Thursday, March 26, 2009

How Bad Is It?

How bad is the current state of economic affairs?  The news media tells me it is very, very bad.  People are losing jobs, and companies are declaring bankruptcy.  Consumers have stopped spending money, and employers have cut wages.  Homeowners are facing foreclosures in record numbers and housing prices have dropped.  It seems bad, but how bad is it really.

Many comparisons have been made to the time of the Great Depression.  I do see some key differences between now and the Great Depression.

We have significantly increased our standard of living since the 1930’s.  Necessities today include basic cable, a cell phone, a car, internet access, and all our convenient appliances.  In the 1930’s many of these items were not available or were very expensive luxury items.  Today, we take them for granted as must-have items.


We have much faster access to news and information.  We don’t need to wait to hear the latest round of bad news.  I also believe the negative information gets more coverage because it gets people’s attention.

We have more economic indicators.  It seems that several times a week, more numbers get released indicating the current state of things.  It seems when things are good, all the indicators confirm it; however, if things are bad, it feels like a continuing avalanche of negativity.

This recession has been one of the worst in our history, however I believe it has not yet reached the levels of the Great Depression.  It is very hard to compare due to the above-mentioned differences. 

Here is my measuring stick:  We will have reached the levels of the Great Depression when more than 50% of 2008 cell phone subscribers have canceled their plans.  That will be tough times.