Worse Than The Great Depression
We now see pundits on TV, who were saying everything is fine a few months ago, comparing stats to the Great Depression to justify how much better off we are today. Great!!!!
But the real question is whether conditions will get worse. We are less than a year into this cycle and we are already making comparisons. It took about 4 years from 1929 to 1933 to bottom out.
In 1929 we had much less debt. Home values were a much lower multiple to income. We were a growing economy creating new industries to sell products around the world.
Today, house values are still over 4X median income. Debt is out of control. And we are a net importer mostly servicing each other to earn a living. Moreover, much of our corporate earnings were based on financial alchemy. Without profits from financing activity, our corporate earnings would be a fraction of what they are today(we are just beginning to see the unwinding process).
In The Great Depression, Florida land only decreased 70% in value peak to trough. Recently, we have seen land transact at 90% off. Now the job layoffs are just starting to pour in. Construction will likely lose at least 50% of its employees. Same with mortgage finance. Ditto with Real Estate Sales. Wall Street is projected to lose 35%. Recently we have seen a slew of companies announce 10% workforce cuts or more including Dell, AMD, INTC, Schering Plough and many more.
Airlines are shutting down completely and Northwest and American have announced hiring freezes. You think Delta and Northwest are going to add employees when they merge and cut overlapping routes to raise fares? States are now announcing 10% budget cuts at every level. The Federal Deficit is running at a record high just six months into the year. Retailers are shutting down thousands of stores. Others are going out of business completely.
So now what? Cut interest rates and more deficit spending so we can pay $5 a gallon for gas and $10 for milk? Cut back spending and slow the economy down even further?
What makes this soooo different than The Great Depression is that wages/income are going down and Non housing related expenses are skyrocketing.