Just call it The Great Depression
February 17, 2009
In October, the stock market collapsed.. The federal government started programs to urge banks to lend money. However mass layoffs still occurred, foreclosures hit the roof and deflation set in as consumers had no disposable income and had to price everything according to what cash was in their pocket, not what they can get credit for.
The problem is that October was in 1929, not October 2008 when our crash happened.
Think that there are no real parallels between then and now? We even tried our own Smoot-Hawley Tariff Act 2 weeks ago.
We have been watching ad agency layoffs for months now, thousands of people out of work in our industry alone. General Motors presented a survival plan that calls for cutting 47,000 jobs globally and closing five more U.S. factories, on top of an ADDITIONAL $30 billion dollar bailout. Every ad agency that is part of WPP group plc has been faced with a hiring freeze since October of 2008. You’ll notice from the comments in October that we were called alarmists for stating that this will get worse, and you are hearing it from us now.. things are not even close to hitting the bottom yet.
Every Advertising Agency holding company has seen their market cap drop like a rock. We have seen small mom and pop stores that have been operating for literally 2 centuries close their doors.
Layoffs after layoffs and even more layoffs with no end in sight.
Everyone in Washington is dancing around the fact that we ARE in a depression. The stimulus package isn’t there to “head off a depression” .. it’s a first attempt at getting us OUT of a depression.
This is not going to turn around quickly. Consumers have zero capital to use. Everything is being priced not with the credit limit they have on their credit card .. but rather only with the cash they have in their pocket.
When Japan’s GDP drops 12% you know things are grim. Japan’s economy is hugely export driven. So when Japan’s economy goes down the tubes.. it means that no one across the globe is buying anything… people in the US are not buying LCD TV’s … people in London are not buying Wii’s … people in South Africa are not buying digital cameras… and people in Seoul are not buying Blu-Ray players..
It’s an economic correction that is enormous in scope.
Most of the bailout money went to the top of the food chain, the banks… when it fact all the losses were at the working and middle classes.. We paid the wrong people to fix the economy.
General Motors and Chrysler are going to get bailout money, when in fact the small businesses (the ones that received nothing at all from the federal government) are the ones that are laying off the majority of people. They don’t have a lobbyist in Washington to get them TARP funds. So they are laying off 4 of their 10 employees.
The problem is every restaurant, laundry mat, car wash and pizza shop is laying off 4 of their 10 employees. That adds up to millions of Americans out of work.
States are running out of money, it’s widely expected that the State of Kansas will bounce payroll checks this week. California is on the brink of Bankruptcy. Tell us the last time you heard of an entire state declaring bankruptcy or bouncing payroll checks?
Those people had jobs 6 months ago.
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