preparing for the next great depression...

[Malila]

Okay, I think I am going to sound Crazy with a capital C, but does anyone else think that our country is heading straight for the next great depression? (Yes, I've been watching the business news! The stock market is in a downward trend, there is a mortgage crisis, debt problems, etc.) If so, what can we do now to prepare for it? Or, just call me crazy!

[velochic]

I don't think you're crazy. I don't totally agree with you (a depression is pretty severe and I'm not convince it will get that bad) and I think the effects will be felt in all world markets, but yes... I think within the next 5 years we are going to see some major changes to the economy.

[ShaggyDaddy]

No, and I can explain why.

The stock market woes are a well known side-effect of the current "credit crisis". The great depression did not happen because of a downward trend in the stock market. In fact it crashed in one day. A downward trend is actually a good thing if you think about it because it shows people comming to their senses, rather than that the system is crashing.

The crash of 1929 happened because people were speculating in the stock market. They were buying bast amounts on something worse than Margin. Basically an "investor" would pay someone else to buy stocks on the margin for them... kind of like a double margin. (if the stocks went down, a whole pyramid of people would lose everything)

We have ALREADY seen the speculation crash from the whole home loan thing... that part is over and we are already in the "depression" part of the whole thing. Investors have stopped buying Alt-A or "more risky" mortgage backed securities. This means the speculation is pretty much over. Most of the money to be lost by this whole thing has already been lost.

But the main reason why this crash will be fairly localized to the mortgage industry is because people will always need a place to live, and the homes are not falling down, they are just losing some value. When companies fail in a huge market crash, stocks and money actually "dissappear" when people default on mortgages, banks lose about 30% of the value of the home. So the whole 100% loss vs the whole 30% loss is a huge distinction.

[mightymoo]

The stock market is a different place than it was in 1929. Mutual funds and institutional investors have changed who is making the buy/sell decision for a lot of the stock held, and attitudes are different as well.

Look at the crash of October 19th, 1987, supposed to have been more severe than the crash of 1929, but two days later the market posted the largest one day increase in history and the market recovered very quickly. Rather than the crash causing mass panic and investors pulling their money out, the crash was perceived as opportunity - to buy low, etc. Perception is important.

The stock market is a long term investment tool. There are always going to be ups and downs. Yes, its down recently, but I find it hard to look at this chart of the Dow over the last 10 years and feel like we are heading into the great depression: http://moneycentral.msn.com/investor...ocookie=1&SZ=0

The trend downward is so small in comparison to the ups and downs of the stock market over the long term.

Not that I'm not concerned, just not about this slight downward local trend of the stock market. What concerns me is having the baby boomer generation pulling all of its money out of the stock market, and the slow decline that may cause. And the massive debt that Bush has gotten our country into, at what point will that come back to haunt us.

But hey, I'm taking an economics course this semester, so I'll have all the answers for you in December.

[MCsMom]

I don't think you are crazy with a capital C. I am not convenced we are headed toward another Great Depression, but I do think the economy is changing. And I agree that a downward slide is better then a huge crash. I also think that generational shifts of the Baby Boomers has quite a bit to do with it.

[kittywitty]

I agree the economy is changing. Something is changing. I want to prepare for the worst. I have been trying to learn emergency preparedness, self-sufficiency, etc. I figure if dh loses his job (education), then we will need to survive somehow.

[2busy2clean]

I don't think you are crazy... but I do hope you are exaggerating a tad.

The stock market now is acting allot like the stock market did before the crash -- wild swings both ways meet with plenty of opptimism. You may want to read this article: http://www.itulip.com/forums/showthr...3997#post13997

If I remember right didn't the dust bowl in the plain states play into the depression too?

I assume that having little debt and money in fdic accounts is the smart thing. Other than that I really don't know. What are your thoughts?

[Malva]

Very very lenghtly blog post on one aspect of a possible recession here that I read today.

[sallyg6]

Originally Posted by dnw826

I agree the economy is changing. Something is changing. I want to prepare for the worst. I have been trying to learn emergency preparedness, self-sufficiency, etc. I figure if dh loses his job (education), then we will need to survive somehow.

:

[velochic]

I was in the market when it "crashed" in 1987. Since then, and since 1929, there have been many safeguards put into place to help the market bounce back. I don't believe the market is going to be the "culprit" if a recession occurs. In fact, I think the market is going to kind of piddle along, hold its own and when the smoke has cleared, we'll have a rally in about 10 years. I also don't think that the housing market is a major player. Right now it's in the news a lot and even world markets are taking a beating because of it, but you have to look beyond Fox news to really see what's happening.

I think we have to think about some longer-term issues, as MM suggested. First of all, eventually, we are going to have to pay for this war that is now the costliest war in history. Like the rest of the American mindset, the government is borrowing to pay for it. Scary when you realize that the national budget was *balanced* 10 years ago and we are trillions of dollars in debt now, and there is more debt to be reconciled. The backing of the dollar is soft, foreign countries are looking to the stronger Euro for their international business. Our Dow Jones is the least of our worries right now. This administration has trashed our economy and it is just floating along right now because we're on borrowed time until the debts come due and until we can stop printing more paper money without backing (eventually the inflation will kill us financially).

I also believe that our aging workforce and increased consumer debt are going to contribute. Hey, but I still am not ready to pull my millions (just kidding) out of the stock market to buy gold bullion to stick under my mattress. I sleep poorly enough as it is.

[mightymoo]

Originally Posted by velochic

Hey, but I still am not ready to pull my millions (just kidding) out of the stock market to buy gold bullion to stick under my mattress. I sleep poorly enough as it is.

Yeah, that's how I got my back problems. So I've invested heavily in beanie babies instead, much softer. I feel confident that they are going to make a comeback...any day now..

[jennlyn]

If you'd really like to freak, do a websearch on peak oil.

[Ellien C]

I was just going to suggest Peak Oil. In general I think things will piddle along just fine UNLESS .....








the big one hits!!!






I think if peak oil is a problem, it'll play out like they say. My mortgage will be the least of my concerns and I'll planting crops in my yard and hunting rabbit and squirrel with my bow and arrow.

Anybody read Jared Diamond - How Societies Choose to Fail? It's more on total societal collapse, not mere economic depression.

[Curlita]

I don't think we're headed for a Depression, per se, but I do think that our days as an economic world power are either dwindling, or already over. I remember learning about World Systems Theory as an anthro major in college (way back in the early 1990s). Basically, what goes up must come down. Greese, Rome, Germany... America. IMHO, the European Union is on the rise as the next economic power.

Of course, I'm a liberal arts major, so take it all with a grain of salt.

[mightymoo]

Originally Posted by Curlita

I don't think we're headed for a Depression, per se, but I do think that our days as an economic world power are either dwindling, or already over. I remember learning about World Systems Theory as an anthro major in college (way back in the early 1990s). Basically, what goes up must come down. Greese, Rome, Germany... America. IMHO, the European Union is on the rise as the next economic power.

Of course, I'm a liberal arts major, so take it all with a grain of salt.

I've felt for a while that we've been living the golden age of the united states, that while we may not meet a horrible demise necessarily, but we won't realize how good we have it until it is gone.

[emdeecee_sierra]

I just finished reading Maxed Out by Scurlock. Yes, things are bad and need to change and might just do that whether we all want it to or not.

Peak oil- I read about this a few years back and it scared me so bad I could not read anything else about it. Until last night. Backwoods Home magazine has an article about peak oil that was insightful and didn't scare the bjeebies out of me.

[serenetabbie]

This is an interesting thread. I do not think we are heading towards a depression per se either, but I agree that there is a huge shift in the economy coming our way. I think that we all need to start thinking in terms of local economy and self sufficiency to help ourselves through what might be coming.

Mightymoo- good thinking. I am sure you are right about that beanie baby thing... if not I understand they make excellent fire starters.

[mightymoo]

Originally Posted by serenetabbie

Mightymoo- good thinking. I am sure you are right about that beanie baby thing... if not I understand they make excellent fire starters.

[Free Thinker]

I do think we are headed for another recession, not necessarily a depression though. I think the effects will be felt by people who are in bad loan situations (owing too much either on houses, cars or CCs) so my solution is to just try not to owe more than I know I can pay even in an emergency situation. My DH and I are both very frugal, so I know we could hold out and be fine. We also live on a farm and would be able to take care of ourselves if anything does happen. I think I am most worried b/c I see so many people my age (I am in my mid-late 20s, DH is 32) who owe for pretty much everything, and don't worry a bit about it! They owe on student loans, cars, houses, frivilous things that should be bought w/ cash (like the furniture, boats, ATVs, big TVs, vacations, clothes, eating out, ect.) and don't see anything wrong w/ oweing so much. These are assets that depreciate in value (unlike a home) so they basically owe money on nothing. I think that the eventual problem w/ this type of over-spending is that they are paying a substancial portion of their income on interest. That is money that they *should* be investing in retirement or a house (IMO anyway), making their overall net worth less than it should be. This is what I feel will be the hurt on the average American. (coupled w/ taxes of course)

Then we have the overall government. I don't know if I should even get started on that but suffice it to say that this war is breaking us. Over-expenditure in most all gov. programs are breaking us. Big Government is a huge problem IMO and is completely inefficient. Schools, well, money definately needs spent there! Taxes are IMO too high anyway, money is just being spent in the wrong places. I don't know that this will ever change, but it needs to.

When I see the above two things coupled w/ the increase in healthcare needed due to poor diet/exercise, that specialist are saying this next generation will not outlive their parents if obesity is not put back in check, the rise in heath issue, then yes! I do worry about the future of America. I feel that America's golden days are over, our freedoms have been greatly compromised and that this is not the country it used to be.

The only thing I know to do to take care of me and my family is to do my best with the money I do make, invest it wisely, save it, don't spend what I don't have and always have a plan B incase something happens to DH or I. I also need to teach my kids to be responsible w/ their money so that they do not get into the same problems I am seeing w/ so many friends my age.

[Tradd]

Well, the obvious things to do would be to stop amassing more consumer debt, pay off the consumer debt you DO have (car loans, credit cards), build up good cash reserves.