Dramatic and Far-Reaching

Although there's some debate about the difference between a depression and a recession, history suggests the former tends to have a lasting impact on attitudes and behavior, while the effects of the latter are temporary.

For the most part, the recessions that took place during the two decades or so prior to the downturn that began in December 2007 did not really alter the free-spending ways of the American consumer. Once the hardest times passed, Americans were quick to resume their old habits.

However, as Robert Samuelson notes in a Newsweek commentary, "Insecurity Goes Upscale," the fallout this time has been dramatic and far-reaching:

How the recession has changed us.

It has been the most egalitarian of all the 11 recessions since World War II. In various ways, it has touched every social class through job loss, pay cuts, depressed home values, shrunken stock portfolios, eroded retirement savings, grown children returning home—and anxiety about all of the above. The Great Recession (as it is widely called) has changed America psychologically, politically, economically, and socially. Just how will be examined and debated for years. Here comes a booming cottage industry of scholars, pollsters, and pundits.

A new study from the Pew Research Center, based on an opinion survey in May of nearly 3,000 Americans and an exhaustive evaluation of economic data, provides a preview. Not surprisingly, it confirms that Americans have become more frugal; 71 percent say they’re buying less expensive brands, 57 percent say they’ve trimmed or eliminated vacations. Life plans have changed; 11 percent say they’ve postponed marriage or children, while 9 percent have moved in with parents.

...

Previous recessions have focused their hurt on the young and unskilled. This remains true. Almost one fifth of workers 16 to 24 were unemployed at the end of 2009, a near doubling since late 2007. Among those without a high-school diploma, joblessness was 50 percent higher than the average. Still, the economic and spiritual damage extends much further, for many reasons.

According to Samuelson, the key factors include a very large number of job losses, widespread pay cuts, and the substantial decline in housing and stock market wealth. That said, the pain has not been evenly felt.

One paradox identified by Pew is that some groups that “have been hardest hit by this recession (including blacks, young adults and Democrats) are significantly more upbeat than their more sheltered counterparts (including whites, older adults and Republicans) about a recovery.” For instance: blacks suffer much higher unemployment than whites (15.4 percent vs. 8.6 percent in June) but believe more strongly than whites that recovery has begun (47 percent to 38 percent). Pew’s explanation for this is politics. With a Democratic administration, Democrats are more upbeat and Republicans are more glum.

Another theory—more powerful, I think—is that the Great Recession, though jarring to almost everyone, was most disruptive and disillusioning to those who previously were the most protected. It punctured their cocoons so unexpectedly that they became more cautious and fearful, whereas those who even in good times faced job loss and income shifts (many blacks, the young and the poor) were less surprised and affected. One legacy of the Great Recession is that insecurity and uncertainty have gone upscale. People feel more exposed. They tend to plan for the worst rather than hope for the best. Their reluctance to make major purchase commitments (a new car or home) validates their pessimism by retarding recovery.

While Samuelson doesn't go so far as to label it as such, it sure sounds like the kind of sea change that characterizes a depression.

Comments

[Tyler Elliott]

I wonder what type of cataclysmic even must happen (or needs to happen) to make the Mainstream media and the public at large stop believing this 'recovery' nonsense?

[Luke]

I don't know if it will ever happen. Most of America is too brainwashed by the MSM and sits in front of the television watching the oxymoronic "america's got talent" or other trash. I sense there is a 50/50 split for those who have really been hit and those not. But the 50% of those not feeling it are beginning to worry as they start to see the sales decline at their stores or the phones stop ringing at their offices. I laugh when I see the smugness of those who pride themselves at their lack of being affected such as evidenced in other threads. This is an all encompassing life changing event that will have an impact ultimately on every person and family. It may not have hit yet, but give it time and it will catch up. by the time it catches up to those who presently are unaffected they will be like deer in the headlights--how could this have happened to me? Well, life does happen and you just move on. Adjust or die, those are the choices basically left.

[Tim]

Almost all of the mega-cap corporations have huge international exposure. So what if fifty or a hundred million Americans move down the economic food chain? It's not a good thing for these corporations but there's plenty of people to replace them in China, India, Vietnam etc. We're becoming the Detroit of the world. A manufacturing and economic powerhouse that's seen better days.

[Kevin M]

This recession/recovery or what ever we choose to call it is muddier than previous downturns because the whole economic landscape is both more complicated and less definable than at any other time. It's hard to say categorically which way the economy is going because it all depends on what area of the economy we're talking about.

It does seem that for the top ten percent, who did not lose their jobs, homes or a significant portion of their retirement portfolios - in other words the people the financial media tend to track and follow - that a full scale recovery is under way. The restaurants are crowded again, and people are booking vacations.

But in terms of employment and housing, the factors that affect the largest amount of people, there's no evidence of any economic drivers kicking in to create a sustained upturn. So far, the recovery looks superficial and shallow, as if driven mostly by more money ciruculating. However if that money doesn't flow into wealth creating enterprises, this may be the shortest recovery in history.

[Michael]

The downtrodden just aren't much of an indicator here. They don't get much of the benefits of the boom, and you don't have far to fall if you're near the bottom in the crash.

No paradox here ...

[sharonsj]

We all know there is no recovery. Everybody is cutting back on spending. But this morning on NPR I listened to an interview with a small business owner who said he had no plans to hire new workers because they weren't needed. He ran a chain of gyms and business was off by 20%--people were cutting back on non-essentials. In order to keep his current employees, they all took a 10% pay cut. However, he blamed the recession on consumers being uncertain about the future.

He sounds like Republican Phil Gramm who said the recession was all in our heads. People are listening to media nonsense and think the solution is for us to stop worrying and go shopping, like Bush said after 9/11. Except no one has any money left to shop once they've paid the bills.

[hernando martinez arias]

the key to the understanding and to the solution or our political and economic crisis lies in the questioning of the fact that a few people have become the monetary authority of the world economy, and consequently have become our lord.

there are two reasons and only one way to make the power of money the true servant of the cooperative instinct of the peoples of the world, and a complement of our intrinsic need to develop a powerful individuality.

The power of money has been for over two centuries in the hands of a few people who control today the central banks all over the world.

for instance, they operate the federal reserve bank, as well as the european central bank, the bank of china, the bank of england...they constitute the "world monetary authority".

that is why we may call them "the lord of capital".

secondly, the major asset under the control of the lord of capital, for the past two hundred years, are the bosses of the traditional political parties.

that is why through the control of the political parties our world-lord controls every State. and the supranational organisations: the imf, the un, nato, wto...

in other words, the executive, the legislative and the judiciary "powers" in every nation are powers answerable to the lord of capital.

thus, we may ascertain that the State has supplanted the nation, in favor of the Lord of Capital.

in addition to controlling the central banks, the lord of capital controls commercial banking, industry,mining, agriculture and trade world-wide.

now, since the most important force to promote growth and therefore wealth in a society is the power of money...

let us deprive the lord of capital of his privilege to run all central banks...and all nations...let us foster the creation of a world nation and a world bank as the true public servant to all producers of goods and services, and a new world would just emerge from the ashes of this crisis.

[Rob Bennett]

It takes time for things to sink in.

I have been posting about the flaws of the Buy-and-Hold Model for eight years and I have seen a significant change in reactions since the crisis hit.

We are not yet where we need to be for people to want to pitch in and start a rebuilding effort. But we are getting there. I think the doom-and-gloomers are going to be surprised about how hard people are going to work to set things right once it really hits how badly we have messed up this time.

I believe we are on the threshold of the greatest period of economic growth in our history (after we survive the Second Great Depression -- ha! ha!)

Rob

[i]

It is a depression, but it's much more hidden. There are no bread lines. There are food stamp cards. You don't notice the person in front of you using them. People aren't hopping rail cars. They're eking out a living on ebay, or craigslist - a phenomenon which will come to a screeching halt once oil prices increase to the point where cheap shipping is no more (i.e. about 2016-2017).

And we started out richer, in general, than we were in the 1930s. We still have some slack. In some cases, a lot of slack and a lot farther to fall.

And fall we will, regardless of the cheerfully ignorant optimists out there who seem to think that the oil supply crunch, water shortages, et. al. will all be solved through the magic wand of new technology forever. The military (http://usjfcom.dodlive.mil/2010/03/15/introducing-the-joe-for-2010/ and Lloyds (http://www.guardian.co.uk/business/2010/jul/11/peak-oil-energy-disruption) are less sanguine.

Resource depletion is. Nature can not be fooled, even if pundits can be.

[roger]

the difference between a depression and a recession,
I see recession as a mild temporary slowdown in economic
activity--like catching your breath after a fast run.
Depression is terminal and presage a major shift in the
geopolitical structure, more like a tectonic realignment
of the continents, with deadly consequences.
And I do believe we are at the beginning of a major depression.
But then I'm not a household name, what the hell do I know.

[I've been through the rain]

Actually there is a small area in Jersey that has discovered perpetual boom times...

Shadowstats' John Williams Exposes The Media's Propaganda Spin, Or Why Watching CNBC Can Be Hazardous To Your Wealth

More recently, following an interview on a major cable news network (not CNBC), I was advised off-air by the producer that they were operating under a corporate mandate to give the economic news a positive spin, irrespective of how bad it was." And now you know that watching stations like CNBC for anything more than just comedic value is hazardous to your health and wealth.

http://tinyurl.com/2bfjft7

[Blurtman]

Gradualism. If you got lung cancer immediately after smoking one cigarette, nobody would smoke. But if you get it after 30 good years of smoking, with gradually declining function along the way, who notices?

Ditto the declining standard of living in the USA. There is a very long way to go before a significant percentage of the population are homeless, which means not even able to afford rent.

The bottomless black hole created by the financial industries' fraud is sucking everyone's future wealth into it. A huge discontinuity was created, and to remend the lines, something's got to give, and it is the wealth of the little people that is providing the glue.

[Blurtman]

Looking at the situation a little differently, if because of a declining manufacturing base, and a disempowered labor force, the FIRE industry becomes a more important part of the USA GDP, and if a crash of this industry crashes the USA economy, that is a lot of power. And a lot of leverage. If I am the F in FIRE, maybe I can do whatever the heck I want. What is the USA gov going to do about it? Want to see the Dow crash? Want to see money market accounts freeze up? No? Then I will do what the heck I want. Seems to be where we are.