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Why am I talking about the Great Depression so many years later? Because I think we are headed for an even worse Depression than our grandparents lived through. When I was growing up I heard the stories of the depression from my grandparents. It was clearly not an enjoyable time. We are in for worse, in my opinion. I know people will think I am crazy when and if they read this whole article but a basic understanding of the economy and some common sense will support my theory. Anybody that compares the economy leading up to the Great Depression and the economy now will see remarkable similarities. It is scary in fact just how similar the trends are. Recessions took place the same amount of years prior to the Depression, etc... What is even more disturbing this time around is that the country is in a much worse financial position now than it was leading up to the Great Depression. Currently, the average household has a credit card debt of over $9,000 the last time I checked the figures. The average household has no savings account set up for emergency situations. The government is way over its head so it will not be able to offer the assistance it did the first time around. In 1929, when the Depression began our government had a total national debt of just under $17 billion. (http://www.toptips.com/debt_history.htm) Today our national debt is climbing faster than you can follow. As of today it is $8.25 trillion. (http://zfacts.com/p/318.html- go half way down the page and watch just how fast it climbs) My great grandparents had money in savings, which they lost because the banks were not insured, but some people had money in the house. They had no credit card debt, it just didn't exist like it does now. The majority of the families at that time did not have cars and if they did it was just one. They didn't have cable, cell phones, or any phone at all in some cases. The point I am making is they didn't have the debt we currently carry. In order to get a mortgage back then you needed a significant down payment whereas you can get a mortgage with no down payment now. During this recent boom in housing, that took place across the majority of the country, some people over extended themselves to afford a house. They got into no money down mortgages, interest-only mortgages, adjustable mortgages, etc...Once the interest rates go up, which they are expected to at least twice this year, some people will not be able to make their mortgage payments on their adjustable rate mortgages. The whole situation is just a recipe for disaster. Granted, a lot of dominos have to fall in order to go into a Depression that will be more severe than the one back in the 1930's. We are living in a time where our currency is worth less and less as time goes on. Our purchasing power is becoming weaker and weaker. Our corporations send jobs overseas to save money so they can make every penny possible. They could help the economy by bringing jobs back into this country but they won't. They will end up laying off more workers in order to save money. Speaking of corporations, a recession or depression could be crippling to companies like GM and Ford who are already in bad economic shape. GM and Ford have been having trouble selling cars, even in the recent splurge of car buying. GM is over $300 billion in debt. If people begin to lose jobs and stop buying cars you could see GM go out of business. GM is also big into the mortgage business through GMAC. As I discussed above, if people begin having a hard time making their mortgage payments due to interest rate hikes, GM could feel it on the automobile side of things as well as the mortgage side of things. I am not trying to paint a grim picture here but the reality is all of these things are very possible. If you are smart you'd start filling up cans with money and hiding them throughout the house like my grandmother did. She was a product of the Depression. As the saying goes, 'Those who do not learn from history are doomed to repeat it.' In the event things do go bad I want to at least have some money on hand to buy food.
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