Are we in another great depression, and we don't know it? If you believe the most dire pessimists, it might be a good idea to brace now for another economic freefall, which will unfold in late 2012 and through 2013, and which will be worse than 2008. By the technical definition, the Great Recession ended in 2009. But this recovery quickly faltered over 2010-2011.
Liberal views on the unfolding Libor scandal. "What we need is to wipe out the entire generation of so called banking leaders who apparently have no ethics or integrity." Financial Times [original FT reference not confirmed]. Eliot Spitzer on America's Current TV (3 July 2012). Video Source: Youtube (Hat tip: ENE News).
Stocks have recovered sporadically, but are not driven by a corresponding rise in employment and consumer spending. Consumer and government debts are astronomical. Whereas people were borrowing a few years ago to keep up their standard of living, now many are borrowing to make ends meet, or almost meet, or not meet. They are not borrowing because they have renewed confidence in the system, but because they have no choice. There is a recession in the UK (amid a rate fixing scandal and some dodgy possible bank hacks now spreading abroad). The EU's debt crisis has Europe leaning on China. The recession is double dipping in the US. Late last year, Paperblog compared the Great Depression to the Great Recession, and indicated the latter was far from over:
The news from Asia is troubling. Japan's economy, due to the Fukushima disaster, could be even more gravely damaged than we already think it is.Currently, America’s fiscal situation is in tatters. While the stock market is doing well, the real problem is unemployment, which is on a level that hasn’t been seen since the Great Depression and things are not going to get better soon. This becomes a serious problem as without employment, people don’t have money to spend and America’s economy “is predominantly driven by consumer spending, which accounts for approximately 70 percent of all economic growth.”
Another Depression is possible due to the fact that while things may seem to have calmed down for now, the deep, structural problems within America’s economy still exist, are still active and therefore still have the potential to do major damage in the future. Economist Nouriel Roubini stated that another crisis is already manifesting itself in developed nations. The only thing that the bailouts served to do was delay the inevitable: the bailed out corporations will fail due to their own risky practices and they will bring the US and world economies down with them.
One of the economists who correctly predicted the Great Recession as early as 2006 is the aforementioned Nouriel Roubini. In 2009, he warned against a 'sucker's rally' and insisted the misery was by no means over; he promised a double-dip recession, which is now occurring. The Boomer NYU professor is nicknamed 'permabear' because of his economic pessimism. Then again, he does tend to be right. On 9 July 2012, he told Business Insider at the FP that a 'perfect storm' of terrible conditions is brewing for a serious downturn in 2012-2013:
Whether Roubini knows it or not, his prediction is ironically hopeful in its hopelessness. A recession or depression marks a failure of confidence in the economy and in society. It is, if you like, a critical mass of millions of bad decisions and unfortunate impulses. To assess if the crisis is finished, look at mass psychology. It is not finished, because lessons were not learned. Just like Japan's government turning the nuclear plants right back on, the slightest recovery inspires immediate returns to the patterns which caused 2008's plunge in the first place. Popular attitudes are characterized either by obliviousness (for those who can afford to be oblivious) or by anomie (normlessness) and aporia (confusion).• ”By 2013, the ability of policy makers to kick the can down the road is going to run out of steam”•“In the eurozone the slow-motion train-wreck could become a faster-motion train wreck”•“The US looks close to stall-speed and a recession, given the latest economic data”•“The landing of China is becoming harder rather than softer”
•“The other emerging markets are all sharply slowing down in terms of growth–the BRICs, China, Russia, India, Brazil, and also Mexico, Turkey. Partly it’s because there’s a recession in the Eurozone and UK, partly it’s because they’re not doing their reforms.”
•“And finally there is the time bomb of a potential war between Israel and the US and Iran. Negotiations have failed. The sanctions will fail. Obama doesn’t want a war before the election, but after the election, regardless of whether it is Obama elected or Romney, chances are the US is going to decide to go and attack Iran and then you’ll have a doubling in global oil prices overnight.”•“So, it’s the perfect storm! You could have a collapse of the eurozone, a US double-dip, hard-landing of China, hard-landing of emerging markets, and a war in the Middle East. Next year could be a global perfect storm.”
At this point, Bloomberg’s Connan asks a question:
So you’re predicting a scenario that is much worse than 2008?
“Well, it’s much worse, because like 2008 you have an economic and financial crisis, but unlike 2008, you’re running out of policy bullets. In 2008, you could cut rates from 5%-6% down to zero, do QE1, QE2, QE3, you could do fiscal stimulus up to 10% of GDP, you could backstop a __ guarantee bailout of banks and everybody else. Today, more QEs are becoming less and less effective because the problems are of insolvency not illiquidity. Fiscal deficits are already so large that everybody has to cut them, not increase them. And you cannot bail out the banks because 1) there is political opposition to it, 2) governments are near insolvent and they cannot bail out themselves, let alone bail out the banking system.
“So the problem is that we are running out of policy bullets. We’re running out of policy rabbits to pull out of the policy hats compared to 2008.
“So if a freefall of markets and economy does occur, you don’t have any more of a safety net of enough policy bullets to try to absorb the shocks, because we’ve been spending the last 4 years using 95% of those bullets. So we are running out of bullets.”
But anomie and aporia need not be dead ends. They need not lead to political stalemates, war and violent global convulsions. In a society where values have fragmented and collapsed, no one really has the answers because commonly-accepted values arise from behaviour, conventions and rituals - collective experiences - which develop over time. Between the 1960s and the 2000s, a combination of the Baby Boomers' generational mission and the tech revolution shattered social norms. But not enough time has passed to bring definition and consensus to new social and political practices. This kind of hazy period of transition is tough to live through, because many people are accustomed to getting their social cues externally. This is why fanatics can thrive in such an atmosphere. They need only claim convincingly that they know 'the answer' to all the problems, that they can lead 'the way through the mess,' and they are nearly guaranteed to attract popular support and power.
How to respond? Prolonged misery awakes the best and worse in people. The 1930s testify to that fact more than any other decade. The Dirty Thirties were a time of rampant crime (Bonnie and Clyde) and the heroism that grew out of that crime (Superman); of mass delusion and collective racist irresponsibility (Nazism) and great discoveries (Cockcroft and Walton split the atom).
John Steinbeck's Great Depression era novel, The Grapes of Wrath (1939), condemned the greed of those who had caused the Great Depression. His novel also revealed a collapse in values, common with our own turn of the Millennium. Steinbeck's work is a relentless exercise in individual soul-searching to find a collective spirit and associated values:
What is to be done? One path, as Steinbeck indicated with his majestic novel, was to look within the heart, to understand 'Depression' as a metaphor for social ills which could be resolved, or at least transformed into something new. But this task could only be accomplished at great cost to those who undertook it. In other words, for Steinbeck, the Depression was a terrible crucible in which the values of the future were set by those who together found a way through a nightmare.Before I knowed it, I was sayin' out loud, 'The hell with it! There ain't no sin and there ain't no virtue. There's just stuff people do. It's all part of the same thing.'... I says, 'What's this call, this sperit?' An' I says, 'It's love. I love people so much I'm fit to bust, sometimes.'... I figgered, 'Why do we got to hang it on God or Jesus? Maybe,' I figgered, 'maybe it's all men an' all women we love; maybe that's the Holy Sperit-the human sperit-the whole shebang. Maybe all men got one big soul ever'body's a part of.' Now I sat there thinkin' it, an' all of a suddent-I knew it. I knew it so deep down that it was true, and I still know it." - The Grapes of Wrath, Chapter 4.
On 7 July 2012, the blogger at The Pictorial Arts, Thomas Buchanan, embarked on a series of posts, starting with 'What's to be Done?'; Buchanan's introspection searches for new Millennial inspirations for the future. It is a common search, undertaken across the Web by bloggers and writers who are trying in different ways to fill a vacuum. The point is to begin not by assuming one knows the solutions already, but by looking at reality and admitting there are no easy answers.
That effort to counteract chaos, to muddle through unsolvable dilemmas whose answers will one day be self-evident, is the path upon which Steinbeck insisted. It is the only defensible choice available when the foundations of stable, prosperous societies weaken or crumble.
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