The current economic crisis rivals the one of the 1930s. Despite shameless propaganda by government and its cronies in the media, people understand that the situation is getting worse. Consumer confidence continues to decline as does confidence in the future.
We are headed for an event that history will record as worse than the Great Depression. It is unavoidable.
The Level of Debt
The principal reason for the dire prediction is the level of debt outstanding. Current debt levels are simply not sustainable. Assets and cash flows cannot support or service this debt.
No economic recovery can occur without massive debt reduction. As shown below, current debt is much higher than the 1930s:
As a percentage of GDP, debt is at an all-time high. Immediately prior to the Great Depression US debt was about 200% of GDP. It rose briefly to 300% as a result of massive government interventions to combat the Depression.
At the beginning of the current downturn, debt was about 370% of GDP. It is about 400% currently.
Eyeballing the chart from 1870 forward, debt levels are generally in the range of 150% of GDP. That appears to be the norm for the last 140 years. Only in the 1920s and recently did debt exceed 180% of GDP. Even funding World Wars I and II did not drive debt above 180%.