What is “Normal”?

Cassandra of Cassandra Does Tokyo has an excellent post about “what’s normal in the economy”?  I’ve also observed the same phenomenon:  lots of people (IMHO, the majority right now) still think this downturn is just a temporary cyclical event.  In a few months they think things will turn around (“they always do” they keep saying!) and we’ll be back to life in 2005 or 2004.  CEO salaries will continue to be at sky-high multiples of what real workers earn.  Wall St will go back to huge bonuses (Ok, maybe they haven’t quit yet). House prices will return to what they were and resume the climb.

Personally, I don’t think so.  I think this is a Big One. By big one, I mean one of those periods/crises where the entire fundamental structure of the economy gets massively re-adjusted.  The 1930’s were a Big One. The 1970’s with the end of gold-backed US$, rise of petro-dollar system, and beginning of banking deregulation was a Big One.  This One is probably bigger than the seventies though.

Not only are not in Kansas anymore, Toto, we’re not ever going back.

Unemployment Map of U.S.

Here’s a link to a state-by-state unemployment map of the U.S.  Krugman observes that there’s a “slump belt” running from the Great Lakes down through Georgia & South Carolina.  This is also the heavy auto manufacturing region.  He also observes that the highest unemployment states aren’t necessarily the same states that had the highest run-ups in housing prices and sub-prime mortgages.