26 THE BiG DROP
have failed year after year and their confusion grows. Perhaps
even you, who have seen scores of normal business and credit
cycles come and go for decades, are confused.
If this “cycle” seems strange to you there’s a good reason.
The current economic slump is not cyclical; it’s structural. This
is a new depression that will last indefinitely until structural
changes are made to the economy. Examples of structural
changes are reduction or elimination of capital gains taxes, cor-
porate income taxes and the most onerous forms of regulation.
Building the Keystone Pipeline, reforming entitlement
spending and repealing Obamacare are other examples. These
are other structural policies have nothing to do with money
printing by the Fed. This is why money printing has not fixed
the economy. Since structural changes are not on the horizon,
expect the depression to continue.
What’s the first thing that comes to your mind when you think
of a depression? If you’re like most investors I’ve spoken to, you
might recall grainy, black-and-white photos from the 1930s of un-
employed workers in soup lines. Or declining prices. Yet if you
look around today, you’ll see no soup lines, read that unemploy-
ment is only 6.2% and observe that prices are generally stable.
How can there be a depression? Well, let’s take each one by one.
The soup lines are here. They’re in your local supermarket.
Government issues food stamps in debit card form to those in
need, who just pay at the checkout line.
Despite popular beliefs, unemployment is at 1930s levels
too. If the Bureau of Labor Statistics measured the rate us-
ing the Depression-era method, it would be much higher than
6.2%. Also, millions today are claiming disability benefits
when unemployment benefits run out — that’s just another
form of unemployment when the disabilities are not real or
not serious, as is often the case.
What about prices? Here the story is different from the
1930s. Prices declined sharply from 1929–1933, about 25%,