Monday, October 20, 2008

Economic Meltdown

A reader recently criticized me for shouting "gloom & doom" from the rooftops. Perhaps he or she is right, perhaps not. I look at the situation this way. My readership varies but hangs around 60 to 70 visits per day. I am not going to, with that small audience create chaos by being negative. What I might do however, is convince someone out there that the head in the sand trick don't make it better. It just hides reality from you. My thirty years in Mortgage and consumer fiance gives me some background. The seventy years that I have lived gives me history and perspective.

This is unlike those, not all, certainly, but those that are young, say 40 and younger that haven't actually experienced bad times in their lifetime. This tends to sway people into thinking that because it didn't happen in my lifetime, then it won't. Well, Mt. St. Helens hadn't erupted in our lifetime either, but it still did. I grew up hearing my parents talk about the "Great Depression." It started only 99 years ago and lasted about ten years, with World War 11 and the rearming of our military and naval forces creating a resurgence in the manufacturing field.

There are several reasons why I think that if we do enter a depression, it will be much worse.First, we have exported most of our heavy industry. Big steel is no longer. Our auto industry is teetering on the brink. Confidence in our financial markets is at a historic low. Our dollar is not backed by anything anymore. When we switched from the gold and silver standard to a GNP based value system faith was the only thing left to back the buck. The worst part though, is that in 1929 through 1938, a large majority of our population either lived on farms, or had acreage that could and did support most of them. The pictures of hobo camps and bums asking for handouts were an overstatement since many if not most farms were paid off and were owned free & clear. Most of the unemployed were those that were previously employed in industry which had shut down. When my parents lost their horse in 1937, it was a tragedy, not just the loss of an old friend. That horse was a Percheron that pulled a plow and other farm implements that allowed them to survive the depression. They had to sell the farm when that happened. Now people use tractors. Unfortunately, tractors do not feed themselves, but require fuel.

Today, much has changed. People don't have the survival skills that Americans did 100 years ago. Most don't have land that they can raise livestock or a garden. Those that do haven't the skills necessary to preserve the harvest, nor enough food in storage to last long enough to create their own supply. I have lived on a subsistence farm. During WW11, we, along with most of our neighbors, had acreage, a family cow, hogs, chickens etc. We also raised our own food for the most part. Why? Because WW11 rationing was in effect, money was scarce and most importantly,my folks having lived through the great depression, knew how.

In writing these articles, I realize that it can be construed as alarmist. When a fire has started, it is sometimes useful for someone to sound the alarm. The "experts" that say everything is going to be alright have an ax to grind. They make their money in the market, or at least have peripheral relations to that bunch. It is in their best interests to try to gloss over the massive problems that we face and put a friendly happy face on things. That doesn't necessarily make it so though. I have been there, done that and have the t-shirt. I was there, in the mortgage business when everything went south in 1980. That lasted four years. I went out of business in my own mortgage company when the crash of 1987 occurred. If we continue to sink, people need to, even as a mental exercise, think about survival IF things end up in the toilet. If we recover without too much further pain, fine. I would be delighted to be found wrong. But if I'm not, perhaps I will be of some help if only to get a few people thinking about the abyss ahead.

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