In the roaring '20s, wild speculation with borrowed money in real estate and stocks (especially in new technologies like cars and radios) led to artificially inflated prices. The 2000s saw similar speculation on housing prices. But such speculation-fueled bubbles never last.
Talk about the chicken and the egg dilemma: frugality prevails when we're financially cooped, yet loss of consumer confidence with its concomitant lack of spending prevents the economy from growing. As in the 1930s, we may need to hatch some new ideas on how to nurture the finances of a civil society -- or we may end up fried.
At the height of the Depression in 1933, unemployment was at 25%. Unemployment in the 2000s maxed out at a national average of 10% (but much greater in some populations and locations). When we ask youth living in COSACOSA's constituent communities what they think the unemployment rate is currently, they routinely reply 50-75%. Times feel extra tough in our city's challenged neighborhoods, some of the poorest in the country. Unemployment in Philly is actually 10.4%, compared to the national average of 7.7% (as of December 2012).
Prior to the 1929 crash, stock investors went crazy for buying on margin, cashing in everything from their retirement funds to their vacation and funeral savings to purchase stocks for only 10% down. With demand high, prices spiraled ever upward until -- well, read first paragraph again. During the FDR years, regulations were placed on the stock market so that history would not repeat itself. So instead, in the 2000s, folks bought houses that they really couldn't afford on terms that were unsustainable, and then -- well, read the first paragraph again.
So much for S.C.U.M. through the decades; tomorrow we'll look at how the Great Depression and the Great Recession differ.