The Crappy Economy is Getting Crappier

No one want's to spend money, according to a new Gallup Poll. Back to school time is usually a boon for retailers, but parents seem to be tightening their belts, as this year's self-reported spending is even lower than in 2009.

The picture becomes clearer when you add in the fact that nearly two-thirds of Americans believe the economy still hasn't hit rock bottom. Many those who still have jobs are convinced that the economy will fall even further, and are probably saving money or paying off debts instead of buying their kids a new Sponge Bob backpack.

My advice? Don't listen to me. It'll only depress you.

Stock Market: Reality (Finally) Sets In

I've been saying the stock market is grossly overpriced for quite some time now, but the market stayed bullish after government bailouts, stimulus, and plain irrational exuberence, despite our economy being in the toilet. But finally, reality has set in, and the Great Correction has begun.

In one month, the Dow has lost 1,190 points, or 10.6% of its value. That is a boatload of money evaporating, and I doubt we have seen the worst of it.

So there's your sunny optimism for the day.

[graph from Marketwatch]

The Depression That Wasn't

In 1920-21, America's GNP plunged 24%, from $91.5 billion in 1920 to $69.6 billion in 1921, in one of the worst economic downturns in history. In response, President Warren G. Harding cut taxes on business, and held personal income tax rates steady at 8% for top earners.

Harding vetoed spending bills, including one that would give bonuses to veterans. He saved billions.

Harding also cut billions from the existing budget. The Federal budget went from $6.3 billion in 1920 to $5 billion in 1921 to $3.2 billion in 1922. Federal taxes also fell, from $6.6 billion to $5.5 billion to $4 billion, respectively. In this time, Harding paid off a significant portion of America's World War I debts.

By 1922, the GNP had rebounded to $74.1 billion and unemployment dropped to 6.7%. Unemployment continued to decline through the roaring twenties.

Without debt, by simply cutting taxes and slashing government spending, Warren G. Harding prevented a Great Depression and turned an ailing economy around in under 18 months.

Suck it Keynes.