Reality Check #1--The latest unemployment numbers. They’re no reason to celebrate, to be sure. But Great Depression? Hardly. At 7.2%, they’re not even close. During the 1930’s, fully 25% of Americans could not find work. It got so bad then that in 1933, over 100,000 Americans actually applied for visas to go to the Soviet Union to look for a job, any job, to avoid starvation. 

            Since the Depression ended there have been at least 8 years with worse unemployment rates than we have now. In the Carter years of the late 1970’s, (and even into the first two years of the Reagan administration), unemployment rates reached over 10%. Worse yet, during the Carter years unemployment checks didn’t go very far. Inflation had reached a paralyzing 13.5%. Our current levels are so low no one is noticing. 

Home prices and mortgage rates? Here’s Reality Check #2. Historically, until about 2000, your home was a place you lived in, not a market play. Home prices remained fairly static in real dollars. That all changed in 2000, thanks to the explosive growth of Fannie Mae and Freddie Mac. Their government meddling brought us the Wall Street crash, trillion dollar “TARP” bailouts, and the nationalizing of huge swaths of the American economy. 

But even with this “crisis,” home values are still up compared to prices of even less than a decade ago. So, change your perspective a bit. What the talking heads are calling the “Worst Housing Catastrophe Since The Great Depression” is instead just a long-needed readjustment of prices to less speculative, more sustainable, levels.  

Besides, all of those dreaded “short sales” going on now are blessings in disguise. They offer overextended debtors a way out of a situation that was doomed from the start. They offer new homebuyers a more affordable deal on a new home than they could have dreamed of even a year ago. They even give the mortgage banks a chance to reorient their risks, take their losses, and start the climb back to profitability.

While folks who bought homes in the last year or two may be a bit nervous for the next few years, (while their home values catch up to their mortgages), the news is actually exciting for people just entering the home market.   

Many young, first-time homebuyers couldn’t have hoped to afford a home of their own even a year ago.  Now, many are moving into one.  Millions of homebuyers in their ‘20’s are buying homes at affordable prices and with affordable mortgages. They couldn’t even imagine the world as it existed in the Carter years, with 16% mortgages and double-digit inflation.

Dark cloud, meet silver lining.

Those new homebuyers will need new cabinets, new paint, and new furniture. Multiply that by the millions of “short sales” and foreclosure auction purchases now underway, and you’ll begin to see the truth of the axiom that by the time we realize we’re in a recession, we’re probably on our way out of it. 

But what about the stock market, you say? Time for Reality Check #3. A tougher sell, sure, but follow me on this one. Did the market really “lose trillions of dollars of value” last year? Unless you sold at the low, you haven’t “lost” anything; you never had it in the first place! The skyrocketing highs reached by the market in 2007 were pure paper—cheap loans, high leveraging, and Madoffian Ponzi schemes. 

Over the long haul (which is the only stock market play that makes any sense), even at the current Dow trading range (around the 8000’s), anyone who has been in the market for a decade or so (particularly those who have taken advantage of their 401K’s and the employer match they provide) has done just fine.  If you don't believe me, check out any historical chart on the Dow Jones performance over the last 20-30 years.

There is good news even in the market plunge, for those with the patience and resolve to see it. Long-haul investors are dollar-cost-averaging their way back into the market and buying more shares for their dollars than they could have dreamed of, picking up good companies at bargain prices.  

So buck up out there, for crying out loud. This is the United States of America. Our best days are always ahead of us. We descend from ancestors who turned their backs on their feudal poverty and boarded ships to come to the New World. We didn’t huddle in our huts back then, and we won’t let a little setback slow us down now. The future’s waiting—let’s go meet it.

[1] http://www.youtube.com/watch?v=2NVjq2py7BA