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Should a second Great Depression come, what will happen?

by wasteofo2
Tags: great depression, happen
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wasteofo2
#1
Oct24-05, 04:20 PM
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Let's take a somewhat pessimistic view of how things are going (or realistic, depending on your disposition), and suppose that America in the next 5-15 years experiences a second "Great Depression."

Let's suppose that even a few of these things come to pass:

- China has taken our manufacturing base from us.

- India has taken our engineering/computer base from us.

- The real-estate bubble has popped.

- Foreign currencies continue to rise against the dollar.

- The Federal defecit continues to rise and becomes insurmountable

- Foreigners begin cashing in their treasury bonds.

- The American Stock Market crashes as people want out of everything relating to the dollar.

- Social Security, Medicare, Medicaid, and all other such programs go broke due to the Federal Government not being able to make enough revenue and more people become eligable for said programs.

- Individual households habitually use their credit cards to get themselves into their own personal insurmountable debt.

- Houses are foreclosed upon, and people evicted, as people cannot meet their mortgage payments.

- Military commitments overseas continue to drain our Federal budget.

How would America react to a situation like the Great Depression in the 21st Century? Would we see another FDR like character to come in with crusading governmnet programs to fix it all? Would it lead to WWIII, and possibly get us out by revitalizing our manufacturing potential (assuming we win)? Could a free-trader possibly be elected President and do away with FDR's social safety net to make America more competitive again? Would America erupt into chaos, not to settle down in any predictable manner?

Let's see some interesting narratives...
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Smurf
#2
Oct24-05, 04:40 PM
P: 2,891
I would hope (and I do not think it entirely unlikely) that we will see a movement similar to that which took place in Argentina in 2001 when their economy collapsed. With any luck people will begin to realise that the economy is not all-important and that it can be sustained reasonably without a corporate structure. Hopefully the loss of confidence in the government will result in an overthrow, or more likely, an effort to decentralize by merely ignoring the federal and state governments.

A radical decrease in consumerism. Freakishly fat Americans become far less common. Thank god.

The effects on Canada, should the US economy collapse, will hopefully lead them towards a more federalist, internal economy. Brought about by renewed distrust in foreign investment as everyone 'realises' that Trudeau was actually right.
Entropy
#3
Oct24-05, 04:46 PM
P: 609
Should a second "Great Depression" come, what will happen?
People will be sad.

russ_watters
#4
Oct24-05, 06:44 PM
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Should a second Great Depression come, what will happen?

If all of those things happened at once, it would be pretty bad. I'm not surre massive spending is a reliable way to pull out of a depression, though: it really didn't work in the '30s, it required the motivation of winning WWII to pull us out. Absent that, I'm not sure how we could pull out.

Either way, we need to work at keeping out of a depression to avoid the necessity of getting out of one.
Smurf
#5
Oct24-05, 06:48 PM
P: 2,891
Really? neoclassical economics would say that massive spending (by many parties) is the only way to get out of a depression.
GENIERE
#6
Oct24-05, 10:55 PM
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Quote Quote by Smurf
Really? neoclassical economics would say that massive spending (by many parties) is the only way to get out of a depression.

It didn't work for FDR. Unemployment was 24% in 1933 and dropped to 17% just before WW2.
Skyhunter
#7
Oct24-05, 11:33 PM
P: 1,409
Quote Quote by GENIERE
It didn't work for FDR. Unemployment was 24% in 1933 and dropped to 17% just before WW2.
I wouldn't characterize a 30% improvement in employment as a failure. Not a complete success, but definitely an improvement.

With the proper investment in infrastructure, the economy will improve. A good example of a smart investment in infrastructure is the "information superhighway" that Al Gore oversaw for the Clinton administration. I wish that we had even a modest investment in alternative, sustainable energy sources. It would aid in solving the inevitable peak oil crisis, create jobs and industries, and generally add to the health of the nations economy.
loseyourname
#8
Oct24-05, 11:41 PM
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It's hard to another "Great" depression happening. Things like the stock market collapse and banks closing are protected against today to keep these things from happening - we no longer have margin buying or uninsured accounts, for instance, two huge contributing factors to the Great Depression. Don't forget that a massive farmland disaster (the Dust Bowl) contributed quite a bit as well, and the agricultural practices that led to that have been done away with, too.

That isn't to say that another depression is impossible, but it's hard to see it being anything like the last one. I would like to think we've learned something - if not to necessarily build the most sustainable economy around, but at least to protect against complete collapse.
Burnsys
#9
Oct24-05, 11:51 PM
P: 655
Quote Quote by Smurf
I would hope (and I do not think it entirely unlikely) that we will see a movement similar to that which took place in Argentina in 2001 when their economy collapsed. With any luck people will begin to realise that the economy is not all-important and that it can be sustained reasonably without a corporate structure. Hopefully the loss of confidence in the government will result in an overthrow, or more likely, an effort to decentralize by merely ignoring the federal and state governments.
A radical decrease in consumerism. Freakishly fat Americans become far less common. Thank god.
The effects on Canada, should the US economy collapse, will hopefully lead them towards a more federalist, internal economy. Brought about by renewed distrust in foreign investment as everyone 'realises' that Trudeau was actually right.
Great to know we were an example..

Once the crisis begun in 2001, banking system collapsed, all saving were confiscated (They were foreing private banks with AAA grade) in a couple of months half of people went to the lower class and 30% left unemployed.

And what was the IMF advice to this depresion... Cut the goverment spending so it can continue to pay the imf and foreing creditors, while keep the people starving...

The good part was the people organizing themselfs, Workers taking factorys in their own hands, new ways of trade without money and masive movilizations against the goverment, the imf and the neoliberal economic model that was in use during the 90'.
Smurf
#10
Oct25-05, 12:00 AM
P: 2,891
Quote Quote by Burnsys
Great to know we were an example..
Once the crisis begun in 2001, banking system collapsed, all saving were confiscated (They were foreing private banks with AAA grade) in a couple of months half of people went to the lower class and 30% left unemployed.
And what was the IMF advice to this depresion... Cut the goverment spending so it can continue to pay the imf and foreing creditors, while keep the people starving...
The good part was the people organizing themselfs, Workers taking factorys in their own hands, new ways of trade without money and masive movilizations against the goverment, the imf and the neoliberal economic model that was in use during the 90'.
Yeah man, it was awsome what you guys did. Just because CNN and BBC never said anything doesn't mean the rest of us weren't watching.
wasteofo2
#11
Oct25-05, 12:30 AM
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Quote Quote by russ_watters
If all of those things happened at once, it would be pretty bad.
Almost all of those things are happening now, or are at least on the way to happening.

LYI, I realize we wouldn't have another Great Depression like the original one in terms of the precise problems, but I meant what might happen if we had another one with simmilar results, namely massive unemployment, foreclosures, people unable to pay off debt, blah blah blah. We just got that tough new anti-bankruptcy law too...
loseyourname
#12
Oct25-05, 12:37 AM
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Quote Quote by wasteofo2
LYI, I realize we wouldn't have another Great Depression like the original one in terms of the precise problems, but I meant what might happen if we had another one with simmilar results, namely massive unemployment, foreclosures, people unable to pay off debt, blah blah blah. We just got that tough new anti-bankruptcy law too...
Well, as I said, I don't think it's necessarily impossible, but the unemployment/foreclosures were largely caused by the stock market and bank collapses, which practically bankrupted many large companies nearly overnight, forcing them to lay people off and making the prospects for getting a new job pretty slim. This particular brand of near-overnight collapse isn't going to happen again. I'd like to think that we have time to reverse any trends that might be moving us in the direct of depression. There would be no excuse this time for having something hit us all at once like a ton of bricks.
coffee na lang dear
#13
Oct25-05, 12:40 AM
P: 22
America survived the first one, why should it not survive this one then?
deckart
#14
Oct25-05, 01:56 AM
P: 193
We need to have more of a "world" mentality when it comes to work and manufacturing. The US cannot compete in the labor market. Noone in the US would work for what 3rd world countries will work for. The key to our competitiveness/success in the world will be based on our capitalistic savy and entrepreneural creativity. The US knows how to have fun and make money doing it. :)
The Smoking Man
#15
Oct25-05, 04:21 AM
P: 1,143
Quote Quote by russ_watters
If all of those things happened at once, it would be pretty bad. I'm not surre massive spending is a reliable way to pull out of a depression, though: it really didn't work in the '30s, it required the motivation of winning WWII to pull us out. Absent that, I'm not sure how we could pull out.
Either way, we need to work at keeping out of a depression to avoid the necessity of getting out of one.
He forgot one though ... maybe the most important ...

The world is slated to run out of oil in 2050.

Before that happens, wars will be fought to ensure the supply.

We are seeing the opening forays into this eventuality even now (Unocal ... Iraq?)
russ_watters
#16
Oct25-05, 07:53 AM
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P: 22,297
Quote Quote by wasteofo2
Almost all of those things are happening now, or are at least on the way to happening.
There is a big difference between being "on the way to happening" and being in a depression. Ie, the thing about losing manufacturing jobs to China: yes, we have lost some, but we need to lose a lot before it makes a big difference.

Anyway, I know that's not really germane to your question, since you want to know what would happen if it did go that far, but I have a tough time with hypotheticals that I don't at least consider reasonable possibilities.

Welcome back, TSM.

No, the world is not slated to "run out of oil in 2050". Even if "Peak Oil" is right about hitting the peak in the next few years, commodities don't ever "run out", they just hyperbolically decrease forever. With oil, that decrease will be especially slow, because there are vast, untapped reserves that far exceed the Middle East, just waiting for oil to be valuable enough to make it worth collecting.

If you want to discuss that more, please start your own thread - I don't want to hijack waste's
Polly
#17
Oct25-05, 09:25 AM
P: 342
Don't worry about the US 100/per month manufacturing jobs taken by China, worry about the 830,000, 1,700,000 and 3,400,000 high earning jobs in the fields of art & design, architecture, business, computer, legal, life sciences, management, office and sales to be offshored to India, Russia and the Philippines etc by 2005, 2010 and 2015 respectively (Source: Outsourcing American by Ron Hira and Anil Hira, p 45). What to do? Dunno
Anttech
#18
Oct25-05, 09:44 AM
P: 1,401
One of the better aspects of capitalism I guess :-) The bottom line rules, and if you can push that bottom line down by outsources and make some more money for those investors you care about so much, then why not!


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