National Post (Canada)
Saturday, January 03, 2009

Not quite the 1930s
By Ezra Levant

So we're in for another Great Depression, are we? Don't believe it.

http://www.nationalpost.com/opinion/...tml?id=1137319

Now that the epic U. S. presidential race is over, a caffeinated press corps is in withdrawal, so hyperventilating about a new Depression is their new fix. Just to pick one newspaper at random, Toronto's Globe and Mail used the phrase "Great Depression" over 300 times in December alone –– or about a dozen times each edition. And that's restrained compared to U. S. cable news shows.

It's not just bored reporters exhibiting their twin traits of hyperbole and economic illiteracy. There's a dose of wishful thinking at work, too. When the U. S. stock market started to tumble last fall, European commentators –– who had yet to have their own stock markets pulled into the undertow –– cackled with glee that it marked the end of U. S. economic supremacy. Igor Panarin, the dean of Russia's academy for diplomats, even opined that America would disintegrate into six different countries, with the mid-West falling under Canadian "influence."

Even to U. S. pundits, a failing economy is a useful story –– it's the mainstream media's preferred choice for George W. Bush's presidential legacy, as opposed to liberating and pacifying Iraq. And for Barack Obama, who once gave a speech suggesting his presidency would mark the "moment when the rise of the oceans began to slow and our planet began to heal," lowering messianic expectations of him, by exaggerating the economic troubles he's inheriting, is a political priority.

Of course, there are real problems in the U. S. economy, the most significant of which is the subprime mortgage fiasco. Hundreds of billions of dollars of "ninja" mortgages have been issued –– "no income, no job, no assets," with no down payment. That worked well enough when real estate prices kept going up –– which also allowed the ninjas to keep refinancing their homes at higher values. When the bubble finally burst, U. S. banks were left holding overpriced homes.

That's a real problem for the financial industry, which has since had its worthless assets backstopped by taxpayers. And the U. S. real estate

bubble, while small compared to that in Europe, has been popped. But a Great Depression?

True, unemployment in the United States is ticking up, approaching 7%, and some economists think the figure might crest at 8%. For the millions of people this affects, that's bad news –– but it's hardly comparable to the Great Depression of the 1930s, when more than 25% were unemployed, over 50% in some regions. If 8% unemployment is considered a Great Depression, then Canada has been in a Great Depression for most of the last 30 years.

The IMF predicts that U. S. GDP will dip by 0.7% in 2009. Again, not good news. But a Great Depression? The U. S. economy shrank 12% in 1930, another 16% in 1931, a whopping 23% in 1932 and another 4% in 1933. That's a Great Depression. A 0.7% dip is America taking its foot off the gas for a moment.

Speaking of cars, the apocalyptic cries of the auto industry represent an opportunistic piling on. The decline of North American auto makers isn't a sudden crisis. It's the free market doing what it should: penalizing companies that pay domestic auto-workers six-figure incomes to do what Japanese automakers do for five figures. Canada's Big Three have 27,000 ized autoworkers building cars –– and 40,000 more retirees collecting pensions. That's why they're in trouble.

The Great Depression just isn't here. In fact, the recession we do have is already remedying itself. The decline in the cost of oil, from a high of US$147 a barrel to US$40, represents a massive stimulus to oil-consuming countries such as the United States; and though it takes the sparkle off Canada's oil patch, that sector was doing just fine with oil in the US$30s, where it was until 2004. (On the other hand, countries such as Russia and Venezuela, where oil exports account for 50% of the government's revenues, and Iran, where they make up 80%, are in for big recessions. That's actually good news –– it'll be tougher for them to finance their rogue foreign-policy schemes.)

Canada will do just fine. We're entering 2009 with nearly the lowest unemployment rate in 30 years, with lower debt, no structural deficit and an enormous stimulus in the form of tax cuts already working through the economy. The real threat is fear-mongering politicians looking to grow government, and opportunistic businesses happy for a new excuse to ask for handouts.

 

Very interesting take on things. With the stock market (U.S.) showing gains over the past several days it's beginning to look like recovery may be beginning. There have been predictions that the world economy would begin improving by mid-2009. Perhaps it's my native optimism, but I believe it.

 

I agree that a 'great depression' will not occur in the near future, but I feel that the best econmic years of this country are behind it. I worry about the trade deficit and the lack of manufacturing. We need to export goods, but since we don't make anything it is difficult. Productivity gains via technology will only help manufacturing nations. Our dollar will only get weaker over time and imported goods will only become more expensive. We will experience shorter and weaker boom cycles with longer and deeper recession cycles. The rich will get richer and the poor will of course get poorer and the middle class will dwindle.

If you are in a position to get on the wealthy side, try your best not to **** it away, if you are on the poor side, get educated or get lucky. It is kind of a doom and gloom projection, but I feel comfortable saying it.

 

I agree, well said.

 

Told yall in a post weeks ago that nothing is going to happen.

 

If you read the post, it states the "depression's" blown out of proportion by the media as a tool and as of now a little premature.. Don't be fooled, all's not well, the economy's is in great despair.

 

Apples and oranges. You cant use the 1930 population to todays and just compare percentages. 306 million vs 123 million. Thats like comparing what a dollar could buy in 1930 compared to what it buys today...

 

WAC this makes for interesting reading. It doesn't take a rocket scientist to realize the worldwide media knows sensationalism sells and what can I say fishfryer527 99% of the time on issues like this. You're dead on the money the most interesting fact here is about Canada. From what I understand they're desperate need of labor and if there is any truth in the urban legends floating around an individual can make almost as much money working there as you can in the sandbox in the private sector with a lot less risk would like to know if anybody knows if that's true or not and of course I'm referring to just the normal job market nothing extreme

 

I don't think people losing jobs or companies losing large contracts as "nothing." These are pretty significant issues. Will it lead to a collapse of our society? In short, No, but to say that nothing is going to happen...tell that to my friends that recently lost their jobs. One in Dupont and another from a Vet hospital (they are married). They lost their jobs within a week of each other. I'm fairly sure, that your nothing is pretty something to them.

 

+1 woo. I think that what we need to take from this recession is that our rampant consumerism is the cause and that in the future we need to figure out if we really do need to buy so much crap. In the short term it will slow the recovery, but with a higher savings rate and less buying of foreign goods, we should be able to lessen the next down cycle.

Of course this is impossible, we, as a society are constantly bombarded by advertising. Those people are awefully clever in telling us what we need, we aren't so smart in figuring it out on our own. Also, for some reason, people are not taught about money when they are younger. The concept of 'Time Value of Money' is lost on so many. Walmart may have made things cheaper in some ways, but other things are out of control. Look at the cost of any piece of crap injection molded toy from china, that crap is pricey, and people buy it. Two days after buying it it is either broken or half the pieces are lost.

Even if we look at our motorcycle community the amount of cash that is pissed away is crazy. $300 for a PCIII, $300 for tuning, $300 for a slip on, forget about undertails and neon and all that nonsense.That money is in many cases a huge percentage of what the bike is worth. It is a classic case of throwing good money on top of bad. Or people financing new 1000RRs, when they should be buying used 600s. Nobody wants to do without anything. This is the mindset that will need to change and hopefully people will remember the hard times so it will help us not to repeat them.