With the mainstream
media focusing on the country’s leveling unemployment rate, improving
retail sales, and nascent housing recovery, one might think that
the US government has successfully navigated the economy through
recession and growth has returned. But I will argue that a look
under the proverbial hood reveals a very different picture. I believe
the data shows that the US economy is badly damaged, and a modern-day
depression has begun. In fact, just as World War I was originally
called The Great War (and was retroactively renamed after World
War II), Peter Schiff has said that one day the world will refer
to the 1929-41 era as Great Depression I, and the current period
as Great Depression II.
look at unemployment. During Great Depression I, unemployment broke
25%. If government statistics are taken at face value, the current
unemployment rate is 9.9%, but a closer look reveals that the broadest
measure of unemployment is currently at 20% – and rising. So,
today’s numbers are in the same ballpark as the ’30s even though
the federal government is using unprecedented measures to keep the
economy afloat. Remember, in Great Depression I, FDR never ran a
deficit nearly as large as President Obama’s. Moreover, the Federal
Reserve of the 1930s still had a gold standard with which to contend,
while today’s Fed has increased the monetary base with impunity.
Yet even with all that intervention, unemployment figures still
indicate that we have entered depression territory.
What is demoralizing
to an unemployed person is not simply being let go, it is being
unable to find a new job for an extended period of time. And this
is where Great Depression II really rears its ugly head. According
to the US federal government’s own data, the median duration of
unemployment is now over five months – and rising. This is
the highest it’s been since the BLS started compiling this statistic
in 1965. As workers start to go this long without jobs, they eat
into their savings. Eventually – and especially in a country
with a savings rate as low as ours and debt as high as ours –
they run out of cushion and hit the street. Formerly middle-class
people have to make decisions never thought possible: do I eat in
a shelter or go hungry in my home?
It’s no surprise,
then, that about 40 million people – or one out of every eight
Americans – are receiving food stamps in Great Depression II.
During the height of Great Depression I, the rate was just one out
of thirty-five Americans. Even with the stimulus programs, Great
Depression II is actually worse on this measure than Great Depression
I – and the USDA estimates that the program could grow by another
50%. Soon, out of ten people you know, one may depend on federal
assistance for daily survival.