Last Saturday Faye and I had coffee at the Pannikin, one of our local coffeehouses. A cup of decaf sells for two dollars. The place was busy with people eating lunch, talking or just drinking coffee. I asked Faye, "Does this look like people are cutting back because of the Great Recession?" Faye shook her head, "Hardly," she smiled.
I reminisced, the Great Depression ended around 1942. That was about 60 years ago. Three or four generations have elapsed since 1942. So it's been three or four generations since Americans have experienced what I call "hard times." Only old codgers like Richard Russell remember what it was like during the Great Depression. Those were the days when people clung to every nickel and dime they could scrape together.
In 1940, if I wanted some coffee, I probably already had it in the thermos bottle that I was cramped into my lunch box. Or I could go to the nearest drug store or maybe to an Automat and buy a cup of coffee for a nickel. Actually, I'd probably prefer Woolworth's because there coffee was always a nickel, and there'd be no charge for "refills" (as many as you wanted).
It occurred to me sitting there with Faye at the Pannikin coffee house that people today have no idea or concept of cutting back and saving money. Here were kids buying cups of coffee for two dollars a cup and ordering sandwiches or salads for 5 to 8 dollars a pop. "Well," I thought, "If the government isn't cutting back, why should the people? It's the way of the world today." But I have this feeling, this creepy feeling, that it isn't going to last. Somewhere ahead I believe the Great Recession could turn in to the second Great Depression.
Russell, a prolific straight shooter, nails it. The distinction between the Great Recession and Depression is mostly semantics. Another great trading box, similar to that of 1873, 1929, and 1971, formed in 2000. This suggests that real (constant currency) stock prices and standard of livings have been falling since 2000. It will take decades before the 2000 highs are breached to the upside.
Russell’s observation suggests that most of the public remains oblivious to the reality that excessive debt-based consumption is dead. A public weaned on reality-based television and bubble gum economic analysis is always the last to know. Russell’s pragmatic observations be viewed as prophetic anyone willing to study history after 2025. I say why wait to send him compliments? He’s right today.
U.S. Large Cap Total Return Index (LCSTRI); S&P 500 Total Return Index to Gold Ratio
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