atomic_fungus (atomic_fungus) wrote,
atomic_fungus
atomic_fungus

#4773: Popular conceptions and myths of the Great Depression

I'm confident that most people don't realize that we're in a depression because it doesn't look like what they were told one looks like. In a depression, huge numbers of people are unemployed and broke, and starving. That's what the pictures from the Great Depression show us.

Today, there are no soup lines, no soup kitchens, no "Hoovervilles". The press is completely uninterested in reporting the economic news accurately, or even questioning the government numbers. The government itself is making shit up out of whole cloth.

There are no soup kitchens because government spends a lot of money on welfare, and indeed government will act to stop anyone attempting such charity. (I recall seeing a story about some people being arrested for having the gall to attempt to feed homeless people without the proper government sanction.) You can't even give away bottled water on a hot day without government coming down on you. Charity is now a government agency, and the government will not tolerate competition.

The statistics are junk numbers. Unemployment is said to be around 5.5%, but that number has been gamed out of all alignment with reality such that an avowed socialist, Democrat Bernie Sanders, is saying it's off by at least a factor of two. GDP is artificially inflated by government spending, and at that it still flirts with recession. Inflation is reported as minimal, yet a pound of ground beef costs 130% of what it did a year ago. The cost of health care is skyrocketing. Housing is perilously expensive, crowding new buyers out of the market.

My favorite example of the common perception of the Depression is a fictional one: John Carter in the TV show ER doing his "poor little rich boy" schtick and saying--his words thick with guilt--that his fortune came down from his grandfather, who had gotten rich "selling coal during the Depression". How heartless was his progenitor, selling coal and earning a profit, instead of giving it away to those poor people!

...but fortunes are frequently made during depressions. Economic activity does not cease. The people who jumped from windows on the day of the crash that set it all off, they jumped because they were overleveraged and had no way of paying anything, having forgotten that what can go up can always go down. Prior to that the stock market looked like it could never crash, and leverage worked very well as long as you bet correctly. Not everyone lost his shirt in the crash, though, and some people won big the day of the crash.

All of this is meant to lead up to a post I read about Caterpillar's sales. They're in their thirtieth month of declining sales.

This is a good way of telling what an economy is doing, by looking at sales of the stuff required to make or build things. Declining sales in heavy equipment is a sign that the companies which use such equipment are deciding to hang on to their older stuff a little longer, use it up, get as much use from it as possible before they have to buy new. A company that's going to spend half a million dollars on a piece of equipment isn't going to delay that expenditure because it's a lot of money--you buy machines like that to make money for you--but because they are unsure whether or not that expenditure will pay off in a reasonable fashion, or because they're worried that they may need that money for something else. Or because they're trying to buy back stock, or-or-or--all decisions which are influenced by the fact that we're in an economic depression.

Companies make capital investments (like new machines) when they're optimistic about the future. When there is no cause for optimism they reduce their capital investments to things which are needed. I think Caterpillar's sales figures are one indicator of which regime we're in.
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