Today, we are going to let you in on the best kept secret of 2009.
Psssst…we are in a depression, not a recession.
There probably are not too many people out there who would recognize what a depression even looks like, or how it is going to affect them either. I once asked my grandfather, Don Emerson about the depression of the 1930’s as he was born in 1917. He said, “It was no different from yesterday except everything cost more and no one had any money to buy it.” At 94 years old he has lived a frugal and practical life because of what he learned during that time. And I have learned from his wisdom.
But do any of the rest of us recognize ‘the D word’ for what it really is? Let’s look at the news for our answers and see what we can draw from that.
Oil prices are down to $40 per barrel, credit card debt is at all time highs, and record job losses have hit us hardest… but the most interesting bit of news I saw this week was that China now buys more cars than Americans. How can that be?
President Obama has told Congress that if his ‘Stimulus Plan’ is not passed soon, totaling nearly a trillion dollars now, the consequences will be catastrophic. The bad news is that you just cannot spend your way out of a depression, a recession maybe? But a depression is a totally different animal altogether. It truly is a simpleton plan to think that since the citizens of our country have stopped spending money then it is time for the government to pick up the slack. Well, if it were that easy then we would never have recessions would we? Politicians don’t need a good reason to spend money, they just need an excuse.
The difference between a recession is sort of like my morning run. Some days I run a couple easy miles and it hurts only for a little while, other days I do a long run measured in hours and it hurts for days after. A depression would be if I started running and did not stop until I was dead. Yes, laying on the ground gasping for breath until my heart stopped.
That is a depression. You can’t meddle in a depression, it is an end to the economy as we know it. A complete restructuring. And it is going to hurt.
What can the average family do today to prevent it from hurting so much? “Never expect the people who caused a problem to solve it, “ said Albert Einstein. We will have to solve this problem in our own way, for our own families.
Let’s give you an example that might hit home. If your family is $12,000 in debt, and you keep spending money the same way you have been, are you ever going to be rid of that debt? Can the average family spend their way out of trouble? No they can’t. So why would we think that our governments should do this? That’s insane. To expect a different outcome by continuing to do the same things is the definition of insanity.
No one wants to say it, but what is needed is what the Depression time Harvard economist, Joseph Schumpeter called, ‘Creative Destruction’. Yes, just let it happen. Don’t try to prop up the banks, bailout the Big 3 auto makers again, let it crash.
The economy needs to be completely restructured for the pain to stop, or we can just keep running ourselves into the ground. More consumption and spending is exactly what the economy does not need. We are in trouble because we have spent too much money and our debt is way too high. And we are in trouble, big trouble… that is where we are, at the beginning of a depression.
What we are witnessing is creative destruction at work. The destruction of millions of jobs, thousands of businesses and trillions of dollars worth of assets. Your family can survive the depression though. Grow your own food, use renewable energy sources for heat, and use renewable energy for your power source. Never in history has there been so much incentive for change.
Call a family meeting and explain to everyone that it is a time for change. Spend only what you have to, and work at cutting down your debt. That is the real killer, interest that eats away at your disposable income. If you need help getting started we can recommend some great resources to get you started.
Where will it all end? We don’t know, but you can be sure that the people who are working their way to becoming self-sufficient will weather the coming economic storms without a blemish. Or you can just keep on running…