30’s Depression Talk: Is It Possible?
June 26, 2008 11:25 PM
There has been a lot of talk for the last 6 months that we may enter a 1930’s type depression. Is this a real possibilty? While I have been extraordinarily negative on the economy since last year (far more than most anyone not named Peter Schiff), I do not believe this is possible for two reasons. One we have pensions today to support the economy to some extent while they did not have any backdrop then. Second, corporations are global now and even if the U.S suffers severely they will likely not go under.
The only possibility I see of a 1930’s type depression is a total and complete collapse in the dollar. With the current policies this is not a complete impossibility. We have massive inflation that is not reported in the new inflation formula. We have trade deficits that the world has never seen before. We have likely trillions in government pension deficits on the state and federal level not being reported. This all bodes very, very poorly for the dollar long term unless we take drastic action and now.
The problem with taking drastic action regarding trade is that is one of the reasons for the original depression - protectionism. But I believe this is far different. This is not a matter of not wanting to trade to save jobs or protect rights, it is a matter of fair trade and trading with equals. We are trading with so called third world countries that make pennies an hour. The only way we can compete is to also make pennies and hour, less the differential in shipping. This is not good and I see zero benefit in trading this way. It is a massive net negative for the U.S long term, and who are we supposed to be looking out for? Last I checked, we elect people to look out for our welfare, supposedly.
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