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The Depression is coming. The Depression is coming.

Written by: Jim Straw

Article Overview: But ... it isn't your daddy's depression.

The Depression is coming. The Depression is coming.

The biggest questions on the minds of Americans today are, “What is going to happen to our economy?" "Will we have a depression?" "How can I survive?”

It has been my opinion for the past 10 years that we are long overdue for a full scale economic depression. But, it will be completely different from the depression predicted by my contemporaries.

We have already seen a stock market crash in 1987 bigger than the one that preceded the depression of the 1930s. – And, we have already had more bank and S&L failures (percentage wise) than back then, too.

The rate of bankruptcies has grown from tens of thousands to hundreds of thousands each year – now, over a million bankruptcies each year - with the biggest percentage of bankruptcies in the higher income brackets.

Employee lay-offs, plant closings, and business failures have increased exponentially over the past 5 years. And, for the first time in our history, the unemployment rate among white-collar executives is higher (percentage wise) than among blue-collar workers.

All of these facts lead me to sincerely believe that ...

The Depression of the 1930s was a “Blue Collar” Depression

But ...

The Next Depression will be a “White Collar” Depression

Simply because ...

Our Economy Has Become Top Heavy

There are simply too many white-collar workers, bureaucrats, and unnecessary people doing unnecessary paper-shuffling busy work. They consume far more than they are capable of producing. – These are the people who will be out of work, on the bread lines, during the next depression ... NOT the blue-collar workers.

As an illustration: Before I had money enough to pay someone to sweep the floors, I did it myself (still do; on occasion). – That is the essence of the difference between the White Collar workers of the 1930s and those of today.

Because there were few business schools before the depression of the 1930s, the vast majority of White Collar workers came up through the Blue Collar ranks. Then, when the economy got tough, Blue Collar workers were let-go and the White Collar workers stepped from behind their desks and filled those jobs. After all, they were the most experienced and best qualified to hold those productive jobs.

Today, the vast majority of White Collar workers are schooled in the arts and sciences of business. They have studied management, economics, political science, marketing, production, contract negotiation, and employee supervision. But, they have never done the jobs they manage and supervise.

It is one thing to tell an employee, “this needs to be milled another one-thousandth of an inch,” and quite another to say, “here, let me show you how to mill this to specifications” (and do it).

As the next depression deepens, it will become necessary (as it was in the 1930s) for businesses to “chop heads” to reduce overhead costs. This time, however, it will be White Collar heads that roll because they are the least experienced and the poorest qualified to “produce” the many goods and services required by our society.

Contrary to the allegations made by a Japanese official, the Blue Collar workers in the U.S. are not lazy and ignorant. They are the victims of the emotional rhetoric of the lazy and ignorant “book learned” White Collar segment of our society. When the Blue Collar workers find that their knee-jerk reactions to that emotional rhetoric has been overcome by reality, they will return to producing more than they consume.

Lest you begin to condemn me as a book burner, consider this ... a Blue Collar worker, upon entering the White Collar world, will by necessity read books in order to learn about doing the things he/she does not know how to do. On the other hand, a “book learned” White Collar worker will rarely, if ever, go out on the shop floor and learn how to do the jobs being directed. – My point is that “book learning” is an absolute necessity, it has, however, become an end unto itself. Therefore, I do not condemn book learning, I simply consider it to be a “starting place” not an “ending place.”

Blue-collar workers may be laid-off; the plants they work-for may be closed – but – they will find work because they have historically produced more than they have consumed. They will take jobs at lower wages, without many of the now customary benefits, in order to produce the goods and provide the services needed. And, because of the reduced costs to produce those goods and services, the prices will fall proportionately.

Businesses that will survive and prosper during the next depression will be those businesses that eliminate top-heavy management positions (its already happening) and reduce their debt to a minimum (also happening).

Why? – Because, contrary to the economic manipulators in our government ...

You Cannot “Borrow” Your Way Out Of Debt

Even if the “prime rate” goes to 2%, blue-collar workers won’t be borrowing. Neither will wise and prudent businesses. The only people vying for those low-interest loans will be the out-of-work white-collar segment of our society – trying to borrow their way out of debt.

Blue-collar workers will – as they have historically – only “borrow” for purchases of major necessities. Instead of spending their hard earned dollars on frills & fancies, they will save their money for that proverbial rainy day.

Beyond that, during the next depression, there will be ...

No Major Banking Collapse

Why? – Because the banks in this country have already been frightened into tightening their belts. – Go to your local bank and count the number of empty desks in the area where the junior vice-presidents used to be. – And, with more low-cost blue-collar savings money coming into their hands, they are shoring-up their shaky liquidity and reserves – PLUS – with the relaxation of some of the more outdated banking regulations, the banks are now in a position to put their depositors’ monies in higher yielding equity positions.

Because of that, during the next depression, there will be ...

No Stock Market Crash

In 1987 – when the stock market did crash – most of the trading activity was in the hands of individual investors. Today, most of the trading is in the hands of professional traders ... managed accounts, mutual funds, institutional investors ... with less liklihood of the major sell-offs that cause market crashes.

But, during the next depression, there will be ...

Major Insurance Company Failures

>From the F.D.I.C., on down, you can expect Insurance Company after Insurance Company to fail.

Why? – Because the biggest buyers of insurance are the white-collar segments of our society (individual & corporate). They have, for too many years, been laying-off their major liabilities to insurance underwriters. – As this white-collar segment loses jobs and default on their insurance premium payments, more and more insurance companies will suffer a cash crunch.

When that happens, insurance claims that have usually been paid from current premiums collected, will have to be paid from reserves. Then, when the reserves are gone, it will be time to start dipping into assets ... selling at pennies on the dollar in order to meet claims payments.

Of course, as the insurance companies fail, there will be more white-collar unemployed. That will only deepen the white-collar depression.

So ... to survive and prosper during the next depression ...

Start Thinking Blue Collar

Put aside some money in a savings account with a smaller, local area bank. – Stay away from regional or statewide banks. Preferrable is a State chartered bank instead of a National bank and – if you can find one – a bank that is NOT F.D.I.C. insured. You won’t make a bundle in interest, but your savings will be safer.

Quit borrowing money, or buying on credit, except for major necessities. Even if the prime rates goes to 2%, stay away from unnecessary credit.

Invest in the stock market. – Buy stock in companies that produce goods or provide needed services. Put some money in a managed account or mutual fund and learn to trade stock profitably for your own portfolio.

Send your kids to Trade School instead of College. Let them learn welding instead of economics. They will have jobs when the economists are in the bread lines.

Those who produce more than they consume will survive and prosper.

Those who consume more than they produce will suffer the fate of the proverbial grasshopper ... and ... the hardest hit will be government employees at all levels – city, county, state and federal. – It couldn’t happen to a more deserving bunch of economic parasites.

The “economic parasites” to whom I refer are ... holders of positions in redundant and outdated government agencies, bureaus, and commissions; some of which have survived since the early 1900s without any useful purpose today ... redundant government employees; unnecessary people who are employed for the sole purpose of maintaining the use of budgeted funds (then can’t be fired without an act of God) ... and those persons who perpetuate those unnecessary, outdated and redundant offices and jobs.

I know. I know. What I am saying goes against everything my contemporaries are preaching ... and ... I know I’m going to catch thunder from some of them – BUT ...
Hide & Watch!

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  Successful Businesses of the Great Depression-Success is a Matter of the Mind

Article Tags: 10 years, 1930s, bankruptcies, blue collar workers, bread lines, bureaucrats, business failures, business schools, contemporaries, economic depression, hundreds of thousands, illustration, income brackets, lay offs, plant closings, stock market crash, tens of thousands, top heavy, unemployment rate, white collar workers



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