What Ends Recessions/Depressions?

Seems like everyone’s involved in the great American pastime of calling a bottom to the recession.

If the Dow blips up, as it has this past week, a crowd of TV analysts is right there, squirming in their seats, telling everyone that this is the buying opportunity of the Century.

But is it? This short a distance into the recession?

Chances are, it’s not. How do I know? Because with all of our excesses, with all of our debt, with our sheer number of real estate shenanigans, the casino-mentality of our banks, the government turning our dollars into so much Monopoly money, it seems far too soon for us to have “learned our lesson.”

What do I mean by that? I mean that underlying the market specifics that got us into this mess, there’s what really drives bubbles and ultimately our eventual recovery from them.

I’m talking about the way we think.

Our attitudes.

Over a period of time, our attitudes evolve like just about everything else. Just preceding the Great Depression, for example, Americans had collectively become a rather proud, “we can’t possibly fail” people, groomed by increasing prosperity and technological progress. But when the Crash happened anyway, it took several years of humbling scarcity before people corrected their thinking and started living more prudent lives.

Again, that transformation in attitude took some time to occur…a lot more time than what we’ve gone through with the current recession.

So, bottom-line, if I were asked when this recession/ depression was going to end, I would have to answer, “However long it takes for our attitudes to change.”

Unfortunately, that may take a few years of living on “beans and rice” before that takes place.

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WHAT TO DO ABOUT IT

FIRST, be leery of any apparent turnaround. Sure, it would be wonderful to get in at the bottom of any recession/depression and ride the profit elevator all the way up to the top floor. But remember how much optimism there was after the Great Crash in 1929. Even President Hoover spoke, in 1930, of how the downturn was a temporary bump in the road to permanent prosperity and his Assistant Secretary of Commerce, Dr. Julius Klein, declared the depression “officially over” in 1931. So be skeptical in a healthy sort of way. People’s attitudes take some time to change…and that’s what will ultimately turn this recession/depression around.

SECOND, I talked about the recession, at length, in the last The Ruff Times. And there’s so much more to talk about in future editions. Consider subscribing today.

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