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.