A FUNNY SORT OF DEPRESSION

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Are we headed to something like the Great Depression?

There is clearly much to be worried about. Most of America's private retirement 401(k) accounts have significantly decreased in value since last autumn's crash. Home equity has plunged. The unemployment rate is above 7 percent and climbing. [snip]

Given all that news, we are in a funny sort of depression. Our spiraling national deficit is being financed by China, Japan and other overseas concerns at almost no interest -- saving the United States trillions of dollars in debt service costs.

Nearly 93 percent of those Americans in the workforce are still employed. Americans, who import 60 percent of their transportation fuel, along with natural gas, have been given about a half-trillion-dollar annual reprieve. [snip]

The vast majority of American homeowners -- well over 90 percent -- meet their mortgage payments. They have no plans to flip their homes for profit. Most are confident that after a few years their houses will appreciate again. As for now, working young couples have a chance to buy a house that would have been impossible just two years ago.

The majority of working Americans are not pulling out their sinking retirement funds. Most are still putting away pre-tax money each month, apparently confident that within a few years their portfolios will return to their former value. Some are even consoled that they are now buying mutual funds at rock-bottom prices. [snip]

For the vast majority of Americans, the fall in prices for almost everything from food to cars has, in real dollars, meant an actual increase in purchasing power.

I live in southeastern Fresno County, one of the poorest regions of a now nearly bankrupt California. Many people are hurting. Yet to go to the local Wal-Mart is to see late-model cars in the parking lots and plenty of cell phones, iPods and BlackBerrys among the shoppers. Carts are stuffed with consumer goods, lots of food and Easter confections.

So are we in a depression that justifies a vast redefinition of government and a massive takeover of the private sector? Not quite. What we are a witnessing instead is a sharp downturn from the most affluent era in the history of civilization.*

For the last two decades, we borrowed and spent as if there were no tomorrow. Now we are living in that tomorrow of cutting back and making do. In relative terms, it is no longer 2005, but that does not mean it is 1932.

[*And we need remember what brought us that prosperity {hint: it wasn't government} - Highly Recommended > ]

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