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US Economy- another great depression?

By       Message T. M. Elkins     Permalink
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Are we in for a replay of the great depression? Recently, the New York Times reported that "the dollar sank to a record low against the euro" as investors overseas began having second thoughts about rising oil prices and the prospect of a decline in the United States.

Meanwhile, the Dow Jones industrial average fell 360 points. This comes after a glum year for the US economy, including a spike in oil prices and a housing crisis triggering problems in the credit and banking industries. Furthermore, the article stated that, "after a relatively strong summer, consumer spending is expected to tighten and business profits slow in the months ahead."

This shouldn't come to a surprise to anyone who has been paying attention to the US economy. Conservative economists have been warning us for years that the current economy, based on deficit spending, and consumers borrowing against their homes and running up credit cards, is unsustainable for the long term.

Both experts in cyclical phenomena and historians point to the parallels between the current situation in the US economy and the trends taking place in the 1920's before the stock market crash.

Historians often point out that the main causes for the Great Depression were the ever greater unequality in the distribution of wealth throughout the 1920's, the inequality of wealth, the extensive stock market speculation that took place during the latter part that same decade and the dependence on consumer credit to keep the economy afloat.

As in our time, the distribution of wealth in the 1920's grew more and more top-heavy. This imbalance of wealth created an unstable economy. And just as George Bush signed tax giveaways to the rich, increasing the burden on the already cash-strapped poor and middle classes, then-president Calvin Coolidge and his administration ruled exclusively in favor of the wealthy.

All advances made by workers to secure decent wages during this golden "gilded age" failed. In the 1923 case Adkins v. Children's Hospital, the Supreme Court ruled minimum-wage legislation unconstitutional. The situation was exacerbated when President Coolidge signed the Revenue Act of 1926, which reduced federal income and inheritance taxes dramatically.

During this time, the US government, at the behest of big business, repeatedly strong-armed the fledgling worker's rights movement, only budging slightly in the aftermath of catastrophal incidents such as the 1911 Triangle Shirtwaist Fire, in which 146 low-paid seamstresses burned or leaped to their deaths.
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In the 1920's, productivity rose, but without any meaningful rise in wages; in the 1920's, wages rose at a rate one fourth as fast as productivity increased.

The same is true in our time, where we see that wages have actually not only frozen, but have fallen. Despite recent gains in worker productivity and record-breaking corporate profits, wages are at their lowest share of GDP on record.

Today, as CEO wages continue to rise to increasingly ludicrous levels, more than 12 million American families are living in poverty, and struggling to pay for food, shelter and clothing. The 12 million families represent 11.2 percent of all U.S. households.

Economists Thomas Piketty and Emmanuel Saez found that despite an overall growth in the economy between 1973 and 2003 and a gross domestic product (GDP) that has grown by over 160 percent since 1973, the average income of all but the top 10 percent of the income ladder -- nine out of ten American families, when adjusted for inflation, fell by 11 percent.

The top 1 percent of Americans - those with incomes that year of more than $348,000 - received their largest share of national income since 1928. David Cay Johnson reported that, "The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression." Meanwhile, the upper 10 percent have been paying less and less of their fair share of the tax burden.

A huge number of corporations have used "downsizing" to increase productivity, often, at the same time, exporting or outsourcing jobs to other regions. The result? Greater corporate profits, and an America economically dependent on foreign labor.

Furthermore, Millions of Americans, while officially counted as "employed" by government statisticians, are, in reality, either underemployed, or working at several part-time McJobs to earn a living. Since George W. Bush has been in office, 2.7 million jobs have left the US. Meanwhile, Bush and his cronies continue to thwart all efforts to provide working Americans with a living wage.
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In the 1920's, with wages frozen, the only way to sustain growth was to allow more and more people to buy on credit. The concept of "buy now, pay later" caught on quickly.

This strategy created artificial demand for products which people could not ordinarily afford. The U.S. economy was also reliant upon luxury spending and investment from the rich to stay afloat during the 1920's.

By the end of the 1920's 60% of cars and 80% of radios were bought on installment credit. Between 1925 and 1929 the total amount of outstanding installment credit more than doubled from $1.38 billion to around $3 billion.

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Born in Camden, NJ, now living in Germany, T.M. Elkins is an educator, author, composer, jazz musician and singer, and founder of Christians against Bush. She eschews labels and "isms", is non-denominational and firmly believes in modern secular (more...)

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