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Will Great Depression II Make The First One Look Like Child’s Play?

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Survival Diva here with something you’ve probably asked yourself more than once: How would a depression now (that many are calling either “The 2nd Great Depression” or “Great Depression II”) compare to what folks experienced during the Great Depression?  Interestingly enough, many of the same pre-incident indicators that warned people in the late 20s are readily visible again today–only we’re living in a completely different world today than what existed in the 20s & 30s.

The Gap Between Then and Now

Most folks living in the U.S. were either debt free or close to it in the 1930’s when the depression began to be felt around the world. It was the norm back then to put 50% down on a home, and many paid for them outright. The average home was relatively small and bedrooms were tiny in comparison to today’s standards. Closets were even tinier because it was not the norm in those days to have more than a few dresses, slacks and shirts. Furnishings were saved for and purchased one at a time as money allowed and were normally utilitarian.

Back then, it was not unusual for several generations to have been born, raised and buried in the same small community. Family members were there for one-another whenever the need arose. In those days, folks tucked money aside in a cookie jar for a rainy day. They grew gardens, and most lived near farms, where they could purchase fruits and vegetables affordably. Many kept chickens for their eggs and meat.

To “put aside” any overflow from the garden, it was common practice to  home can or they preserved their fruits and vegetables in a root cellar.  (David’s note:  Canning got a big boost from the Land Grant College, which gave classes and distributed literature on best practices for canning during the 30s.  When WWII hit, it became “patriotic” to can and preserve and was the subject of iconic war effort posters, like “Yes, I Can.”)

They saved up for the family automobile and took care of it, many times doing routine maintenance themselves, and they nursed these automobiles until they basically fell apart.

Many still used wood stoves for heat and bathroom facilities and knob and tube electricity was a relatively new invention. Their “lifeline” was not the telephone, because they all had party lines where telephone operators could listen to conversations–whom could be counted on for salacious gossip.

They knew how to entertain themselves, for the radio was their one vice and children didn’t need a “family room” to hold all of their toys.

Most important when comparing today’s world with what life was like in the years leading up to the Great Depression is people did not expect the government to shelter and feed them. They were on their own, and they did quite nicely, thank you.

In fact, up until 1934 (4 years into the Great Depression) the needy were helped on a local level; in part communities, but also the Church and family members.

Most everyone was in the same boat during the Great Depression—food was scarce and because of the 25% unemployment, many were jobless. For those lucky enough to be working, many times employment was reduced to day jobs, paying much less than what people made before the depression.

The Era of Entitlement

Now compare the 1930’s with today. Today the average household is $18,000 in debt, with the lions’ share being credit card debt that if paid off with minimum monthly payments can easily take 30 years to pay off. Many of those that have managed to hang on to their homes are upside down in their mortgages and the equity they once took pride in is now a distant memory.

Nowadays homes have walk-in closets the size of the average bedroom found in a 1930’s bungalow. We now require “family rooms” to house huge flat screen TV’s and electronics while our children are showered with so many toys that they can’t fit them in their oversized closets.

With the advent of travel, families no longer remain in the same communities where they were raised and the family unity of previous generations is no longer seen as necessary or even desirable.

Today, most families do not have extra cash to tuck away in a cookie jar we may or may not possess. Most couples have at least two cars that are traded in routinely, and this does not address the cars purchased—on credit—for our children.

Few of us live anywhere near a farm where we can buy fruits and vegetables and most do not grow gardens, or raise chickens, and forget about home canning and root cellars!

Except for a tiny percentage of the populace, the average American depends upon the electrical grid and the gas company to heat our homes and to be able to cook. Should electricity or the water supply suddenly get knocked off-grid, most won’t have a clue how to survive without these conveniences.

(David’s note:  I’m more guilty of this than I like to admit, but another huge difference is how much we’ve grown dependent on “labor saving devices” and the shock to the system when they stop working in masse.)

The US population has never experienced a complete disconnect from normal everyday life. The closest we have come was the Great Depression. The problem with the assumption that “we’ve been there, done that, and survived” is that it’s a misnomer. We weren’t there, did not do that, and have not survived to the other side with a populace that expects the government to feed and shelter them. That mindset and the current expectation of instant gratification and entitlement is a fairly recent event.

It’s worth asking the question…what will people do if the time ever comes when  food stamps aren’t available, or welfare entitlements are no longer being doled out, when electronic entertainment budgets shrink, and/or labor saving devices aren’t as inexpensive and easily available…how will people keep a roof over their heads, or by food, or receive medical attention?

It’s for sure there would be picketing and people taking to the streets. In some locations it’s likely it won’t stop with people simply voicing their anger. Not when folks are hungry and thirsty, and possibly homeless, or at the very least, without running water and heat and the ability to cook and keep food from spoiling.

When Stuff Hits The Fan

With an economic meltdown, we have a window of opportunity to get prepared—unlike a natural disasters that can happen without notice. That’s the good news. The bad news is, if my take on what’s looming ahead is correct, things may heat up to a level that it would be wise to be watchful.

Take a look at the five things that led to the Great Depression and compare them to what’s happening today.

1.Stock Market Crash

Within two months after the 1929 stock market crash, stockholders had lost more than $40 billion dollars.

Compare that with today:

Although talking heads on TV say that the stock market looks healthy, many financial experts who are brave enough to speak the truth are warning that the bubble is about to burst. Others are warning of derivatives being obliterated (what predominately started the beginning of the mess we are in in 2008). It bears notice that the wealthy are jumping ship from stocks and grabbing up gold and silver, and some are admitting it publicly. Could it be they know something that isn’t being shared with the rest of us?

(David’s note:  While it’s easy to get excited about the big gains in the stock market, it’s important to look at them and see if there are ANY fundamentals to back them up.  There are currently MANY big name stocks that have negative earnings, but their stock prices are still going up.)

2. Bank Failures

During the Great Depression 9,000 banks failed between 1930 to 1939/1940. Unlike today, bank deposits were uninsured and many lost their life savings and their financial security. Surviving banks stopped approving new loans, fearful of what the future held.

Compare that with today:

Weren’t Cyprus depositors told that they had nothing to worry about and that their money was safe in the banks? Indeed they were. Yet, the people of Cyprus have had their life savings seized with no clear answer of what the future holds. Businesses have had their accounts frozen and have no way to pay payroll, or suppliers, or their overhead and have had to lay off their employees and close their businesses.

The message sent to the citizens of Cyprus is catching fire all across the EU and many want their money out of the banks not only in Cyprus, but all across Europe and elsewhere.

If the warnings of respected financial experts that the U.S. is joined at the hip with the EU, it is time to keep watch on what’s happening in Cyprus and elsewhere because it may reach our soil.

(David’s note:  This is ESPECIALLY the case with the BRICS nations working more tightly with each other, grabbing asset rich land at a shocking pace, and working to replace the World Bank and IMF with their own alternative funding source.)

In the U.S. the FDIC assures us our bank deposits are insured up to $250,000 for each depositor,  and up to $5000,000 for joint accounts. But what if U.S. banks go the way of Cyprus? What if one morning we wake to headlines that all accounts have been seized “until things can be worked out?”.  Would FDIC insurance really matter at that point?

(David’s note:  In short, no.  FDIC insurance is designed more to protect depositors from individual banks or chains of banks that make enough bad investments that they become insolvent.  FDIC insurance is not designed to protect people from a crash of the banking system–it’s simply beyond it’s scope, similar to somebody expecting a child’s bike helmet to stop a round from the main gun of an M1 Abrams tank.)

Let’s hope we’ll never have to find out.

3. Drastic reduction in U.S. Consumer Discretionary Spending

After the 1929 stock market crash that led to the Great Depression people quickly began to fear deeper economic trouble. Individuals from all classes stopped purchasing items. This hit suppliers, manufacturing and retailers and led to spiraling unemployment. It was the ultimate domino effect, causing many to lose their jobs, thus tightening spending, leading to retailers having to close their doors. Home foreclosures climbed, defaults on loans climbed, and the banks only got more reluctant to approve loans the retailers and manufacturers had earlier been able to depend upon.

Compare that with today:

Lately we are hearing retailer reports of greatly reduced discretionary spending. Many times it’s a result of lower wages and benefits, but more recently, people are scrambling to cover new tax hikes, higher food and gasoline prices, hikes in utility, and Obama Health Care woes.

We’re not far off from the statistics of the Great Depression with regard to the impact this recent recession has had on retailers.

For quite some time manufacturers have gone globetrotting overseas for lower tax rates, more realistic regulation, and cheap labor.  Many of those affected simply rolled with the punches and moved on to other companies or other industries, but many also have suffered as a result.

U.S.  businesses are now struggling to get the bank loans they once relied upon, leading to cut backs on employee overhead just to stay open for business–if they’re able to hang on at all.

Because Americans have had to tighten their belts, many staple businesses have reached critical mass and are either locking their doors or closing less productive locations. Did you ever think you’d see the day when Sears, Radio Shack, Best Buy, J.C. Penny’s and more would be closing 10-30% of their stores?

(David’s note: it’s important to note that one of the effects of the mass of stores that are closing is an artificial depressing of prices (stagflation/deflation).  Stores are either going to liquidate their inventory or transfer it to other stores.  In the case of liquidating, this will depress prices and have a domino effect on competing retailers in the area.  In the case of transferring inventory, it will have a negative effect on manufacturers who may have to sell at breakeven prices until excess inventory works it’s way through the market.  Once the dust has settled, and the false honeymoon is over, some of the same economies of scale that came from chains having hundreds of profitable locations will start working in reverse as the chain’s buying volume and purchasing power drop.  As a result, I expect the end of this major round of retail store closings to be the start of a major uptick in the rate of inflation.)

4. U.S. Trade Deficient &Tariffs

During the Great Depression, businesses began failing which led to the Smoot-Hawley Tariff in 1930 to protect American companies (notice moving overseas was NOT promoted back then). This lead to higher taxation for imports thus reducing trade between the U.S.  and foreign countries.

Compare that with today:

In 2012, the total U.S. trade deficit was $539.514 billion. The current U.S. trade deficit with China has cost the U.S. 2.8 million jobs between 2001 and 2010.

5. Drought Conditions

During the Great Depression bank closures and out of control unemployment weren’t the only troubles the people had to contend with. The drought (otherwise known as the dust bowl) in the Mississippi Valley in 1930 hit farmers and workers so hard, many were unable to pay their taxes and farms were lost.

Compare that with today:

Over the past several years, drought has again hit many parts of America (and China), leading to reduced crops which, in turn, has led to sticker shock at the checkout counter for canned goods, packaged foods, dairy and meat.

The mighty Mississippi has its share of problems with the current drought as its levels have become drastically reduced, limiting barge weights that also rises the price of food. Along with escalating gasoline prices, our food budget is feeling the pain.

What We Can Do to Protect Ourselves

We have time to prepare, and the fact we’re paying attention to what’s going on around us is the first step to preparing. It fuels our conviction to get ready as quickly as possible (but minus fear of a meltdown because we’re already on our way).

Should the U.S. suffer further bank closures or if the price of food continues to rise, as preppers we know what to do. Just put into practice what you already know and the rest is likely to be found here at Secrets Of Urban Survival. And remember, we still have time to get things in place. The only difference is our window of opportunity may be narrowing, so don’t delay till tomorrow what you can do today.

If you’ve been toying with the idea of a garden, even a vertical garden for those who don’t have the yard space, now is a great time of year to get started! Practice what you’ll need for survival, so you can work the kinks out of your game plan!

David’s note:  And of course, I would be remiss if I didn’t strongly encourage you to sign up for my Fastest Way To Prepare course.  It’s a 6 module course that is delivered in both video format OR written format, so you can use whichever one is best for your particular situation.  The course is focused on improving your survivability in a disaster and speed of execution…so that you can actually put most of the lessons into place within 72 hours of starting the course.  It covers basics like food, water, fire, shelter, trauma care, security, and power, as well as several priceless, eye opening, sometimes esoteric, but always valuable tips, tactics, and techniques that I’ve become well known for unearthing, testing, and sharing over the years.  To learn more and to see a special offer for my readers, head on over to FastestWayToPrepare.com.  If you know you want to sign up for it, or if you just don’t like watching videos, you can go straight here >Text Description of Course with no video <