As an American when you think of horrible economic issues your first thoughts probably jump to the Great Depression.
And if you think of The Great Depression you probably think of things like bread lines, the Dust Bowl, and other pictures like the ones seen below.
This is a picture of men standing outside of a soup kitchen in 1931. Picture is via PBS.
And this is a picture of the Dust Bowl in Texas circa 1936. Picture via PBS.
The Great Depression lasted for 11 years give or take depending on how various sources classify things. And spanned the entire world.
It was so bad for so long economically and emotionally that it literally scarred people for the rest of their lives.
Many people who lived through this time forever swore off the stock market. Stayed away from debt and conserved as much cash as they could. And they “Pinched pennies and didn’t waste money.”
Things were bad already economically by 1930… But they got even worse after this.
In 1932 the US saw its Gross Domestic Product (GDP) – economic output contract by 12.9%. An all-time high still not surpassed in the 88 years since then.
At the height of the Great Depression the “official” unemployment rate in the US hit a high of 24.9% in 1933 leaving millions out of work for months or years at a time.
87 Years later, and this is still the record high level for unemployment in the US.
But both records are about to get broken in the coming weeks and months.
As of this writing in early June 2020 the “official” unemployment rate in the US is 14.7%.
I put official in quotes above because that isn’t the true number. The “official” number includes people who are unemployed but no longer working. And, people who are getting paid but not working.
Members of The US Federal Reserve estimate the true economic unemployment is closer to 23%. And this was as of May 8th or almost a month ago.
New unemployment numbers will come out on June 5th. And these are likely to show a new record high unemployment rate in the US. Even if the “official” numbers don’t show this.
What about GDP?
First quarter 2020 US GDP originally dropped 4.8%… But on May 28th this was revised to a 5% drop. And during most of the 1st quarter we weren’t locked down. That only came in the US in mid-March… Or only 2 weeks of data.
For months now economists, investment analysts, and government officials have been guessing as to what 2nd quarter US GDP will fall by. While the ranges vary widely most project US GDP to fall between 20% and 40% in the 2nd quarter.
If it falls anywhere in this range, it’s an all-time record in the US.
But on June 2nd, 2020 an even scarier report came out from The Atlanta Reginal Federal Reserve.
This regional arm of the US Federal Reserve now projects a 52.8% 2nd quarter fall in US GDP.
The entire US yearly GDP before these coronavirus lockdowns was an estimated $20 trillion.
A contraction of 52.8% is like cutting US economic output from $20 trillion to $9.4 trillion. Or a total loss of $10.6 trillion if measured on a yearly basis.
This is like taking the Japanese, German, and Italian economies out of worldwide economic output.
These are the 3rd, 4th, and 6th largest country economies in the world respectively.
Even if their projections are off by a large amount, we’re looking at a Great Depression type of economic scenario.
But if these projections are even close to that scary prediction, we’ve never experienced economic devastation like this in the history of man on Earth.
Will things get as bad as The Great Depression… No one knows. I am fairly certain whatever we’re dealing with won’t last for 11 years. But I have no idea if it will get as bad as the worst of The Great Depression in terms of things like food lines.
So why am I telling you about this today?
To help you prepare for these uncertain times in any way you see fit.