Friday, October 10, 2008

Great Depression this ain't

There are so many mutterings going around about how this present economic dive is going to resemble the Great Depression of the 1930s. I think those who say that kind of thing have not the faintest idea of what the Great Depression was like.

"Nor do you," I hear you say. Well, I didn't live through it, certainly - it had ended by the time I was born, courtesy of something far worse - but I grew up with the residual effects of depression and war. I had parents who knew all about what it was like to work and never be able to afford a day off - not one day in a year - and who never wasted a thing, because you could not afford to do so. (I hasten to say that many people in developing nations already know the equivalent of this - and have never known anything else).

So, until I see in western countries:
... people who will work 20 miles to save the bus fare;
...kids who will walk a couple of miles to school and home again every day as a matter of course;
...men darning socks, and women darning stockings - ok, panty hose - rather than buy a new pair;
...people growing their own food instead of flowers in their gardens or window boxes ;
... owners feeding their cats and dogs on nothing but scraps;
...folk squishing their old bits of soap together rather than buy a new cake;
... families never using shampoo or toothpaste because it is too expensive;
...someone scrubbing floors and bench tops and baths without commercial cleansers because they can't afford them;
... a whole family using only one light at night to do homework, darning and whatever else around the same table;
...folk mending their own shoes and shirts and belts and cooking pots and roofs and chairs and anything else, rather than pay someone else or throw the broken thing out and buy another;
...people who NEVER eat out, not even at a fastfood joint, because they don't have the money;
...people washing out their clothes every night (by hand of course) because they only have one good shirt/blouse/whatever to wear to work the next day;
...kids who never get given pocket money because all household money goes to important things like food;
... I could go on and on and on.

Until I see families - many of them - families wh0 have at least one employed member and yet still having to do all the things I have listed above, then I will know that yes, this is like the Great Depression.

That doesn't mean that the coming times won't be tough. Very tough on many. But it still won't compare with the 1930s. Not yet, anyway. The equivalent of the Depression won't come in the West until the world is at a standstill because of a total breakdown in the environment.

Depressed? Buy a book. They are still the cheapest form of entertainment.

20 comments:

Cheryl said...

Thank you, Glenda. I was beginning to think I was the only person that wasn't crazy.

By the way, my mum still darns clothes, including panty-hose, rather than buy new, because she's still stuck in a wartime mindset.

Jo said...

How very true Glenda. Not that I was around in the depression either. I think recession is the actual choice at the moment, not depression. It is a fact that people are ending up owing more on their mortgages than their houses are worth. A lot of people are out of work in the States and of course have no medical coverage either which doesn't help matters. Canada is certainly feeling it as well, but not, we hope, as badly.

Satima Flavell said...

Dire predictions, Glenda, but if we're in trouble it's because we no longer do those things. They were pretty standard behaviour even when I was a child, post WWII. We've become so profligate with resources these days that we have no idea how to economise and we've lost most of the necessary skills, too.

hrugaar said...

Yes, we've grown accustomed to having too much and sqaundering it, and now folk are squealing like spoilt brats.

One thing that did depress (and appal) me was the UK PM's open threat to poor floundering Iceland to hand back umpteen billions of pounds of UK investors' money. So much for European Unity and international alliance. Still, I guess there's nothing like kicking the scapegoat when he's down to make a bully think he looks good.

Cheryl said...

hrugaar: there's nothing Europe would like more than to help Iceland get out of the mess it is in. Everyone else in Europe is trying to cooperate on fixing this problem. Governments are busy guaranteeing deposits made to banks based in their countries, regardless of who deposited it.

Iceland is doing their own thing. They are saying, "sorry, money all gone, go away." Now part of that is because the Icelandic government doesn't have enough money to bail out its banks - the Icelandic banking business got to be bigger than the national treasury. But we can work with them on that, if they will let us.

One of the big differences between this crisis and the Great Depression is that in the 1930s banks really did go bust and people really did lose all of their savings. That's not happening right now, except in Iceland.

Jo said...

Thinking about what you wrote, I used to darn as a youngster, but then synthetic fibres were introduced and everyone stopped darning any more, things lasted so long, they were fully worn out when you had a hole. Never heard of darning nylon stockings (or whatever they are made of today). As for kids walking a couple of miles to school, with all the predators out there today, I wouldn't want my kids out there on their own. But I know, its the principle of the thing that counts.

hrugaar said...

Sorry Cheryl, I'm being thick, I don't understand the point you're making there in relation to the UK. :\

Jo said...

Not so thick Ru, I didn't understand either.

Glenda Larke said...

Cheryl's right to point out that the big difference here is that banks failed back then. Which meant that the moment you lost your job, you had no back-up, and nor did anyone in your family who might have helped out. It meant that you didn't have money to search for another job, or to relocate.

I remember my mother had a distrust of banks that lasted till the day she died - she remembered the locked yards in the country town they lived in, filled with the harvesters and seeders that might have helped the farmers - repossessed because they fell behind in payments - rotting away along with the wheat in the fields. What good did owning a harvester do to the bank? And yet they seized them. And farmers walked off their land.

Didn't I hear something about Russia coming the aim of Iceland??

Satima Flavell said...

Yes, when I was a child there were lots of old people who kept their money under th bed rather than put it in the bank. I heard of a woman who moved into a house and found $25,000 hidden in the loft!

Cheryl said...

hrugaar & Jo:

I'm not sure where to start because I'm not sure what it is you don't understand, but I'll give it a go. Let's try a personal illustration.

I have bank accounts in three countries (UK, USA, Australia). That's a result of having had different jobs around the world. I have a few thousand dollars spread between those banks, not all of which is mine because I will have to pay some of it in taxes (I'm self-employed).

Now, the money I have in the US is in a bank called Washington Mutual (WaMu). It is one of the banks that got into trouble, and it has since been sold to Chase. Back in the 1930s, WaMu would have gone bust, and I would have lost every cent I had in the bank. But in response to what happened in the 1930s governments set up insurance schemes. The American one is called FDIC. It has two effects.

Firstly the US government guarantees my money, up to a total of $100k (and I think they raised that to $250k as part of the bailout bill). Secondly it was the FDIC people who stepped in and forced WaMu to sell to Chase before it actually went bust.

So the US government has protected my savings, even though I'm not a US citizen or even a US resident. The UK government runs similar guarantee schemes, and I'm pretty sure Australia does too. Ireland and Germany recently announced that they would guarantee all savings in banks in their countries, regardless of how large the sum was.

Iceland, however, is not playing ball. A bunch of Icelandic banks have gone bust, and the people who put money into those banks appear to have lost it. The Icelandic government appears to be trying to shrug and walk away. I don't know what they are doing for Icelanders, but foreign investors are being left in the lurch. For them it is just like the 1930s again.

I don't know the exact details as I don't have money an Icelandic bank. It could be that the government never guaranteed the banks, or it could be that there was a guarantee and they've torn it up. However, I do know that governments all around the world are moving to reassure people that their money in ordinary commercial banks is safe (investment banks are another matter, but the "man in the street" doesn't bank with them). Iceland is an exception, and people are annoyed with them.

You have a point that Gordon is blustering. Much of that is probably grandstanding for the benefit of the British public who are understandably angry. I think there's something like $2bn of British money in those Icelandic banks. But I'm sure that a lot of diplomacy will be going on behind the scenes. Because...

Glenda - you are right, the Russians have offered to help prop up the Icelandic economy. I'm sure that Mr. Putin will want something in return, however. Use of a naval base, perhaps.

Cheryl said...

Here's a little more information that has come to light today.

Firstly ordinary accounts with two of the collapsed Icelandic banks have been purchased by ING and have therefore been saved. ING is a Dutch company so deposits there are presumably being guaranteed by the Dutch government (although ING doesn't appear to be in difficulties at the moment).

That leaves Icesave, an online bank holding some $8bn from British customers. The Icelandic government had guaranteed individual deposits up to $16k, but had tried to walk away from that promise. They now appear to have been persuaded to honor the promise. The UK government will be topping up protection to the current UK guarantee level of $100k, so if any individual savers from the UK had more than $16k in an Icesave account the UK will take the hit for that.

Finally there remains the question of institutional investors. Various British organizations, including local councils, the police, London Transport and charities such as The Samaritans and the Cats Protection League also had money invested with Icesave. As they are not ordinary citizens their money is not guaranteed. Negotiations continue.

glenda larke said...

Fascinating. Maybe the world did learn something from the 1930s, although the financiers might not have done.

My main concern is that in hard times environmental concerns get relegated to the bottom of the pile, when they are actually more important than anything else. Unfortunately so few people believe that. I will get very little satisfaction from being right, I'm afraid.

glenda larke said...

Ok, maybe there is a silver lining for the environment.

Read here:
http://www.slate.com/id/2202051/

Satima Flavell said...

It's an ill wind etc, Glenda! I've read that post-WWII, British people were fitter than they are now because they were used to eating less and exercising more, due to rationing and the "Is your journey really necessary?" campaign. And the spin off is that eating less junk food and using less petrol has got to be good for the environment, too!

hrugaar said...

Partly what irritates me about the situation with Iceland is that we see the current press reports with the spin of the outside world - and iceland has something of a history of being shafted by the outside world.

Iceland has a longstanding association with the Baltic and Russia. When I visited there several years ago, a lot of the farm machinery and vehicles were second hand from Russia. It also has to be said that when the (Western) Allied Forces set up a base of operations in Iceland in World War II, the Icelanders felt they were pretty much 'under Occupation', just as the Channel Islands where I live were under German Occupation during that war.

Icelanders suffered very badly from the Cod Wars and the anti-whaling measures, it cost a lot of their people their livelihoods and made life extremely hard, and is still a moot point to this day I think.

Outside investors were all too happy to take advantage of Icelandic financial services when it suited them. But now things have gone a bit wobbly, the wolves are at the door again. And being bought out by foreign banks may not be much more consolation than being bullied by a grumpy UK PM (more like £20bn in investments I think, Cheryl). Were I an Icelander, I think I'd be more than tempted to shove an impolite gesture at the greedy abusive world and look to the welfare of my own people.

Sorry, glenda, that turned into a bit of a rant. :\

Jo said...

I just read that post Glenda, I think it is so true. Satima is right, Brits were never so healthy as they were during and after WWII. The incidence of hearth attacks was rising in Britain prior to the war and dropped drastically once rationing etc. was in full swing. Once that was over, the incidence came back up again.

It is nice to think that environmental concerns won't take a back seat after all though.

Must admit I know nothing about Iceland and its economics.

Cheryl said...

hrugarr:

So let's see. Your first rant was complaining about lack of European cooperation to help the Icelanders, and now that Europe is stepping in to do something you complain about the Icelanders being bullied by foreign interests. That, sadly, is typical of the ignorant, selfish ranting I'm seeing way too much of right now. I certainly won't waste my time trying to explain things politely to you any more. It is pretty clear that all you want to do is vent your spleen on someone who isn't you.

Jo said...

Is it really necessary to be so unpleasant?

hrugaar said...

No, I'm sorry, Cheryl - my first comment was actually directed against the UK PM and questioning his approach when Iceland and UK are both part of Europe (that's what I was referring to with the European Unity thing, I wasn't getting at the rest of Europe but maybe that wasn't clear).

I'm afraid I can't really apologise for defending Iceland because like many small nations (or small companies, or small communities) they can get hurt in the playground when the bigger boys/girls move in; and being supported, underwritten, bailed out or bought out - even if it is charitably meant - can be a very difficult thing for human beings to accept and live with. So I wasn't aiming to vent my spleen, but trying to look at things from the perspective of the Icelandic people. Mea culpa for being English and backing the underdog, it seems. :\