The (New) Great Depression.

For those of you who don’t think we are in the beginnings of a Great Depression, you might want to think again and take a look at the charts below.

Here’s what we all know:

1)      The U.S. economy remains stalled out with a housing crisis that won’t go away, because foreclosures have only now really begun to start through the process; credit card and student loan bubbles loom on the horizon to the tune of $2.4 trillion; and, Europe is about to fall into the biggest depression in history. This will get worse.

2)      The U.S. unemployment rate remains high and will continue to stay where it is, as analysts finally begin to come to grips over the reality that all of the jobs that went away aren’t coming back, because corporate America doesn’t want them back, and because productivity is at an all-time high (as are corporate profits). This will not change.

3)      Income inequality has been surging and has reached historic highs – like, as in, never before. And, this gap will continue to expand.

But, just in case you thought things couldn’t possibly get any worse, check out three charts from Gluskin Sheff strategist David Rosenberg’s latest report, that show the share of personal income from government transfers like welfare and social security, and the spike in food stamp participants.

In the 1930s, you could tell the country was in a great financial depression because you could see the soup lines everywhere you looked. You could see the unemployed lined up in front of every employment hall (sort of like Europe right now). We don’t have soup lines and we don’t have employment lines anymore, but we surely do have a Great Depression.

Rosenberg writes:

Government transfers to the personal sector now makes up nearly one-fifth of total household income. That is incredible. Even Lyndon Johnson, the architect of the Great Society, would blush at that statistic. The reason why nobody considers this to be a modern-day depression is because nobody can see the soup and bread lines that were so visible during the 1930s. That’s only because these days, you receive your bread and soup from Uncle Sam either electronically or in the mail.”

Here’s the chart from Gluskin Sheff that shows the shocking rise in transfer payments to personal income:

personal income chart

And this chart shows the surge in the number of food stamp participants:

soup line chart gluskin sheff

Any questions?


About Steve King

iPeopleFINANCE™ Chief Operating Officer. Former CEO of Endymion Systems, Inc. a $36m Information Systems Services company. Co-founder of the Cambridge Systems Group, the creator of ACF2, the leading IBM Mainframe Data Center Security product; acquired by Computer Associates. IBM, seeCommerce, marchFIRST, Connectandsell alumni. UC Berkeley alumni. View all posts by Steve King

One response to “The (New) Great Depression.

  • Daniel Herr

    Good post Steve. This definitely shows that people are making use of government services more than has been in the past few decades, but to me it seems we will level out soon (assuming Europe and the rest of the world doesn’t completely crash and burn, which is possible).
    Few people love to be in hard economic times, but it is these sorts of time that create the best innovation because we must to survive. All time record profits should entice more and more startup businesses to start in competition with “Corporate America” eventually driving down the profits in industry and increasing the number of small businesses and people employed by small businesses, but obviously these things take time. While the number of new established businesses dipped to a low in 2010, it looks like the startup train is catching up: . 2011 shows a significant increase in new establishments, though not huge. She’s a little shaky right now, but give ‘er time. She’ll come around.

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