The Second Great Depression Era is Close

The Second Great Depression Era is Close
Image made by Dr. Seuss

I have been following the news since I was a kid. Recently, these troubling thoughts emerged: Are we living through the second Great Depression? Is this more than a recession?

Economic turmoil, wars, and geopolitical shifts have left many people feeling uncertain and anxious. But is anxiety a justified response? Or are we witnessing the collapse of an economic system? The end of capitalism?

We all occasionally experience economic instability and geopolitical tensions. The economy has ups and downs, just like our lives. A healthy balance is needed to appreciate the good times.

Problems start when we are down for too long, and things escalate if getting up is harder than it used to be.

I wonder if we have gotten up since the financial crisis in 2008.

I was wondering for so long that I started to draw a comparison between the Great Depression and our current era. Let’s see if you see the same, particularly in terms of economic and social instability.

First, let’s look at the Bear Market.

Many economists agree that the Great Depression had multiple causes. The combination of a stock market crash, bank failures, overproduction and underconsumption, decline in international trade, agricultural collapse, and monetary policy failures led to severe economic contraction, high unemployment rates, poverty, and economic turmoil.

Does this sound like something that we get to face in 2025?

Let’s see.

The Bear Market

“The longest bear market was in 1930 and lasted for 783 days.”

To an investor, a bear market can be as terrifying as a grizzly. Why? A bear market can reveal the vulnerabilities in your investment portfolio and exacerbate them. Unlike a bull market, which indicates a strengthening economy, a bear market is a sustained decline in the stock market and may indicate an upcoming recession.

Typically, a bear market is defined as a prolonged period in which investment prices plummet at least 20% or more from their most recent high, usually for particular stock indices such as the Dow Jones Industrial Averagethe S&P 500, or the tech-oriented Nasdaq. But the term can also be applied to any other asset that slumps for an appreciable amount of time.

When the Bear Market hit in 2022, I was paying attention to two things: one, how this change affects society, and second, how long it will stay. 

The bear market that began in 2022 lingered, with the Russo- Ukrainian war dragging on, conflicts in Gaza escalating, and inflation rising.

These events left their mark on the global economy and people’s daily lives. Techbros tricked many investors into thinking that AI-powered apps are the next promising invention, and the election wave reached the EU and the USA.

All this within just two years.

Now, it’s obvious that the changes hit hard on society, and this bear indeed a grizzly for all of us, not just for the investors.

It seems like we’re living in the second-longest bear market in history. This implies we might be heading to or already knee-deep in the second depression era.

Timeline

Let me show the connection between the great depression era and our time.

“The unequal distribution of wealth throughout the 1920s caused the Great Depression.”

In the 1920s, wealth inequality in the US reached extreme levels, with the top 1% holding a significant portion of the wealth. When the stock market crashed, consumer demand plummeted, factories slowed production, and millions lost their jobs. Today, we are seeing similar patterns of rising inequality and an economy weighed down by massive debt from the COVID-19 pandemic and geopolitical conflicts.

Speaking of the stock market…

The Ghost of the CryptoBro

In the golden era, in the 20s, many ordinary people played the stock market for the first time in history. That might remind you of how many people were interested in the crypto trade around 2017 until the Russo-Ukranian war. People put their life savings into risky trades, hoping to get rich easily. Eventually, they lost all their money and all their hopes, and many of them committed suicide, leaving nothing but debt behind.

Next Step: Freezing in International Trade

A well-known one in the Great Depression era. Remember when gas and oil prices started to increase because of the sanctions against Russia? Trump is also threatening Mexico, Canada, the EU, and China with tariffs.

Living costs are barely affordable, even for those who work. People buy gadgets, vacations, or essentials on credit cards, which causes debt and financial insecurity. The fact is that our current consumer confidence is unstable.

I think average people feel poorer is enough to determine that we are still in the bear market era.

What is consumer confidence? We are trying to spend less than we save, but it’s getting harder and harder. A month-to-month trend in consumer confidence reflects consumers’ outlook on their ability to find and retain good jobs according to their perception of the current state of the economy and their financial situation.

The tariffs in the American drama are another conversational starter. Let’s talk about politics a bit.

Turn Right

The political instability that followed the Great Depression provided fertile ground for far-right movements to thrive; as desperate people sought out radical solutions.

Today, we’re seeing a rise in populist and nationalist movements in many countries, fueled by frustration with economic inequality and a sense of disillusionment with traditional political systems.

Similar to the timeline when Hitler became popular. Remember, the unemployment rate skyrocketed in Germany in the 20s at 21%. 

Jump a hundred years ahead and take a look at the job market. People are desperately looking for jobs. Severe unemployment and acute deflation are close. Corporate greed will cause declines in consumer demand that will escalate to financial panics, and if we get more misguided government policies, we will end up in economic output.

Joblessness makes people question their faith in the future. Wealth gap inequality is on the corner again, just as it was right there in 1928–1929 and for a short time in 2007–2008.

The great depression caused political tensions in Europe that preceded WWII.

Fight for What?

When everyone has a job, a house, and a life worth living, no one wants to go to war. There is no war without soldiers. But when you have nothing to lose anymore and nothing to gain, the masses have no other choice but to be up for the dirty job. So, the unemployed and desperate people got hyped up by the right propaganda and became soldiers.

“The mobilization of manpower following the outbreak of war in 1939 ended unemployment.”

The Great Depression, of course, had created the perfect environment — political instability and an economically devastated and vulnerable populace — for the Nazi seizure of power and fascist empire-building. Consequently, it was the spread of totalitarianism and not economic hardship that occupied the minds of Europeans in the 1930s.

But before we march to the next unnecessary war, let’s try to solve this problem.

Modern Problems Require Modern Solutions

My joker card is called UBI (universal basic income). UBI could solve the problem, or at least ease our pain for a while, and probably increase consumer confidence until economists come up with a better long-term solution. If they ever…

What is UBI? Universal basic income is a social welfare proposal in which all citizens of a given population regularly receive a minimum income in the form of an unconditional transfer payment. In contrast, a guaranteed minimum income is paid only to those who do not already receive an income that is enough to live on. A UBI would be received independently of any other income if the level is sufficient to meet a person’s basic needs.

Universal basic income has a long history. Julius Caesar started it when he gave each Roman citizen money, and after he died, he left some money for everyone. Fairness, equality, and rights were always in the air, and ideas made slight changes throughout history.

If you want to know more, I can recommend reading Utopia by Thomas More or about Johannes Ludovicus Vives, Thomas Paine, the American Revolution, Henry George, B. Russell, M. Friedman, Lady Rhys-Williams, and the negative income tax model.

History time: Many voluntary unemployment compensation schemes were operating in the 1920s and 1930s in the USA. They were successful for a time, but eventually, even the larger ones could not continue to pay benefits as the Great Depression deepened.

Congressmen were laminating and researching European acts on the high unemployment rates until the pressure was so high they had to act.

In 1935, the Social Security Act was signed, and in 1938, benefit payments began in most of the states; 20 million workers were covered by the program nationally.

In my humble opinion, the four-day workweek and freeing public transportation would also be beneficial for fighting this second great depression.

That’s all for now. My sincere apologies for not going into deep into topics for now. I wrote this piece at the beginning of 2024 and put it aside, thinking I just overreacting.

Seeing what is happening in the news, I thought I might share it with anyone interested and not just with my friends.

Thank you for reading me!

Please leave feedback; I’ll appreciate it.