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The Difference Between Now and the 1930s

There are a great many similarities between the economic indicators today and those of the late 1920s, but there are differences that are even more important than the similarities.

The parallels are more or less obvious, but it is the differences that should actually concern us regarding any comparisons between what we face today as opposed to what we faced in the Crash of 29 and the Great Depression of the 30s.

One of the biggest and perhaps one of the most potentially devastating is the U.S. Trade Deficit. Once again, while the similarities pose a serious problem, the differences pose a grave threat that the people who endured the Great Depression never had to worry about. Actually, the U.S. and the People of that day were much more ?prepared?, if you can call it that, then we are now in 2006. Even the government was much more capable of handling the disaster then than it is now.

Today, many children and even young adults under the age of 35 were brought up watching TV, playing video games and have spent their time shopping at the malls. Few, very few know how to use a hoe or grow a vegetable. The vast majority of people are now concentrated in urban settings, family farms are scarce and most people have no concept of what it would mean to survive without the corner grocery store or without 24/7 access to electricity.

The overall indebtedness of both the public and private sectors will weigh heavily on both the governments and the publics ability to weather the coming storm. On top of that indebtedness is the massive trade imbalance; at least in the 1930s we still had something to actually sell to other countries, today that is not the case. Our manufacturing ability has been decimated through the various policies, agreements and the inflationary pressures, which have removed much of the profit out of the manufacturing business; therefore we now produce very little.

By 1934, Roosevelt had devalued the Dollar, but it was still considered relatively strong, that along with Trade helped immeasurability during the Depression. Today, we have neither! We have become a debtor nation, borrowing an estimated $2.5 Billion per day, everyday, year after year. Soon that will stop, we will no longer be able to borrow because no one will be willing to lend. Soon Foreign investors will decide its time to get out of the Dollar, actually it?s already happening and that will put enormous downward pressure on our economy as it pushes the Dollar into the dirt and hyper-inflation shoots through the roof.

In the 1930s, U.S. Trade was at a surplus and for that matter the Dollar was still backed to a degree by gold, although on a fractional basis by the end of the 30s. So, we were in a positive position when we were leading up to the Crash of 29 and the Great Depression of the 30s, now we are deep in the negative. The positive Trade Balance had a ?softening? effect on the Great Depression; indeed it provided the government with a medium of recovery that, of course, is sorely lacking today.

As with any Trade Deficit, there is the other side of the coin, which is the Manufacturing Base, you rarely have one without the other. In fact, they mirror each other over the past few decades, both in a downward spiral as cheap foreign labor and products invade the once thriving U.S. marketplace. Both are economic cancers eating away at the flesh of this Nations health and security. Anytime you destroy the manufacturing base of a country you will automatically destroy the ability of that country to produce wealth and therefore the prosperity and wellbeing of the people. When you have nothing to produce, then you have little to invest in and when you have little to invest in you have few investors willing to invest over the long-term. The cycle then becomes tighter where fewer and fewer investors feel the need to invest in a country that has so little to offer in return.

We have become a Nation of consumers, but consumers are becoming much easier to find around the world, and most of the other consumer nations are also producer nations with a growing wealth base due to their manufacturing ability. Consumers who do not also produce will be of little value, especially if that consumer nation has to borrow in order to consume. As soon as more and more countries become wealthier by their manufacturing base, we will become far less important to the world of trade. After all who would you rather sell to: someone who has the money to pay you or someone who has to borrow the money and then turn around and pay you with the very money they just borrowed?

In Liberty,
Republicae-Seditionist

Full post as published by The 1776 Solution on November 26, 2006 (boomark / email).