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Five Things You Need to Know: The Modern Stealth Depression

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Despite the seeming enormity of it in retrospect, the stock market crash of 1929 barely even registered for most Americans. Today, it is some kind of weird obsession.

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Chaos and fear never sleep. This morning the first news story I read was a piece from the Los Angeles Daily News about police threatening to beat down and arrest any "disorderlies" trying to get their money out of a failed IndyMac (IMB) bank branch in Pasadena, CA. Apparently, after being turned away Monday, customers began lining up at 1:30 a.m. the next morning to take out any cash they had in excess of the $100,000 maximum insured by the Federal Deposit Insurance Corporation. The scene was reportedly emotional and tense. At another IndyMac branch in Encino, the police were called in after line jumpers threatened to turn an ordinary bank run into a full-on riot.

Yes, it's here. Welcome to the Depression. No, don't drop whatever it is you're doing. Don't get up. It's not going anywhere. It will wait. It's just going to sit over here in the corner and read a magazine while you do whatever it is you need to do.

A Depression doesn't run hot and fierce like some crazed meth burner. A Depression is methodical, purposeful, patient. It will build a shelter out of tree branches and newspaper, light a small, well-contained campfire and wait you out, brother. While you feed on the empty calories of denial and popcorn, it will quietly gather shards of broken dreams and fashion them into a terrible weapon of blunt force reality.

It's a hell of a thing to call this day and age the next Depression. It's dangerous tinfoil hat territory inhabited mostly by screeching lunatics and volatile nutjobs. But by the time they get squeezed out by reputable folks the whole gig will be up, the circus will have left town.

But how can this be? To understand the mechanics of this, the nature of it, let's look back at the last Great Depression.

Despite the seeming enormity of it in retrospect, the stock market crash of 1929 barely even registered for most Americans. The day before the crash, Time Magazine's Oct. 28, 1929 issue was business as usual; national stories, Washington stories, a review of the newest plays opening in Manhattan, a piece on a cat washing contest in Kingston, NC.

A week later, in the wake of the stock plunge, the cover story was as far from a piece on crashing share prices as you could get - a profile of a man named Samuel Insull, the "financial father of the Chicago opera." The crash did make the magazine, of course, second billing in the Business section in a piece titled, "Bankers v. Panic." The next piece, however, was about a $2.5 million investment by a Wall Street investment bank in orchids: "Last week, however, to the orchid industry went 2,500,000 Wall Street dollars, not squandered, but carefully invested."

Heh. Yes, the dream dies hard, doesn't it?

It took a little more than two full years, Dec. 11, 1931, before the New York Bank of the United States would collapse. Surely that would rattle a few cages. Well, no cover play, that was reserved for Dr. James Henry Breasted, "foremost Egyptologist of the U. S.", but the bank collapse did garner a story in the Business section, below a piece on Lorillard Co., then in the news as "the only major industrial concern in the U.S. to resume dividends in 1931."

Jesus, Mary and Joseph, what is wrong with these people? Haven't they even the vaguest sense of the impending doom they face? Someone should warn them. They're headed straight into a vicious buzz saw. It's like watching drunken sheep follow one another off the Cliffs of Moher.

On January 22, 1932 things turned desperate. The Reconstruction Finance Corporation was formed to dole out government aid to banks, railroads, farm mortgage associations and all manner of failed business enterprises. By any decent measure of journalistic standards, this deserved top billing in a weekly newsmagazine. So Time's cover story on playwright Philip Barry's 11th play, "The Animal Kingdom," comes as a sharp, kneecap-shattering nightstick blow.

By the end of the following year, 1933, President Franklin Delano Roosevelt had squeezed the Emergency Banking Act through Congress, signed the Economy Act, the Credit Act, the Reforestation Relief Act, the Agricultural Adjustment Act, the Farm Act, the Federal Securities Act, the National Cooperative Employment Service Act, the Home Owners' Loan Act, the Glass-Steagall Act, the National Industrial Recovery Act, the Emergency Railroad Transportation Act, created the Federal Emergency Relief Administration, the Federal Deposit Insurance Corporation and Civil Works Administration.

In short, everything in America was falling to pieces and going to hell. And yet I am staring right now at the cover of Time from August 7, 1933, just past the mid-point of that awful year, and Marie Dressler is on the cover in full character as a "a raffish, vigorous old woman whose generous heart thumps under sleazy clothes that do not fit her."

Three months later, the November 13 cover is "Football."

The December 4 cover features Seton Porter of National Distillers, whom the magazine, with bald-faced envy, claims has "50% of all U.S. whiskey in his saddlebags."

This is quickly turning into some kind of preverse joke. These people deserve the Depression, dammit! No wonder the country has gone to hell; all anyone cares about is Tugboat Annie, football and whiskey.

Hahaha. Kind of like today. And there it is, finally, the point. We are slowly sidling up to The Fear. With wealth and lifestyles evaporating right before our eyes, The Fear is really the only tangible thing we can hold onto. The Fear is always worse than the actualization. The Fear feeds on potentiality, unimaginable potentiality.

Now, there are two ways to look at that. One is to despair over our misfortune at finding ourselves in the wrong place at the right time, taken along for a ride on this wave past the cresting point, and the other is to consider what adventures await on the other side. I'm in the second camp because I am an optimistic person by nature, or at least a defensive pessimist, and also because I understand that despite it all, we will continue to live our lives, raise children the best we can and find ways to make the best of whatever situation we are in.

During the first Great Depression, times were tough for many people, but even now the vast majority of us will adapt and continue on and soon take for granted the change in lifestyle that may (or for some may not) entail.

I read a piece in the New York Times several months ago by a woman consistently finding herself feeling humiliated by her parents' reckless disregard for money during the Depression - they didn't have much anyway, but her parents were intent on squandering what little they could accumulate on fancy clothes and cocktail parties. As I remember the story, she asked her mom, "Why on earth are you having a party with things the way they are?" Her mother, without missing a beat, said, "It's times like these when people need parties most of all."

Indeed. The time for preparations and battening down the hatches has passed. It's finally here. Let's party.

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No positions in stocks mentioned.

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