The Coming of another Great Depression by 2012?

I have to admit that I have on occasion caught parts of the Glenn Beck show; you know that far Right-Wing fear and hate monger. Mainly I catch it on the weekends, if at all. Anyway, Beck for well over a year has been preaching about the coming economic apocalypse.  However frightening and interesting it is to listen to him drone on and on, I remained skeptical of his apparent delusions of grandeur. We’re too big to fail, the economic make up of our country today is so vastly different than it was in the late 1920s and early 1930s, right?

However, as a student of history I am beginning to have some cause for concern. With the recent closed door signing of a bill by the President to increase the Federal deficit to $14.3 trillion, along with: a potential massive health care bill and the jobs bill that supposedly will create jobs (remember we already had one that was to keep us from seeing 8-9% unemployment; we are now hovering around 10%.)  That’s not to mention Cap and Trade and other bills lurking in Congress. The fact that future taxation will have to become a burden for not just the wealthy but for most of us who hold jobs, has got me wondering if Mr. Beck is right?

According to the report [linked above]:

White House Office of Management and Budget projects that these changes will raise taxes on wealthy Americans by $636.7 billion over the next decade.

Spend and tax did not get America out of the Great Depression as unemployment never stabilized because the job creation initiatives by FDR failed to initiate true economic recovery (it was a government injected mirage that was never sustainable). Some argue FDR did not go far enough, did not spend enough. FDR wanted to keep the deficit somewhat under control. How did he achieve this? Taxes, especially on the wealthy and small business (those that survived). It’s the private sector, the small businesses that will create long term sustained job growth. However, not when they face no incentive to create jobs as their government will simply tax their profits to some extreme measures. Spending money by the government can be just fine and dandy, but when that is combined with heavy taxation, the private sector is doomed. Spend money on what you must, but cut taxes on the small businesses (and corporations) and watch them grow and grow and before you know it, you have the tax money needed because the private sector has grown, thus producing more tax revenue. Think of it this way, when Henry Ford introduced his assembly line and sought to produce more and more cars at a cheaper price in order to create more demand, he made more money. Same thing applies to taxation, create more tax payers without increasing the tax, and you make more money.

Several arguments. What got us out of the Great Depression? You could argue that the New Deal created the infrastructure that allowed the country to survive. The massive spending on war materials in the late 1930s early 40s. But mainly, and this is a point of serious debate, is the simple fact that after the war the United States was the only industrial economy left standing and this allowed the private sector to blossom and with it the complete recovery of our economy.

In comparison, the Great Depression did not truly become great until three years after the stock market crash of 1929. When the floor fell out of the economy (1932) is when true suffering occurred and thus produced the  “great” depression. Recently, our stock market crash was 2008-09.  Will we see a similar result by 2012 that we did by 1932 (per graph unemployment hits 25%)? I hope not.

FDR did not listen to small business owners. Henry Ford (you know, that great capitalists mentioned above) equated FDR’s policies to communism and refused to sign into the National Recovery Administration’s policies [for more on that click here]. FDR relied on economists who were ideologues and theorists who knew little about running a business. I hope our current President is not making the same mistake?

The facts are daunting. A $14 plus trillion dollar deficit will probably doom my generation from ever enjoying the sustained prosperity of our parents. The Republicans started the spending under Bush, and now the Democrats are doing the same times ten. Meet the new bosses, same as the old bosses. It’s hard to keep a straight face when I teach American Government and Politics as a high school teacher.

We can, however, hopefully, do something for our children. That probably starts this year when we elect fiscally responsible politicians? I don’t care if these include Democrats, Libertarians, Tea Partiers, whoever, it is our most direct way to avoid a potential disaster if Glenn Beck and others are right. And I hope they are not!

UPDATE: Lone voice warns of debt threat to Fed

The US must fix its growing debt problems or risk a new financial crisis, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, warned on Tuesday, adding a mounting deficit could spur inflation.

Economists Predict Cutbacks, Tax Increases That ‘Aren’t Even Imaginable’…

American political and economic leaders have sounded the alarm for years about the red ink rising in reports on the federal government’s fiscal health.

David Muir looks into how the deficit has become so large.But now the problem of mounting national debt is worse than it ever has been before with — potentially dire consequences for taxpayers, according to a report by the nonpartisan Peterson-Pew Commission on Budget Reform.

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9 Responses to The Coming of another Great Depression by 2012?

  1. The bigger they are, the harder they fall.

  2. Michael Schack says:

    I rarely watch Beck except when feeling real cynical, I know that at some point in his show he will look directly into the camera, eyes water up and attempt to act humble. At that point I clap and feel as if I have won a bet on the Kentucky derby.
    I too am worried about the economy. I tend to see it as a loss of the market. First the country gave up its manufacturing sector companies and deciding to become a financial based economy. I also see the economy being controlled by fewer and fewer companies shutting down competition and innovation. A small company might invent but then do not have the resources to produce or market, so it sells out to one of the larger ones that then bloat the original company. I believe that for our economy to be strong it needs a wealth of small- middle size companies that continually innovate and export products. (much like the mid size companies of Germany.

    Oligopolies in the U.S manufacturing sector. include the steel, aluminum, and automobile industries.
    80 percent of all television earning come from five companies: Disney /ABC, CBC broadcasting, News Corporation, NBC/ Universal and Time Warner\There are now just 5 major book publishers
    Anheuswer Bush and Miller Coors have 80 per cent of the market.
    In California with 20 million people needing insurance ought to be a very competitive market has two insurers Anthem and Kaiser Permanente
    Dairy Farmers of America (DFA) controls 80 percent of the milk sales in New Jersey, Tennessee and Michigan
    It has been too difficult for me to keep up with all the mergers in the banking industry. Although the loss of Bear Sterns And Lehman Brothers was a shock to the system.
    Finally the New Deal might have saved the capitalistic system from dying in the country. It was world War2 that revitalized it.

  3. Kenneth Bentley says:

    If we do have a great depression it will effect the whole world since we are the biggest consumer of products the world produces so we will bring down all the other nations . It reminds you of Babylon the great . It boasted of it’s greatness but it fell and was over run by the Persians . There is a prophecy in the bible that discribes a 2nd Babylon when it says Babylon twice in a row . So we may see the collapse of America not only from within but without . Another prophecy comes to mind that says the stranger within you shall eat up your substance . it may refer to immigrants coming in and taking our social security and benefits . We spend 312 billion a year on them now so we may only have 2 years left if things don’t change .

  4. john says:

    I fully believe a depression of unprecedented magnitude is going to hit the United States and take the world down with it. The dollar will cease to exist it will be worthless right along with the euro. We are now monetizng our debt and unlike Zimbabwe who was backed up by the dollar when they did it we have no back up. The dollar is it when it goes we go. The world as we know it will likely end and our country will be laid to ruin. We are playing a shell game with the Central Banks – we are buying agency bonds from the central banks using money we print out of thin air. The central banks are then in turn buying our treasury notes with the same “created money” in essence we are shifting our debt around like the marble under the three shells game. When the marble is found it is not going to be pretty.

  5. john says:

    Since Obama took office we have monetized 2.2 trillion of our own debt. In other words we have printed money to spend that has been added to the deficit this is the shell game I spoke of earlier. TARP and Stimulus funds came from this printing it is a delicate balance and can work if done absolutely right at the absolutely right time. The problem is that it cannot be sustained and real sconomic growth must start very soon or we are heading for trouble. I am talking over 50% unemployment disruptions in supply lines for food, fuel and other essentials. I am not tryinfgto scare anyone but I thnk it can no longer be staved off. We will know in the next 6-18 months. Time to Pray America like we haven’t for years!!!!

  6. LibertyVini says:

    John Williams of Shadow Government Statistics (http://www.shadowstats.com/alternate_data/unemployment-charts) argues pretty convincingly that if unemployment were calculated as it was in the Depression era, the actual unemployment rate RIGHT NOW is very close to 25%. According to the government, it’s the Depression that never was. But they continue following seriously wrong Keynesian demand-pumping, exactly what made the last Depression last 20 years (technically the Great Depression never ended until at least 1946 or later).

  7. LibertyVini says:

    Anyway, don’t waste your time listening to Beck, his solutions all seem to boil down to more war, all the time. Instead, check out the high-quality economic analysis available at the Ludwig von Mises institute; http://www.mises.org. The late Murray Rothbard , who along with Hayek was one of Mises’ star pupils, wrote a little book, called “America’s Great Depression”, that explains how insane Keynesian policies deepened and prolonged the last depression. It is available as a free .pdf download; 
    http://mises.org/rothbard/agd.pdf

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  9. Norm says:

    Ref:”Finally the New Deal might have saved the capitalistic system from dying …” Not according to Henry…

    “We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong…somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises…I say after eight years of this administration we have just as much unemployment as when we started…And an enormous debt to boot!” ~ Henry Morgenthau, Jr, Secretary of the Treasury, 1939

    Source: http://collectingmythoughts.blogspot.com/2009/02/sourcing-morgenthau-1939-quote-at.html

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