The ‘D’ word is being uttered in the mainstream now. Despite whatever the media says concerning the ‘jobless recovery’ we’re in (which is a complete oxymoron) or the ‘summer recovery’ we’ve begun that Obama touted as truth last month, all indicators are pointing to the fact that the US is officially entering an era of economic depression, something not seen in my or my dad’s generation.
The numbers tell the story. A couple of articles in particular are pointing to this fact. One on CNBC, the other by Ambrose Evans-Pritchard of the Telegraph. In addition, even liberal, Keynesian economist Paul Krugman from the New York Times is calling this the beginning of the Third Depression, as I talked about in my last entry. He is dead wrong on how to fix it, but his diagnosis is correct.
With the US trapped in depression, this really is starting to feel like 1932 – Ambrose Evans-Pritchard, Telegraph
“Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP.
“Roughly a million Americans have dropped out of the jobs market altogether over the past two months. That is the only reason why the headline unemployment rate is not exploding to a post-war high.
“The average time needed to find a job has risen to a record 35.2 weeks. Nothing like this has been seen before in the post-war [World War II] era. Jeff Weninger, of Harris Private Bank, said this compares with a peak of 21.2 weeks in the Volcker recession of the early 1980s.
“The share of the US working-age population with jobs in June actually fell from 58.7pc to 58.5pc. This is the real stress indicator. The ratio was 63pc three years ago. Eight million jobs have been lost.
“The housing market is already crumbling as government props are pulled away. The expiry of homebuyers’ tax credit led to a 30pc fall in the number of buyers signing contracts in May. “It is cataclysmic,” said David Bloom from HSBC.
“Federal tax rises are automatically baked into the pie. The Congressional Budget Office said fiscal policy will swing from
a net +2pc of GDP to -2pc by late 2011. The states and counties may have to cut as much as $180bn.”
Wow. Good news! Right. The thing is Austrian economists predicted this exact scenario several years before it started to unfold, even during the boom times. The one thing many got wrong was a scenario entailing hyper-inflation. This is clearly panning out to be a deflationary depression. The core problem at the root of the financial crisis was debt and complex, exotic financial instruments leveraged against that debt (CDO’s, Derivatives, MBS’s, etc). Once the housing market began its tumble, the house of cards came tumbling down and the economy down with it.
Simple logic says that trying to solve an economic problem caused by debt with more debt is like a heroin addict trying to solve his addiction with more heroin. The problem is that the more we keep putting off the inevitable deep collapse and restructuring the economy needs, the worse the collapse will be, just as the more heroin an addict uses makes his withdrawal worse. This is not hard to understand and it doesn’t take a Ph.D in economics to figure out.
“The Dow Jones Industrial Average is repeating a pattern that appeared just before markets fell during the Great Depression, Daryl Guppy, CEO at Guppytraders.com, told CNBC Monday.
“‘Those who don’t remember history are doomed to repeat it…there was a head and shoulders pattern that developed before the Depression in 1929, then with the recovery in 1930 we had another head and shoulders pattern that preceded a fall in the market, and in the current Dow situation we see an exact repeat of that environment,’ Guppy said.”
Instead of talking about the rest of that though, how exactly is this going to impact the church? I believe this will be an incredibly good thing as the church and the Gospel are concerned. As gold is refined through the fire, so God will sovereignly use (and has even purposed) this hard time to refine His church, His bride. Nothing stands, comes about or exists outside of His sovereign ordination.
As John Hendryx said in an interview with the Internet Monk a number of years ago, things like this can serve to burn off the dross in our churches, that is, those who are merely nominal Christians with no basis in true discipleship or true faith for that matter. There is great hope in worldly calamity oddly enough, as hard as that is. James speaks of this, as does Paul, as does Jesus and pretty much all of Scripture.
The hope in calamity is that we will begin to turn our attention more toward eternal things, namely the things of the Spirit and the Gospel, rather than Earthly things that have so captivated the American church for far too long. Will it be hard? Certainly. But we can be assured in calamity that God is for us because of the wounds Christ endured on behalf of His people. We will endure for eternity even while we suffer loss here. And in suffering loss, we will be refined and made more into the image of Christ. That is quite a hope.