The economy is in the worst shape it has been in since the Great Depression. With no end in sight, many are using the D word when talking about the future of the economy. However, no one knows for certain if the United States is headed in that direction.
The Great Depression was not predicted by economists. The stock crash of 1929 is generally hailed as the beginning of the Depression, although what very few people realize is that the economy rebounded a bit and then slid downward several times during that period. Even at the end of the 1930s, the unemployment rate was in the double digits. During the Great Depression, the unemployment rate was at 25 percent. Today, the unemployment rate is up to 15 percent in some areas of the country and is nationwide just below 10 percent.
The difference between what happened during the Depression and the current recession is the foreclosure element. During the time of the Depression, there was more of a class distinction than there is now. The middle class did not exist. People were either of the working class and on the poor side, or had a great deal of money. The vast majority of those in the country rented their homes. The foreclosure rate has never been as high as it is right now. And this rate is continuing to climb.
During the Depression, no one worried about credit. Credit did not become a concept until the late 1960s. Prior to that, there were no universal charge cards and anyone who wanted to buy something on time went to the store and signed up for an account. Personal references were often used to vouch for character.
Today, all credit appears in a credit report. These reports are used by creditors to determine credit worthiness of an individual. Those with bad credit can restore their credit by using a credit repair service. Credit reversal is possible due to changes in laws protecting consumers. Many people today are looking to credit repair as a way to regain their credit after foreclosures and bankruptcies.
No one knows whether this will be another Great Depression as of yet. There are many differences in government regulations and social services that did not exist in the 1930s. However, the current economic crisis has all of the makings of a financial catastrophe for the country and is also affecting the global economy as well.