Silent depression?

I came across an article recently called "Lessons from the Great Depression" that recapped a memoir of that decade. This sent me down a links-leading-to-links rabbit hole about other wisdom from the 1930s. I thought it might be worthwhile examining and consolidating these stories, especially since so many economists and other experts are predicting something similarly catastrophic for America (and the world) in the upcoming year.

My parents were born in the middle of the Great Depression: My mother in 1931, my father in 1935. Mom was born in poverty in the bayous of Louisiana; Dad was born to working-class immigrant parents in Buffalo, New York. Both bear mental scars from that decade of their youth because of how their parents and neighbors coped with the hardships.

While people are stating unequivocally that currently we're not in a depression (largely on the basis that the stock market hasn't crashed in a suitably dramatic fashion), others claim we're already in a "silent depression."

This hit home after watching a short video comparing the costs of homes, rent, and income between 1930 and 2023.

"You're in a Silent Depression," says a man calling himself Wall Street Silver (Freddie Smith, a realtor based in Orlando). "When you compare the Great Depression to today, this is absolutely going to blow your mind. In 1930 during the Great Depression, the average home in America was $3,900. The average car was $600. The average monthly rent was $18, or $216 a year, and the average salary was $1,300 a year. Fast forward to today. It is $436,000 for the average home, $48,000 for the average car, and the average rent is $2,000 a month or $24,000 a year, and we have a $56,000 income for the average American right now.

"So if you look back to the Great Depression, the house was only three times the average salary. Now it is eight times the average salary. The car was 46% of the salary. The car today is 85% of the salary. And here's the craziest part. The rent was 16% of the average salary. It is now 42% of the average salary."

And of course, there's the issue of unemployment. During the Great Depression, unemployment famously reached 25 percent. Now? Well, it depends on what sources you consult. Shadowstats (which uses the original metrics that were used to calculate such things) reports a current unemployment rate of, well, 25 percent.

Additionally, a frightening 62 percent of Americans are living paycheck to paycheck (this being called "the main financial lifestyle among U.S. consumers") and 74% of Americans (understandably) say they are stressed about finances. Sadly, as one economist pointed out, "Because real wages have declined so much over the last three years, consumers have turned to debt to maintain their standard of living." Food pantries are struggling.

Tucker Carlson, in interviewing economist Stephanie Pomboy, noted people used to be suspicious of debt, but now the entire economy is based on that vice (rather than being built on real things, which are now outsourced overseas). But, though policymakers still have their blinders on regarding the dollar remaining the world's reserve currency, all that is changing ... and changing rapidly. Pomboy says, The demise of the U.S. hegemony is really upon us, and ... so many in Washington are just sleeping right through it as if it's not a reality."

As Ayn Rand so memorably put it, "You can ignore reality, but you can't ignore the consequences of ignoring reality."

If we are in a depression, it behooves us to learn from the last one. I've often wondered if people knew in 1928 what would happen in 1929, what could they have done to brace themselves? In light of the current situation, I think that question is just as pertinent today. What is the best way to brace for a looming or current economic depression?

To answer this, I drew advice from several pieces on the subject of "Lessons of the Great Depression" (here, here, and here) and plucked out some pertinent concepts. If nothing else, it strikes me that these pertain to current and future times as well.

• Diversify everything from investments to skills (generalists and jacks-of-all-trades thrived).

• Fewer bad things happen to those who are debt-free.

• Need less and waste less. Get lean.

• Multiple income streams are better than one solitary stream, no matter how large.

• Wean yourself off dependency wherever possible, everything from addictions to government aid.

• Tangible investments are often better than intangible investments. Livestock and gardens reproduce.

• Band together whenever possible (family, neighbors, church) to help each other out. There is strength in numbers.

• Belief in a Higher Power was a massively sustaining force for when people were at their lowest.

• "The situation at hand had the final say." People were forced to roll with the punches and adapt to their circumstances. No amount of anger, despair, or bargaining could change reality.

• Be generous. Personal circumstances can change in an instant.

• Always look for work. This doesn't (necessarily) mean you're working a second 40-hour-per-week job; but it does mean you're taking advantage of side gigs or odd jobs that come your way. Even unpaid "work" has its merits, as it teaches you skills, develops your reputation, and broadens your influence.

• The concept of "retirement" changed completely. People worked as long as they were able.

What other tips would you add?

The advantages of being a country bumpkin

When we think about the Great Depression from the 1930s, we think of the images of pathetic apple vendors on New York City streets, or people lining up for soup kitchens, or families fleeing dust storms billowing over prairie landscapes, or other grim scenes. We hear stories of hardship handed down by our grandparents. We remember the sad cases of people losing everything they owned when the stock market crashed.

What we don’t hear very often are people who (mostly) escaped the hardship and deprivation of the 30s altogether... because they were independent farmers in parts of the country not hit by drought.

Reader Sidetracksusie left this comment on my Why Be Normal? post which was so fascinating I didn’t want it buried. She wrote:

An old rancher in Wyoming shared with me that he was not aware there was ever a depression: he had no stock in Wall Street, only stock with four legs; no money in a bank, only what was in his pocket. He rode out to care for cattle every day, cut hay with a team of horses, ran his simple irrigation ditches, fixed his fence with tools and wire he all ready owned. He pushed cattle to mountain pastures in the spring and brought them back in the fall. He didn't have tv, radio or a newspaper. He just had his work and his land. Prices of beef went up and down. He never have many clothes, and no fancy ones, but kept a good heavy coat, gloves, hats, scarves.

He found it strange that "normal" people thought they could make something from nothing and would jump off buildings (something he read years later) when they found out it didn't work. He was happy he lived in what he learned was "fly-over" country.

My mother's parents fared those same years in much the same way…they were poor and raised every bite they ate, buying only salt and such. No savings in a bank that they "lost". Nothing much changed for them, other than they shared what they had with more people. Country bumpkins that were probably looked down upon, previously, and that in years to come, were most likely looked down upon again, living life simply by the labors of their hands, content to sit on the front porch and visit, to play cards with the extended family and neighbors, to have potlucks after church.

They had little but I guess they had enough and they seemed secure and content for as long as I was honored to have them as my grandparents on this earth.

This is an intriguing notion -- to be independent enough that an economic depression more or less passes you by. It shows the strength and benefits of tangible assets (cows, garden, chickens, etc.). Being a "country bumpkin" has some advantages, I guess.

I know it's not possible to be entirely immune from another economic depression -- but it's not a bad goal.

This is what worries me

Here's an AP article called "Midnight grocery runs capture economic desperation."  It encapsulates perfectly my concerns about our country's economic instability and dependence on outside sources for our basic needs.

The article details how people who depend on food stamps start shopping around midnight at large retail grocers such as Walmart and Krogers.  The writing captures how close the shoppers are to destitution and desperation.

And it got me thinking.  What happens if the money dries up?  Or worse, what happens if the food and other supplies don't get delivered to the stores?  These people are utterly, totally dependent on both - food stamps and regular deliveries - and quite literally their lives would be in danger if there were disruptions.

Our - and by "our" I mean "America's" - dependence on other people to supply us with life's basic necessities is a trend that has gotten more and more extreme in the last hundred years.  Most people used to live on farms, and for those who lived in towns their food was still fairly local (farmers would come into the cities and sell their produce).

Today, local economies are virtually nonexistent.  And the few places that DO have local economies are in danger (once again) of being shut down by our own government.  As a result, everyone - our family included - is dependent upon unseen faceless people and entities to supply us with our daily needs.

It scares me.  It scares me because I don't like seeing innocent people suffer because of this dependence. If there is a wide-scale disruption in society - say, an EMP weapon taking out the national power grid - then few people have backup resources or skills, and a lot of innocent people may die.

So what can be done? I don't know. Perhaps we've gone too far and there's no turning back. Thoughts?

Ten Practical Steps

Here's an article I lifted (with permission) from a blog on economic collapse. What I found interesting was this exact post was picked up on the Lew Rockwell website. In other words, prepping isn't just for extremists any more. More and more people are waking up to the unavoidable reality of our economy.
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Ten Practical Steps That You Can Take To Insulate Yourself (At Least Somewhat) From The Coming Economic Collapse

Most Americans are still operating under the delusion that this "recession" will end and that the "good times" will return soon, but a growing minority of Americans are starting to realize that things are fundamentally changing and that they better start preparing for what is ahead. These "preppers" come from all over the political spectrum and from every age group. More than at any other time in modern history, the American people lack faith in the U.S. economic system. In dozens of previous columns, I have detailed the horrific economic problems that we are now facing in excruciating detail. Many readers have started to complain that all I do is "scare" people and that I don't provide any practical solutions. Well, not everyone can move to Montana and start a llama farm, but hopefully this article will give people some practical steps that they can take to insulate themselves (at least to an extent) from the coming economic collapse.

But before I get into what people need to do, let's take a minute to understand just how bad things are getting out there. The economic numbers in the headlines go up and down and it can all be very confusing to most Americans.

However, there are two long-term trends that are very clear and that anyone can understand....

#1) The United States is getting poorer and is bleeding jobs every single month.

#2) The United States is getting into more debt every single month.

When you mention the trade deficit, most Americans roll their eyes and stop listening. But that is a huge mistake, because the trade deficit is absolutely central to our problems.

Every single month, Americans buy far, far more from the rest of the world than they buy from us. Every single month tens of billions of dollars more goes out of the country than comes into it.

That means that every single month the United States is getting poorer.

The excess goods and services that we buy from the rest of the world get "consumed" and the rest of the world ends up with more money than when they started.

Each year, hundreds of billions of dollars leave the United States and don't return. The transfer of wealth that this represents is astounding.

But not only are we bleeding wealth, we are also bleeding jobs every single month.

The millions of jobs that the U.S. economy is losing to China, India and dozens of third world nations are not going to come back. Middle class Americans have been placed in direct competition for jobs with workers on the other side of the world who are more than happy to work for little more than slave labor wages. Until this changes the U.S. economy is going to continue to hemorrhage jobs.

The U.S. government has helped to mask much of this economic bleeding by unprecedented amounts of government spending and debt, but now the U.S. national debt exceeds 13 trillion dollars and is getting worse every single month. Not only that, but state and local governments all over America are getting into ridiculous amounts of debt.

So, what we have got is a country that gets poorer every single month and loses jobs to other countries every single month and that has accumulated the biggest mountain of debt in the history of the world which also gets worse every single month.

Needless to say, this cannot last indefinitely. Eventually the whole thing is just going to collapse like a house of cards.

So what can we each individually do to somewhat insulate ourselves from the economic problems that are coming?....

1 - Get Out Of Debt: The old saying, "the borrower is the servant of the lender", is so incredibly true. The key to insulating yourself from an economic meltdown is to become as independent as possible, and as long as you are in debt, you simply are not independent. You don't want a horde of creditors chasing after you when things really start to get bad out there.

2 - Find New Sources Of Income: In 2010, there simply is not such a thing as job security. If you are dependent on a job ("just over broke") for 100% of your income, you are in a very bad position. There are thousands of different ways to make extra money. What you don't want to do is to have all of your eggs in one basket. One day when the economy melts down and you are out of a job are you going to be destitute or are you going to be okay?

3 - Reduce Your Expenses: Many Americans have left the rat race and have found ways to live on half or even on a quarter of what they were making previously. It is possible - if you are willing to reduce your expenses. In the future times are going to be tougher, so learn to start living with less today.

4 - Learn To Grow Your Own Food: Today the vast majority of Americans are completely dependent on being able to run down to the supermarket or to the local Wal-Mart to buy food. But what happens when the U.S. dollar declines dramatically in value and it costs ten bucks to buy a loaf of bread? If you learn to grow your own food (even if is just a small garden) you will be insulating yourself against rising food prices.

5 - Make Sure You Have A Reliable Water Supply: Water shortages are popping up all over the globe. Water is quickly becoming one of the "hottest" commodities out there. Even in the United States, water shortages have been making headline news recently. As we move into the future, it will be imperative for you and your family to have a reliable source of water. Some Americans have learned to collect rainwater and many others are using advanced technology such as atmospheric water generators to provide water for their families. But whatever you do, make sure that you are not caught without a decent source of water in the years ahead.

6 - Buy Land: This is a tough one, because prices are still quite high. However, as we have written previously, home prices are going to be declining over the coming months, and eventually there are going to be some really great deals out there. The truth is that you don't want to wait too long either, because once Helicopter Ben Bernanke's inflationary policies totally tank the value of the U.S. dollar, the price of everything (including land) is going to go sky high. If you are able to buy land when prices are low, that is going to insulate you a great deal from the rising housing costs that will occur when the U.S dollar does totally go into the tank.

7 - Get Off The Grid: An increasing number of Americans are going "off the grid". Essentially what that means is that they are attempting to operate independently of the utility companies. In particular, going "off the grid" will enable you to insulate yourself from the rapidly rising energy prices that we are going to see in the future. If you are able to produce energy for your own home, you won't be freaking out like your neighbors are when electricity prices triple someday.

8 - Store Non-Perishable Supplies: Non-perishable supplies are one investment that is sure to go up in value. Not that you would resell them. You store up non-perishable supplies because you are going to need them someday. So why not stock up on the things that you are going to need now before they double or triple in price in the future? Your money is not ever going to stretch any farther than it does right now.

9 - Develop Stronger Relationships: Americans have become very insular creatures. We act like we don't need anyone or anything. But the truth is that as the economy melts down we are going to need each other. It is those that are developing strong relationships with family and friends right now that will be able to depend on them when times get hard.

10 - Get Educated And Stay Flexible: When times are stable, it is not that important to be informed because things pretty much stay the same. However, when things are rapidly changing it is imperative to get educated and to stay informed so that you will know what to do. The times ahead are going to require us all to be very flexible, and it is those who are willing to adapt that will do the best when things get tough.

Preparedness 101 - #13 - Why prepare?

A few days ago, an English reader expressed bewilderment at our preparedness efforts. She said she was bewildered that we should even think it necessary to prepare, or that being prepared would make much difference if some economic disaster did occur.

I've been mulling this comment over in my mind, largely because I couldn't believe anyone would think that being prepared isn't a smart idea in the face of economic disaster. Quite simply, if the bleep hits the fan I'll still be able to feed my family. What's bewildering about that? I had to chalk up her incomprehension to a "If you have to ask, you wouldn't understand" mentality.

However, I just read something last night that might clarify some of our reasons for stocking up.

As with most other people in the U.S., I've been following the BP Deepwater Horizon oil spill in the Gulf of Mexico with great concern. My mother was born and raised on the bayous of Louisiana, and she grieves for the loss of industry, ecology, and beauty of her birthplace. The stories we hear - from oil-slicked wildlife to despondent boat captains committing suicide - are heartbreaking.

So I came across this article which examined the worst-case scenario for the BP spill. What if the well can't be capped?

"For the U.S. economy, already weakened by a still-unfolding financial crisis, a worst-case scenario in the Gulf could be the last straw. The cumulative impacts — falling grain exports, soaring unemployment in southeastern coastal states, higher oil prices — would almost certainly spell the end to any hope of recovery and might push the nation into the worst Depression in its history.

"We would all prefer not even to contemplate such a scenario, much less live with it. It is irresponsible to inflict needless worry on readers on the basis of entirely speculative and extremely unlikely events. But the more I learn about the technical issues, and the worse news gets, the more likely this scenario seems. We all hope that a relief well will succeed in stopping the oil flow sometime around August, and that until then BP will be able to siphon off most of the oil escaping through the riser and damaged blowout preventer. But one has to wonder: is anyone at the White House seriously considering the worst-case scenario? And what should citizens be doing to prepare, just in case?"

Worst depression in its history. If that's not enough to scare the pants off anyone, then they're not thinking straight.

And that's why we're preparing.

Preparedness 101 - #8 - "NOT your 1930's depression"

"My concern is that this isn't 1930. People aren't interested in trading work for food. They aren't interested in trading one commodity for another. The people of the 2000's are interested in being given something for nothing. In 1930, a down-on-his-luck fella from the city would have knocked on their door looking to exchange a little fencing for a bowl of soup. In 2010, the punks knocking on their door won't be interested in either their fences or their bowl of soup. They will want it all... We have a nation full of angry, indolent people just looking for a reason kill and destroy."

Here's a serious post by a friend on the subject of preparing to deal with unwelcome visitors during hard times. It's well worth reading.