25 June 2011
I have been arguing the point for a couple of years that we are in a depression not a recession. If you take the gains in "financial services" away then the economy is still shrinking. We all know these gains are falsely propped up as the FED gives away gambling money in QE1 & QE2 to those "financial services" multi-nationals. Ted McLaughlin from Jobsanger has posted this timely and insightful piece that backs up my assertion.
While the pundits argue about whether the current recession is over or not, most Americans know the country has not recovered and may not for many more years. Millions of jobs have been lost and the few jobs currently being created can't even cover the new entrants to the work force. Wall Street may be doing well, but there is no doubt on Main Street that the recession rages on.
In fact, it may be worse than just a recession. It may actually be a full-blown depression. The evidence for this is mounting. A few days ago I wrote a post that showed the percentage of Americans that have been out of work for over six months has exceeded the percentage during the Great Depression. At least 6.2 million people, or 45.1%, of the 13.9 million unemployed in this country have been out of work for longer than six months (and that doesn't count the people who have given up trying to find work).
Now there is more evidence we may be in a second Great Depression. It has now been confirmed that the price of houses has dropped 33% since the start of the recession. That's more than the 31% that the cost of houses fell during the Great Depression. And the fall in prices may not be over, since the banks have a glut of homes they have repossessed and are still foreclosing at a record pace.
It's even worse when you consider that the modern drop in prices has occurred in less than four years -- a much shorter time than it took during the fall in the Great Depression. Paul Dales, senior economist at Capital Economics, put it this way for his clients, "The sharp fall in house prices in the first quarter provided further confirmation that this housing crash has been larger and faster than the one during the Great Depression." He predicts the prices will fall at least another 3% the rest of this year (making a total of 5% for the year).
Currently there are 4.5 million homes where the owners are at least three months behind on payments or banks have issued a foreclosure. The normal yearly average is only about 1 million. That tells us that the housing crises, like the jobs situation, is not going to be solved anytime soon.
The Great Depression was not actually called a depression until years later. At the time it was just a serious recession. I think it's becoming more likely every day that a few years down the road people will be referring to this period of history as the Second Great Depression.
Posted by Ted McLaughlin