if the economy (like it always does) went down even a little bit?  How can people not understand that planning for the future is so much more important than “living for the present”?  How can we be surprised by these recent events – and why is it shocking that it would occur in our financial sector?  Sure the Stock Market surged over the past few days because the government FINALLY acted as they should have.  That doesn’t mean we are out of danger – not at all.  If anything, this wild roller coaster the Stock Market is on should signal to the average American that things are just as unstable as they were yesterday, and there is no such thing as a “quick fix” or a “band-aid”.  There can’t be.  We need to stabilize the base of the pyramid, not fix the surface wounds on the top.  It won’t work this time.

Those of you who know me know that I am not a fan of government involvement.  Even though I refuse to identify with a political party or even republican/liberal paths, I guess it can be said that I am closer to a libertarian than anything else.  Unfortunately, those ideas may have worked in another situation, a different setting.  Now, there is no choice but to have the government act.  They need to act quickly and decisively to help implement long-term change.  I am not foolish enough to think that I know enough to present an answer; I know there are people who can, though.  There also must be an official investigation as to the practices of the financial sector as well as the people running it.  As much as this is the everyday American’s fault (because it is), there is no doubt in my mind that the people running these companies hold a certain amount of blame as well.

Let us hope that, as the government dumps millions and millions of tax-payers’ dollars into the economy, that we have learned the lesson history tried to teach us almost 80 years ago.