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Great Recession? Great Denial

What is the best way to describe our economic situation?  If you look at the popular press, the term that is gaining  truck lately is “Great Recession”, a term that refers to the worst recession since the Great Depression of 1929-1937.  But isn’t a really bad Recession just one way of defining a “Depression”?   Well, maybe, but that would involve using that dreaded “D word”.  That kind of cowardice, the inability to call the situation what it is, lies at the heart of why we aren’t capable of dealing with it properly – which is why it continues to get worse.

This is a topic that’s been on my mind since before most people even understood there is a serious problem.  Whether you want to call this a Recession, Depression, or a banana may not seem particularly important at first.  Some people have even told me that using the “D word” will only scare people into a kind of panic that will make things worse in the short term.  But let’s think this through for a while so that we can see how important it is to be accurate about our situation.

If you listen to economists and economic reporters, there are two very important things that they stress.  The first is that no one saw this coming, a statement that is easily shown to be wrong.  The second is that you can never be sure how bad it is until all the stats are in, which is to say that we can only drive by looking in our rearview mirror. Both of these, taken together, add up to one thing:  we do not believe that we can predict the future with any degree of reliability because we can’t even tell you where we are now.

Imagine for a moment that the weatherperson on the nooze told you, “Today it was 25 degrees F and snowing, but tomorrow, well, things are highly variable.”  Or if the beefy panel of jocks on ESPN Sportscenter said before the big football game, “I dunno which team will win, they’re both pretty good”.  You’d probably stop listening to both of them in a hurry because there’s little point in hearing what you already know.

The economy might look harder to predict than, say, the weather, but it’s also a lot more important.  Risk assessment is at the core of a market economy, which is to say that it’s all about how you place yer bets on the future.  The process of making investments is all about the future, not the past. Refusing to take a reasonable stab at predicting it isn’t just cowardly, it’s dangerous because it causes people to make the wrong bet consistently.

The truth is that we know a lot about the situation we are in.  This is roughly the Fifth Depression in US History, depending on how you count things.  It’s a lot more like 1893 than it is 1929 in most respects.  Yes, our government has intervened in a way that it never did before to stave off the worst of it, but it’s still progressing about the way that you can expect it will happen.  More to the point, not everyone is simply telling us, “We don’t know” – a lot of smart people are telling us what will happen if we don’t (literally) take care of business.

You may still think that it doesn’t matter what we call this thing, but if we don’t have a real sense of seriousness we have plenty of room for political grandstanding and games that have no place in a real emergency.  It’s like any other betting behavior – someone who has put a lot of money into one slot machine is always slow to leave it behind on the theory that it’s due to pay at any moment.  If you keep telling everyone that they are right, it’s sure due, you only harden that delusion.

Will we ever get around to calling this what it is, a Depression?  I’m certain that we will.  I only hope that it won’t happen too late.  There’s very good reason to believe that a second Credit Crisis is brewing and may hit us in March or April, just as surely as we can expect spring to arrive somewhere in there.  How can we tell?  Because the defaults are already happening and there is considerable weakness in sovereign (national) debt in some industrial economies.  Will we be ready for that, or will it be a terrible surprise that we’re totally at the mercy of?

A free people have control over their own lives.  They can be delusional in spurts, but in the end they have to take care of business.  That means that they can see what’s coming and plan accordingly.  Denial is not a substitute, nor is simply declaring that we have always been at war with Eurasia.  The term “Great Recession” is nothing more than cowardice that needs to be junked quickly if we’re ever gonna get real.

28 thoughts on “Great Recession? Great Denial

  1. Excellent! I hope you are wrong about the next credit crisis, but I can see that you might be right. Not being prepared for it is no excuse. Our press is really falling down on the job, yet again.

  2. No one wants to admit how bad things are. I think it is even worse than you say here because the government is probably only making things worse in the long run by running up the debt. That is what gets scary.

  3. I totally agree that saying we can’t predict the economy is not only wrong but dangerous. Calling it “cowardly” is not a stretch, either. It’s so important that no one wants to be proved wrong, but saying that we can’t tell is not an excuse. We need to be a lot more honest about the situation before it’s going to get better.

  4. I pretty much agree with you here. I heard the secondary markets (i.e. the twincities metro and other secondary areas probably not the sunbelt areas) will be nearing their wave of foreclosures whereas the first wave was in the sunbelt.
    Now could you reengineer a city? Write about it please. Could you reengineer a metro area? Please write about it! Could you reengineeer a state? Write about Minnesota or Wisconsin dammit. I want some specifics here or it is forty pushups for you.
    On a personal level we will probably be purchasing our first new refrigerator due to the cash for clunked appliances. I am also remotely thinking of installing a non code bathtub with solar water in the basement (my teens drive me crazy so Dad seeks refuge). Of course I’ll provide proper drainage so itll be fine. My parents/mother did laundry reusing the first hotwater load from the whites and cleaning the jeans with proir water. I should do that. Make it simple. Do a washington carver here where it can be widely adapted.
    We still live in a very strange economy I saw a billboard the other day advertising plastic surgery for your legs. Now I understand and all to a degree but what about wearing long pants. Please write about the gini coeffecient and bonding. 2 related and unrelated topics depending on your point of view. I’d like to read your thoughts.

  5. Thanks, everyone. Especially Anna with the great link from MNspeak. 🙂

    Dan, you’re right that at some point cities (especially) will be re-engineered. I’ve gone on and on about the way we designed our “Downtown” regions for offices – something that probably won’t be necessary in the future. So what will replace them? Saint Paul is better on residential, which … well, it seems as though there’s a lot more to it than that. Rather than plan the heck out of everything, I’m more concerned that we have the right elements in place to allow a free market to do its thang. That takes a little more thought. I’ll think it over.

  6. I think people are beginning to take this seriously. You noted after the SOTU that the response has been pretty serious and I agree. The term ‘great recession’ may be a step in the right direction at least compared to where we have been on this. It takes people time to wake up and smell the coffee so it may be going the right way.

  7. Erik rips the media on depression denial!

    Did you see John Stewart last night? He had a piece on blog language and how silly it gets. I thought of you right away because thats why I read this blog – you give it straight. This is a great example of what I mean, thanks!

  8. Janine: Eh,you’re probably right. It’s just that I’ve been on this for 2 years now, and it gets frustrating. It’s like pushing on a rope. I have to press my advantage, tho.

    Angie: Yes, I saw it. I never understood all the violent, over the top language in most blogs. Still, if you want to do that for me, this is what I’d prefer:

    Erik Defenestrates Media on Depression Denial!

    Has a nice medieval ring to it, no? 🙂

  9. 2 minor disagreements. Some think there has never been a free market, it is always mixed more free possibly at the lower levels, more fixed at the higher levels. Again I would defer to “the structure of everyday life”
    St. Paul vs. MPLS. St. Paul probably has a better school system, less transciency, police with less more hard core problems. MPLS is better laid out with many interesting instituions (altho SP does too) and has a world class park system (partly geography) . Why the difference and there is a difference esp. in perception.

  10. I like your grassroots feel at times with a touch of high tech. Where money comes rushing in due to a freeer market we often get a temporary boost/blip. Stability and new change towrds more progressive policies (define please) would be welcome.

  11. Perhaps I fall into the group that believes it doesn’t matter what you call this thing, the nomenclature debate seems fundamentally wrong: Whatever predictions one makes about the economy must also accomodate the new social safety nets when comparing the present to the past.

    Social Security in 1929 was pawnable jewelry, a membership in a fraternal organization and a couple of boys with strong backs. Unemployment insurance likewise didn’t exist as a government program until we were years deep into the Great Depression. Two other issues that rarely come up that sharply distinguish now from then are bankruptcy protection laws and the FDIC – people truly lost everything including the shirts off their backs if their creditors thought them worth taking.

    Human suffering may be suggested by the number of consecutive quarters of shrinking GDP and the numerous ways of calculating the “real” percentages of unemployment. But the structure of the depression of the 30’s and the structure of the current problems are still light years away.

  12. You’re right about the name, Bruce. I just want people to take this seriously and stop screwing around.

    When we were attacked, a certain group of people made it clear that they felt the rules of normal civil discussion had to be suspended because of the seriousness of the situation. Dissent was not welcome.

    I don’t want us to go that far, but certainly playing around with the President’s nominations to key positions is not consistent with a state of emergency. Blocking everything that comes your way just because you can – without adding to the debate – doesn’t help one bit.

    I think Obama has done a much better job of conveying the seriousness lately, so I’m mostly satisfied. But I still smell denial out there. I want to add my part to, as civilly as possible, tell people to cut it out. That’s all.

  13. Bruce, your idea reminds me of a House episode where one student makes it to medical school and the other flunks out. He keeps saying well it could always be worse you still have a shirt on your back even though you have no health insurance and your house just got reposeced (sp). yes we have advanced but sill imagine being unemployed right now the fear, the anxiety it would just eat you up. There was still a decent percentage of the pop. that lived on subsistence farms and could produce ( aright in itself) and eke out a living. I don’t know what is the right balance. Just because we may have come a long way doesn’t mean we still have ground to cover. Hopefully rights aggregate not decimate.

  14. Dan, I think you missed my point. I was not saying things aren’t that bad. My point was, it is an apples and oranges comparison if you hold up the depression of the 1930’s and today’s problems. The economic context is too different for meaningful comparisions.

    An economics textbook I had once asked “If you could be the richest person 2,000 years ago or an average (American) person today which would be better?” The richest person 2,000 years ago could have dozens of servants fan them. Most Americans have access to air conditioning. That was my point.

    I am unemployed by the way.

  15. Bruce: I missed your point in the sense that I forgot to respond to the part I agreed with and went straight to the apologetic part.

    You are absolutely, spot-on right. While this Depression compares very well to 1893, the big difference is the level of support that we have and the relative wealth of most of society coming into it. Nothing really compares to the “Great Depression” of 1929, which really was “The Big One” and deserves to be called “Great”.

    We don’t have a lot to whine about, at least not in historical terms. Where I get sensitive is that … well, we seem to whine a lot. It’s serious, but we’re dealing with a lot of things far better than we ever did before. I just want us to take the serious part a lot more seriously.

    Perhaps being grateful for how good it is might not be a bad start. From that perspective, I might look like a whiner, too. Don’t want that to be out there, for sure.

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