Seldom is history made while we watch. Only in retrospect do we usually recognize the important turning points of history.
But this month’s cascade of bad economic and financial news has been like watching on old movie reel of history in the making. You know that the landscape has changed, but you just can’t see through the fog to know where you stand.
Just as Sept. 11, 2001 shook up the nation’s foreign policy, September 2008 is shaking up the nation’s economic policy. After this month, the U.S. financial system will have been turned on its head.
Does all this bad news mean the nation is headed for that dreaded “D-word” — a Depression?
Hopefully not, although it was not reassuring to watch the key players last week; they had a look of fear on their face that left many wondering just how close to the abyss we are standing.
It’s interesting to look back at the last American financial disaster, the Great Depression, for a comparison.
The financial bust that began with the stock market crash in 1929 had been preceded by an era of booming growth. All kinds of new and exotic financial instruments had been put into play. But excessive borrowing created a house of cards and when it fell, it fell hard. All of that echoes in today’s economy with the sub-prime mortgage mess.
The Depression era also had the overlay of a major drought, which further wrecked the economy, especially in the South where agriculture was the main source of income. Now we have another drought that in this area complicates the economic woes.
And there are other similarities between today and the Depression era. In Jackson County in 1932, citizens were complaining about high property assessments after property values had fallen. That year, the county held the tax rate the same as 1931 — 20 mills — but the county’s tax digest actually shrunk by 17 percent in one year. The tax digest isn’t shrinking here yet, but if there is a prolonged downturn the declining property values will eventually go in that direction.
Foreclosures were also going up in 1932 and some local banks were going out of business. This month, Jackson County set a new modern record of 126 foreclosures with an October sale date.
In 1932, Jefferson Mills, one of the few industrial employers in the area, had to shut down operations for a while, reorganize and then reopen later. Credit markets — borrowing — was difficult, if not impossible.
And like today, there was a presidential election in 1932. That election, which brought FDR into the White House, altered America’s political landscape, just as the election of 2008 appears to be doing.
The Depression of the 1930s affected Jackson County for decades to come. It killed much of the agricultural economy, or what was left of it after the decline of cotton in the 1920s. Jackson County lost population between 1930 and 1960 as people left for larger towns and more industrial jobs. It wasn’t until the 1970s that the county really began to recover from that economic disaster.
It’s unclear where the nation’s economy is headed today. Unlike 1929, today the nation’s leaders appear to be responding quickly to the financial crisis. On the other hand, high fuel prices are slamming the economy at the worst possible moment. Hopefully, another major downturn will be avoided.
But it may be a long time before this area sees another growth boom like it did from 2002-2006. That was a bubble and it distorted our expectations and view of the economic landscape. Now the bubble has burst and the areas that were booming the most have had the farthest to fall.
Whatever happens in the coming weeks and months, we are watching history being made.
I wonder, however, if any of the candidates running for president today will prove to be another FDR?
Mike Buffington can be reached at firstname.lastname@example.org.
I know that is coming to light these days, thank God for History buffs. But we need to learn from history and try to do it right this time. During the Depression, people's incomes did not rely on the stock market. Things are much different now. No the FDR method may not work, but by analysing what did't work could guide politicians on a course of deligation that does work!
Buddy have you got a dime?