Brink of Depression? Fastest Consumer Price Drop Since 1932
No longer do we need to look to history books and grandparents to know what the darkest days of the Great Depression were like: we are there if consumer prices are any indication.
In November 2008, consumer prices fell to their lowest in 76 years. Will the Bush Depression be worse than the Great Depression?
1932 is considered the bottom point of the Great Depression:
Though the U.S. economy had gone into depression six months earlier, the Great Depression may be said to have begun with a catastrophic collapse of stock-market prices on the New York Stock Exchange in October 1929. During the next three years stock prices in the United States continued to fall, until by late 1932 they had dropped to only about 20 percent of their value in 1929…The failure of so many banks, combined with a general and nationwide loss of confidence in the economy, led to much-reduced levels of spending and demand and hence of production, thus aggravating the downward spiral. The result was drastically falling output and drastically rising unemployment; by 1932, U.S. manufacturing output had fallen to 54 percent of its 1929 level, and unemployment had risen to between 12 and 15 million workers, or 25-30 percent of the work force.
Have we reached the bottom of this economic depression or is the worse still to come? Mike Schenk, an economist for Credit Union National Association, expressed his economic concerns, “This is scary stuff. We are teetering on the brink of a massive downward spiral. Deflation is a threat.”
Gasoline prices have seen the sharpest decline as they plunged by 29.5% in November, the greatest drop since the government began keeping records in 1967.
Energy, the airline industry, and commodities have been the hardest hit by plummeting prices. In contrast, medical, food, and housing prices rose slightly last month.
On one level, I am glad prices are dropping to a more affordable level for Americans, especially the unemployed or those who have received pay reductions. On the other hand, I worry what the reduction in prices will do towards the sustainability movement. For the employed, lower plane tickets and cheaper gas prices may encourage behaviors that increase carbon output. Slate explains:
History shows that significant declines in U.S. oil consumption occur only after prolonged periods of high prices. Over the last two decades, U.S. consumers have been spoiled by low fuel prices. And those lower prices led to a buying binge that put millions of giant SUVs, pickups, and other gas guzzlers on our roads.
We’ve experienced the decline in oil consumption that resulted from $4.00 a gallon gasoline. Americans began to carpool, ride mass transit, bike, etc. Now that oil prices have dropped significantly, will oil consumption increase? If we really are in the darkest days of the Bush Depression, the economy should take care of these concerns. The average Americans can’t afford to buy a new car, whether it is a hybrid or SUV. let alone take an extravagant vacation. With the economic uncertainty facing this country, no one is immune from losing their job or facing a paycut (just ask the bloggers).
Image credit: Lange, Dorothea, photographer, “Migrant Agricultural Worker’s Family. Seven Children without Food. Mother Aged Thirty-Two. Father is a Native Californian. Nipomo, California.” February, 1936. America from the Great Depression to World War II: Black-and-White Photographs from the FSA-OWI, 1935-1945, Library of Congress.
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