A Funny Sort of Depression

Victor Davis Hanson (website) is about the best and most thoughtful historian out there these days, the sort of guy who always has a very wide perspective on current events’ place in history.  Read anything that he has written, for example The Soul of Battle is excellent.

He wrote an article a couple of days ago in which he tries to put some perspective on our current economic crisis.  Hanson notes that while we do have a huge deficit, it is being funded by Japan and China at almost no interest.  Even now, almost 93 percent of the American workforce is still employed.  And the “crash” in energy prices has not only had a huge positive impact on the average American’s wallet, but those same lower oil prices have also had the benefit of hurting some who are hard to feel sorry for: The Persian Gulf states, Russia, and Venezuela.

Hanson sums up some postive results:

For the vast majority of Americans with jobs, the fall in prices for almost everything from food to cars has, in real dollars, meant an actual increase in purchasing power. The loss in value of home equity is serious for those who need to relocate for work or want to downsize and move to an apartment or a retirement community. But when averaged over the last decade, real estate still shows a substantial annual increase in value.

Moreover, the vast majority of American homeowners — well over 90 percent — meet their mortgage payments. They have no plans to flip their homes for profit. For them, the fact that they have lost paper equity, or even owe more than their homes are currently appraised at, is scary — but not equivalent to a depression. Most are confident that after a few years their houses will appreciate again. As for now, working young couples have a chance to buy a house that would have been impossible just two years ago.

Not denying that we are in a tough spot to say the least, Professor Hanson does deliver some perspective on all of this:

Unemployment insurance, welfare, food stamps and even more new social programs on the way have redefined poverty from what our grandparents told us of the Great Depression.

I live in southeastern Fresno County, one of the poorest regions of a now nearly bankrupt California. Many people are hurting. Yet to go to the local Wal-Mart is to see late-model cars in the parking lots and plenty of cell phones, iPods and BlackBerrys among the shoppers. Carts are stuffed with consumer goods, lots of food and Easter confections.

So are we in a depression that justifies a vast redefinition of government and a massive takeover of the private sector? Not quite. What we are a witnessing instead is a sharp downturn from the most affluent era in the history of civilization. For the last two decades, we borrowed and spent as if there were no tomorrow. Now we are living in that tomorrow of cutting back and making do.

In relative terms, it is no longer 2005, but that does not mean it is 1932 either.

VDH always brings an interesting and historically wide perspective on things.

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