Oct 12 2008
Is there any lesson for us in the Depression?
“Hey!” I said to the Old Man. “They say that this is the worse since the Great Depression as far as banks failing.”
“Yes, and in 1931, I got a nickel for picking cucumbers. Five cents an hour, and that was hard work! I was fifteen. With that we could buy a lot of different things, like an ice cream cone, and a package of gum, five sticks for a nickel.”
He saved up over thirty dollars and when the bank went broke in ‘35, he only got $8 back. The caution he learned from that stuck with him, and he often had several bank accounts throughout the years.
Talking with him about this sudden bank crisis, this possible global depression that could hit, is interesting in that there are some similarities. But he likes to point out the differences, too. Those, to him, are the most important.
For one thing, he reminded me, back then the small banks were failing like crazy. Now the banks that are failing are much bigger. He wonders out loud if the smaller banks can stay solvent.
I pointed out that houses are much more expensive these days, but he countered that the price of housing had undergone a huge run up back before the crash of ‘29. I mentioned that the government couldn’t bail out everyone, and may even be forced to back out on some of the promises they had made.
“Well, good Lord, don’t you think they are pulling all the rich people to help out now?” he asked. “They called in a bunch back then to get some money. You can bet they are making phone calls now.”
There are so many other things about that time period that are so different from today. In my mind, I can still see the picture of my mother and her brothers and sisters. It was a ragtag group of children and only the oldest had on shoes.
“Where were all your shoes?” I asked her.
She snorted, “We couldn’t afford shoes.” I turned to her in wonder. Something we take for granted, something so simple as shoes, they only had for school, and only one pair at that.
It just goes to show how much more money we have around in our system now. That’s another difference between now and then. Foks today just have so much stuff! We Americans are better educated, better homes, better everything.
And yet, if the Depression tauught us anything, it is to persevere. My son told me yesterday how struck he was about something he heard on the radio.
“Mom, the speaker said, “It goes through the mind of the man, ‘My life insurance policy is worth a milion dollars and if I were dead, I could put food on the table.’” He turned to me and said, “That really makes you think, Mom.”
Maybe the real lesson is the one my son is learning, the one his grandfather learned so many years earlier in ‘29. The real story of life isn’t the price of gold, the drop of net worth, the job you suddenly need. It’s the story of survival and what you have deep down that’s important. It’s the idea that you will still be around to marvel about the bad times in ten years from now. It’s appreciating what you have instead of what you don’t have. And it’s lving through the times that make history that shapes the fabric of your very soul. Those are the lessons. Those are the moments now that you need to stop and be sure to remember.
I just read an article in the newspaper today that noted small banks, which are using capital from savings and checking accounts for loans rather than from investments (which are going south fast), are doing fine at this time. This is the “old fashioned” way of making money (they earn it!). I sure feel like we should let the large banks with their risky investments (at least in this market) fail and let the conservative, safe (in this case small) banks thrive. If a business needs credit to make its payroll or function, it needs to rewind 40 years back to when you earned money before you spent it. It seems that the only people who need the money are the companies who are playing some large version of the shell game with their accounts and the large banks that determine their money available based on some complicated formula that doesn’t seem to involve incoming money versus outgoing money. No one should be “too large to fail”.
David
Thanks for the comment, Dave! As a former business owner, I understand why credit is so important to a small business. It would be nice if money flowed in evenly, but wihen you have a dozen employees, and the insurance companies are slow to pay for various reasons, then small businesses such as ours would fail without credit. Also, some businesses need to get through slow times, such as our shop had during the summers. It’s the owners who let go of a paycheck when that happens, but others have to be paid, then the bank paid back.
I can’t imagine what these small businesses must be going through. Since we saw this coming, we got out. However, we feel for those business owners in a crunch. Furthermore, if enough small businesses fail, it will lead to serious unemployment. I am gad that at least ACTED. God forbid Bush had been like Hoover, who just couldn’t get it together at all.
Thanks for stopping by!