For the millions of Americans without a job, “it’s a depression,” Biden said.
“My grandpop used to say — there was a suburb of Scranton called Minooka. He said, ”˜When the guy in Minooka’s out of work, it’s an economic slowdown. When your brother- in-law’s out of work, it’s a recession. When you’re out of work, it’s a depression,'” Biden said.
“Well, it’s a depression — it’s a depression for millions of Americans, through no fault of their own,” he said.
While I understand the importance of showing concern for the suffering of so many, it is so unhelpful for the Vice President to be using the D word. It doesn’t help the national mood, and it simply isn’t historically accurate.
None of which is to say that the labor market is not very bad.
This is a variant of the line Ronald Reagan used so much, with his addition: “And when Jimmy Carter’s out of work, it’s called “recovery.”
“…through no fault of their own…”
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Well in addition to the fact that the economy is the organic product of billions of human decisions and goes through ‘downs’ as well as ‘ups,’ there is “fault” to be addressed.
A major “fault” is the Congress’ faulty and demented low income mortgage program that resulted in unsustainable loans, from the situation of the borrower, being foisted on the American people.
Another was the ‘invention’ of further loans being made at the initiative of the lenders and with the tacit, sometimes open, approval of the Congress and the President that were based on collateral assets that were based upon the supposed ‘value’ of of the the low income loans.
The is plenty of “fault” here that can be placed squarely on the shoulders of politicians and irresponsible money managers.
Something else about Biden’s statement: It elevates the personal, the subjective, as the ultimate standard. Forget the fact that “recession” has been defined as two consecutive quarters of economic contraction. What matters for Biden is how you feel, what your individual experience is, finding the compelling anecdote.
It makes rational discourse impossible.
[b]Dives sum si non reddo eis quibus debeo.[/b] Plautus, ~200 BC, in [i]Curculio[/i].
“Depression” is not an historically accurate term only if you make the comparison on the basis of unemployment data. Job losses, however wrenching for those involved, are not what define either a recession or a depression.
Briefly put:
A [b]recession is an inventory adjustment[/b] event. Recessions a normal and necessary part of a healthy business cycle typically recurring every five years or so. When inventories have been over-produced, those companies need to slip the clutch until inventories are sold down to healthier level; employees are laid off or furloughed.
A [b]depression is a [i]balance-sheet[/i] adjustment[/b] event. Depressions are the normal result of excess debt. Debt is liquidated either by repayment or by default, but in either case debt liquidation begets distress selling, contracting bank deposits, and declining velocity of money. Depressions continue until all the bad debt is wrung out of the economy. All of it.
People most certainly lose jobs in a depression, often because the jobs disappear forever, but unemployment is the result rather than a defining characteristic. The difference between a recession and a depression is over-indebtedness. On that basis our current situation is close kin to the depressions of 1782-88, 1837-44, 1873-78, and 1929-42.
Many key metrics of the current depression are already worse than they were by the equivalent phase of the 1929-42 depression, most notably the absolute collapse of world trade.
What is unhelpful is not that Biden uses the word “depression,” but that the administration of which he is a part is making things significantly worse by:
a) creating astronomical deficits that will choke off productive investments for at least a decade
b) pouring phenomenal sums into supporting failed businesses
c) demonizing productive businesses
d) lurching into protectionist trade policies
e) raising taxes
Our current situation is duplication nearly the exact sequence of previous depressions, which begs one key question:
[b]How is more debt going to solve the problem of over-indebtedness?[/b]
[i]Dives sum si non reddo eis quibus debeo.[/i]
I am a wealthy man, as long as I don’t have to repay my creditors.
I think any American should be dreadfully concerned about the staggering debt and Obama/Biden’s plan to add about $2 trillion a year for the next decade. Any objective person might ascertain either complete fiscal incompeteny or a strategy to bankrupt the country.
Concurrently, the administration is engaging in a consolidated effort to malign any dissenters of its policies. Right now they are attacking FoxNews, a free-market expression, and the US Chamber of Commerce. They have previously attacked Rush Limbaugh and Sean Hannity. All Americans should be concerned about these attacks and see them in the appropriate historical light.
Elections have consequences…
Using the same methodology and criteria employed during the 1930’s, the current unemployment rate in the United States is a little over 17%. That’s a depression by any reasonable definition.
Just an FYI to fellow posters. Please be careful when copying and pasting links or text into comments here. If not done using the codes provided it can really make a mess out of the html and screw up the appearance of the comments section making them difficult to read.
Kendall, I seriously disagree. I and the people I work with in the real estate industry are under no illusion that this is a “recession,” and that we are “recovering.” This “recovery” is like a family maxing out its credit cards to keep up its standard of living and assuming they never have to be paid back. It’s the same kind of foolishness that got us here in the first place, primarily fueled by government policy dating back to the Clinton administration mandating and/or encouraging loans that could not under any stretch of the imagination be seen as prudent, and a financial sector that figured they would take advantage of the froth generated by such unwise practices before the whole house of cards came down.
We are in a depression, it’s just being masked by all the government’s wasteful spending to try make things look better than they are. Cash for Clunkers was a perfect example. It was solely to prop up the auto workers’ union and the government’s new car companies and to pump yet more paper into the system for no value added to the economy. And now they want to pass out yet another $250 stimulus check to senior citizens, to compensate for the fact that Social Security is not going to be increased because of deflation of the national economy?
Pretty soon the money’s going to run out, because we will run out of public credit (the result being devaluation of the currency and rapid escalation of interest rates).
I can tell you that in the real estate industry, nothing has improved. Banks still will not lend, and in my area there are absolutely no projects going on, high rise buildings sit half-built and abandoned, commercial buildings are sitting empty, and foreclosures continue to multiply.
As commercial loans continue to mature, they cannot be refinanced because of the significant decline in asset values, and then go into default and foreclosure. Every day you read about another commercial venture, hotel or resort going under. There has been no improvement since the beginning of 2008.
Plus the other zapper that is about to hit us locally is that our state unemployment fund is running out of money, and we have been informed that our unemployment assessment rate is going up 1000%. Businesses cannot take that. They are either going to have to lay off more people, cut salaries by at least another 10%, or if they can’t do that they will shut the doors. Of course, that will only increase the unemployed and in a vicious cycle put more and more burden on fewer and fewer businesses to underwrite increased government social welfare expenditures.
Unfortunately, the approach utilized by the present administration has pretty much bankrupted the country. The classic response to that, as the private sector loses the ability to produce and sell goods and services, is to institute an increasingly socialist government structure where the government controls the economy and dictates what will be done. Indeed, since the government already controls most of the automobile sector of the economy (in the process having wiped out private investment in favor of protecting the worker unions), is increasingly taking over the financial sector, and now is also trying as hard as it can to take over the healthcare sector, that is where we are headed.