Is America Entering Another Great Depression?

The article that follows was published ten days ago and some of what is said is already out of date. How time flies when you’re having fun. Or not.

A few of my recent posts have suggested now is a bad time to get back into the markets, always assuming you have the necessary liquidity to enter a buy order. Some readers have commented, saying I must be deranged for not believing the tide had turned. They accused me of having Trump Derangement Syndrome. For them to recent upturn was proof their leader was solving our economic problems and had the pandemic under control. It’s as though there was a new motto to follow: Make America Great Again – Hurry Up And Die. What difference does it make if a few people die? Think of the money to be made!

I guess there will always be people ready and willing to drink the KoolAde. I’m just unsure why they bother to read my posts.

The last big crash, now referred to as the Great Recession, happened roughly 12 years ago. It took a decade for the effects of that crash to be fully erased for most of us. Some never recovered.

Meanwhile, people who have established their credentials over decades in the world of money are saying you should wait, that we’ve a long way to go yet. While I accept they may be wrong, my 45 years in the money business is telling me there’s a greater existential risk for me and my family if I jump back in now.

by Amanda Marcotte \ 28 MAR 2020 \

The one extremely thin silver lining of the current crisis and the economic collapse that has followed is that it provides indisputable proof that workers, not CEOs, are the engine of the American economy. If we are on the verge of another Great Depression, as seems likely, that didn’t happen because the occupants of the C-suite are working from home, but because millions of ordinary working people can’t show up for work in public-facing jobs that keep this country running.

The Senate reacted to this by passing a $2 trillion stimulus that expands unemployment benefits, will send a check to most American households, and — since Republicans are running the show — $500 billion in industry bailout money. This bill may mute some of the worst economic effects of this crisis, but there’s a real threat that this will just be a repeat of the 2007-8 economic crash and stimulus, in which corporations and the wealthiest Americans recovered nicely but the rest of the nation never really regained its economic footing.

Americans technically got their jobs back, but, due to soaring wealth inequality, many or most never regained their pre-recession levels of wealth. Millennials, who were just starting their productive adult lives when the crash hit, have been particularly screwed over, and are largely unable to build any real wealth at all. Millennials only own about 3% of the country’s wealth, whereas boomers held about 21% of the country’s wealth when they were about the same age in the 1980s.

In light of this, what Democrats need to do — because it’s the right thing to do and in order to drive a big electoral victory in November — is bring back the politics of the Great Depression. It’s time to run on a new New Deal, one that won’t let “recovery” be defined by how the wealthy benefit and whether 401k’s recover their value, but will address deep economic inequalities by redistributing the wealth out of the C-suite and towards the people who actually build wealth in this economy.

The current crisis, with all its horrors, provides a neat narrative that Democrats can use to advocate for this new New Deal:  A story of sacrifice repaid.

People are staying home right now not just to protect their own health, but as a collective sacrifice for the greater good. Most people will survive this, but recognize the need to stay home and slow the spread of disease in order to keep hospitals from being overrun and to keep more people from dying.

Recognizing this sacrifice, and arguing that a grateful nation needs to repay these workers with a new New Deal that fixes our grotesque economic inequality, should be a slam dunk. It is, after all, the same kind of argument that got the original New Deal passed in the first place. It’s also the attitude that likely informed the marginal tax rates, middle-class prosperity, and relative economic equality of the 1950s. Ordinary Americans had just sacrificed a lot to save this country during World War II, which makes it much harder to justify the predatory capitalism that defines the early 21st century.

The good news is that we’re winding down a presidential primary in which not one, but two candidates — Bernie Sanders and Elizabeth Warren — made robust arguments for raising taxes on the rich to pay for things like universal health care, free college tuition and affordable child care. There are many proposals floating around for a Green New Deal, which would implement 1930s-era federal investments in building infrastructure that would put people to work, rebuild our economy and directly attack the climate crisis.

While former Vice President Joe Biden, who is decidedly more moderate, has pretty much locked up the Democratic nomination, that’s not evidence that voters reject these ideas. Warren’s plan for a wealth tax to pay for these ambitious programs was polling at 63% before this crisis hit. It’s safe to say those numbers would probably go up if Democrats actually embraced rhetoric about repaying American workers for their sacrifice and making clear that it’s workers who build wealth, not CEOs or “entrepreneurs.”

Biden has already shown himself open to moving leftward in response to public opinion. He could and should fully embrace these plans to address epic levels of economic inequality, which will only be exacerbated by the current economic collapse.

In the 2017-2018 midterm cycle, Democrats offered a half-baked notion of what I’m suggesting here, called “A Better Deal.” It had some good ideas, such as more restrictions on corporate mergers, job creation for infrastructure building and regulatory controls meant to control rising prices on pharmaceutical drugs.

But it really wasn’t ambitious enough to address the main problem in the American economy, which is that the top 1% of Americans own more wealth than the entire middle class combined. (Note: the article refers here to a CBS video where a reporter asks various passerby about wealth inequality.)

Not only is it the right political time to push for a restructuring of our economy so that it’s both greener and more just, that’s critical to give younger generations of Americans any hope of a better future.

The New York Times Friday published a piece about the hellscape facing new college graduates, who are watching their job prospects dissipate in the wake of the economic collapse. The grim reality is that this economic setback, happening at such a crucial time in their lives, may be impossible to truly recover from. Millennials faced a similar setback in 2008, with the result that most are still unable to start saving for retirement, are saddled with enormous debt and cannot hit basic adulthood milestones like buying a home.

There is an opportunity here not to screw Gen-Z the way we screwed over the millennials: A new New Deal, one that helps wipe out student debt, helps young people buy homes and addresses other concerns, like medical bills and child care, that keep people from being able to save money even when they have decent jobs. Jobs will presumably come back when this crisis is over, but the government must do more to make sure those jobs pay well and that basic living expenses don’t keep outstripping ordinary people’s salaries.

Any such program would likely help older people, too, of course. We all could use a break from the richest Americans sucking up all the wealth that workers actually created. But it would be especially beneficial for younger people who have had their early earning years so horribly interrupted.

Right now, Donald Trump is irresponsibly running around crowing about his desire to “reopen” the economy by Easter Sunday, which would be catastrophic for public health and would probably end up making the economic crash worse. But it’s not enough for liberals to call him a ghoul or an idiot in response. Democrats must make a counter-offer: Let’s get through this crisis together, America, and if we win in November, we’ll repay your sacrifice with a new New Deal.

Our lives have already been upended in ways that seemed unimaginable just a few weeks ago. If the time for drastic action isn’t now, then when will that time ever come?

5 thoughts on “Is America Entering Another Great Depression?

  1. Tony Broadhurst

    A large symptom of Trump Derangement Syndrome is the cognitive dissonance. Case in point…..if you look at my posts over the last few weeks, I have said NOTHING OF THE SORT. How on earth does one translate my comments to meanI everything was fine…..I never said so what if people die…..I never said ANY of the things you said I said. I clearly said twice “we will most likely retest”, that the moves made by the federal government have bent the death curve down from 2 million projected, to now under 200k, and perhaps even less. That’s a good thing, wouldn’t you agree?
    A world renowned virologist (Didier Raoult) has had nearly 100% success using the hydroxycloro/zpack mix….as has Dr. Zelenko in NY. However, the media won’t say that, mostly because ORANGE MAN BAD.
    My comments regarding the markets, I have not been studying the markets 45 years. Only twenty…..but it only took me twenty years to learn a lesson you have yet to learn. There is one trade: emotional strength. A cheaply owned diversified portfolio that is rebalanced is the proper way to invest. You are trying to time the market. 45 years in, and you are trying to time this? I never know which way the next 25% move in the markets is going to be, but I am positive where the next 100% move will be…up.
    Posting articles by Amada Marcotte….Amanda Marcotte!!!! is no way provide emotional strength.
    I think your readers are better served by a counter point, wouldn’t you agree? The fact that you ignore my specific points, and try to mind read is pretty telling, wouldn’t you agree?


    1. Tony – I don’t read your posts. I read your comment, which suggested I was suffering from what you called TDS. To me that means I don’t like trump, what he says and how he says it. If that’s not you, then why suggest I’m full of shit. BTW, you’re not the only person who argued I’m full of shit. I’ve been on this planet almost 80 years, more than half of which as someone earning their living in the world of money. I’m sorry you took my new take on the MAGA motto personally, I didn’t intend that. But even my first cousin in Colorado called me to say it was more important to get the economy healthy than to worry about a few people dying. Your comments about the markets make the assumption everyone has the necessary time to let their investments recover. Sure, if you’re in your 50’s or less and plan to get back to work as soon as possible. But not if you’re 70 and have health issues. That calls for a very different approach to putting your money to work, assuming you haven’t already lost 25% of it. We’re now looking at something as bad as the Great Depression and the impact of the virus and it’s impact on the global economy is going to be staggering. I wish you luck.


  2. Tony B

    One other statement needs a comment, lest you do more damage to your clients and readers:
    “The last big crash, now referred to as the Great Recession, happened roughly 12 years ago. It took a decade for the effects of that crash to be fully erased for most of us. Some never recovered.”
    Had you bought a diversified 60/40 or 65/35 pie (not that that might be a recommendation for you….) on 10/9/2007 (ie, the date of the ALL TIME HIGH prior to the crash)… suffered a great drawdown. But you were back to level again in 2010 (whereas, the indices did not reach their all time highs again until 2013). A diversified portfolio tripled over the next decade. Those who never did recover? They had bad advice, or had an emotionally weak advisor with no historical perspective.


  3. Tony B – the great majority of people either have no advisor or have one whose loyalties are mixed. By that I mean their retirement money is accumulating in a 401k or 403b account. The only advice they get are from representatives of whomever sponsors their plan. Those folks are typically young, inexperienced, and whose loyalty is to their employer. There’s a reason why Wall Street fought so hard to not be held accountable as fiduciaries. The other force at work is often emotional. It’s very hard to be objective when it comes to positioning your own money, especially when you have limited financial literacy. The effects of what we’re experiencing now is going to last decades. I had clients in the 70’s whose parents lived through the Great Depression and 40 years later they had difficulty coming to grips with contemporary approaches to money management.


    1. Tony B

      There are plenty of resources these days…and yes, Wall ST. fighting the fiduciary rule….that’s why fiduciaries are kicking the crap out of them. Education is key, and failing in this country…..that’s why we have politicians like Bernie Sanders out there.
      Decades? Really? How long did the Great Recession last? No question, this is going to be bad….but pandemics flame out. Free markets are coming to the rescue as never before…..and the Hydroxycloro/zpack treatment works…….a balanced portfolio will be up 3 times in the next ten years. A person who is sick and in their 70s? Only a small amount of their portfolio should be in stocks.
      So you are blaming ME for something someone in Colorado said to you… it….


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