The Invisible Depression

School will be starting up again soon. Next time you drive by the school yard look at the children playing and know that 1 in every 4 children on that playground likely is on food stamps. If you live in western Kentucky or inner city Chicago all of the children might be on food stamps. The number for adults is 1 in 7.

Some argue, often people in the old media, that we are not even in a recession. We hear over and over about how we are in “recovery.”  How the economy is strengthening. How we need only wait until next year, better days are just around the corner.

Technically this is true. If one defines a recession as 2 consecutive quarters of negative GDP growth then we, since we have not continued to fall, are not in “recession.” But what about where we fell from? If one falls into a hole and can’t get out, this is a big problem.

We are told that the unemployment rate is going down, though even officially it has ticked back up a bit in recent months. But much of the “progress” made in this metric is a reflection of individuals simply falling off of the unemployment rolls. Once the unemployment money stops flowing an individual is no longer counted in the official unemployment number.

What’s the real number? 14.9%, the U-6 number used by the government (but not widely reported as the jobless rate) which includes the workers who have fallen off the rolls and those workers who are “discouraged.” In Nevada the U-6 is 22.1% in Rhode Island it’s 18.3%. Include people who are underemployed and the rate is much higher, in some areas as high as 25% to 30%.

The current economic situation is often compared to The Great Depression. Though the situations are vastly different, it is useful to compare “Depression era” stats with current ones. Below is a chart of employment statistics during the 1930s.

Many (even establishment) economists believe these Depression numbers are overstated even though they count discouraged workers and long term unemployed unlike today.

In other words the unemployment rates in the Great Depression and now are pretty similar, yet no one uses the word “depression”  these days largely because of political pressure I believe. No one in the mainstream, old media uses the term ever. The only thing we hear is of a “recovery.” There is no mention (at least as of late) of the historic slog we are mired in, perpetuated by suicidal government and Federal Reserve policy. No, the sun is just over the horizon and more government action will eventually raise it back into the sky.

An important point here.

Though the great depression and the current depression (and it is a depression) are very dissimilar as stated above, they have one very important thing in common, massive government action. Notice how unemployment lingered all through the New Deal, so often touted as the thing that saved America from the Depression. It not only lingered, the unemployment rate remained high because of government action. Because the economy was not allowed to correct, and markets to allowed to clear, the misery continued. We face a similar situation today.

For a good study in contrasts take a look at the depression of 1920, the sharpest in modern American history, which lasted only a year due to the fact that the government for the most part minded its own business and let markets adjust quickly.

We are in an Invisible Depression. The soup lines are there, they are just virtual soup lines. EBT cards (food stamps) save folks the indignity of standing in line for food at the local church.

In the Invisible Depression the unemployment rate is reported as half of what it really is.

In the Invisible Depression more people join disability rolls than find a job.

In the Invisible Depression people go to college only to emerge with a useless degree and tens of thousands in debt. (Facilitated by the government)

In the Invisible Depression this is an “Occupy Camp.”

Not an Obamaville.

In the Invisible Depression savers (your grandparents) are crushed by artificially repressed rates of interest while “investment banks” get to wager with free money.

In the Invisible Depression “interning” indefinitely is a good career move. (Even with tens of thousands in college debt.)

In the Invisible Depression the president can campaign on a message of “forward.” And no one, except partisans ask “forward” into what?

Invisible though it may be the current depression is very real. My hope is that for you the reader, personally, it is not currently too real.

The only solution is to let markets correct and then build again from real levels. That will mean letting the invisible depression become visible however and no one (with power) wants that to happen. We will put off reality for as long as we possibly can. It’s human nature. But it’s terribly unwise.