What Factors Will Lead to an Economic Depression? Question: What are some of the factors that will lead to the economic depression? Answer: There will be a number of factors and as I speak of them, they will not necessarily be in order of importance. The economic situation of the world, particularly the United States will have difficulty in making ends meet because of our inability to compete in the world market. This will increase our world trade deficit and we will have to devalue our money somewhere along the way. That, of course, means that the world’s faith in the security value of the dollar will have the bottom drop out. There will also be natural disasters that will economically cripple some states and will cause people to hoard their money for security rather than spend it. This will produce quite a loss of sales in the hard-goods industries with subsequent layoffs for the people who are employed in those industries. Our part of the world will also experience famines in the near future and this will also lead to a depression. All of these things blended together will produce a sense of panic, a lack of faith in currencies and will produce a general drying up of spending. When people panic, they want to save; and when they save, they depress the cash flow. Spending is what makes our particular economy function. (12-1972) Is the Energy Crisis a First Step Toward Economic Depression? Question: Is this energy crisis the first step toward the depression? Answer: No. We had the first step some time ago. By the time we catch up by increasing production facilities there will be other economic difficulties that will come upon us that will keep us from gaining the kind of momentum that we need to recover. [1] Really, a major cause for some of our problems is our overpopulation. The population has grown at such a rate in comparison to our expansion of production facilities that we are under producing just about everything. [2] Our nation’s tax policies for quite some time were such that people who had businesses were not particularly encouraged to risk more capital expansion in order to produce more. They knew that in any event they were going to make as many products as they could possibly sell, and there was no encouragement from the government for them to expand to meet future population growth. [3] We are not really in the position to produce all of the petroleum products that we need even if we were able to get all of the crude petroleum that we wanted. We just do not have sufficient oil distillation plants and purification processes in order to produce all that we need. We have to buy a lot of finished petroleum products from the outside. It would take about three years, starting from now, with all the engineering design required and with the shortages of basic things like steel before manufacturers could actually step up refinery production. We find this in the plastics business. [4] Not only does the nation have a shortage of petroleum, but also a shortage of facilities for making more plastics. All of the plastics factories in existence today are at a zero growth position. Everybody thought that on the basis of past growth of plastic products there would be about a 20% expansion in the plastics industry as a whole this year. But there is not enough plastic around to even hold to the production levels of last year. [5] Many companies that produced fuel and steel products closed down because they were not making very good money at it. Foreign chemicals and steel were cheaper. [6] But now foreign countries have developed a demand upon their own countries’ facilities so that they are no longer exporting. It is almost impossible for us to purchase some foreign raw materials. They are selling us limited goods, not the raw materials by which we could compete with them. (02-1974) What Is the First Step to an Economic Depression? Question: What do you consider the first step that led the United States toward a depression? Answer: It is always a combination of a lot of things. The first step has already happened: [1] It was the overpricing of our labor as far as the world market is concerned, and everything started going down from that point. [2] We still are not producing the things that people in Europe want to buy, except for food and forest products. So long as our farmers can sell to foreign markets as much as they want to buy (and they will pay pretty high for some of the stuff because they desperately want it), our food prices will continue to go up because foreign consumers are going to be bidding higher for food than we have been; and the only way our local stores are going to get food is to bid higher. So things like flour will probably double in price. Lumber doubled in price because the Japanese were buying every available piece of lumber. (02-1974)
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