Life if the Dow Jones declined to 4000

Worldwide Economic Depression Hypothetical

In our family, life has changed dramatically. I should be finishing up my freshman year of college right about now, but in the year since the Dow Jones plummeted below 4000 points, many American colleges had to close because their endowment funds were entirely wiped out. The few that remained open at all now have a very high acceptance rate of nearly one-hundred percent, simply because there are so few students whose families can afford approximately $1,000,000 annual tuition.

Many community banks have failed, wiping out people's life savings because they were not insured by the Federal Deposit Insurance Corporation (FDIC). Larger banks have also failed wiping even many of the wealthiest people's life savings if they had them all in any one institution, since the FDIC guaranteed only their first $250,000 on deposit. Therefore, of the (already) few people who were wealthy enough to have a net worth in the millions, only those who spread their savings into many smaller accounts at FDIC-insured banking institutions still have any substantial financial assets. Generally, even they stopped spending any money except for absolute necessities, since inflation is so high that one could easily spend millions on nothing besides ordinary consumer and household goods.

Inflation and corporate insolvency has virtually eliminated any type of financial credit and a barter system has evolved whereby people trade goods and services instead of paying for them in cash or cash substitutes. Businesses folded on a wide scale after commercial credit and lending ceased because they could not cover their normal operations costs or pay for raw materials and other ordinary business necessities. My father's advertising firm closed about six months ago because most of their client firms ceased buying advertising and eventually closed business operations altogether. When the weather is decent, he rides his bike over to do small repair chores for people with gardens in return for some fresh produce; he also works as a part-time deputized sheriff trying to keep our neighborhood safe.

Since gasoline became unaffordable (at more than $100 per gallon), police departments stopped using patrol cars and most of them had to lay off the majority of their officers. Crime is rampant, at least compared to before, and few people leave their homes unattended, always making sure at least one adult remains home (armed and awake) to guard against robbers and looters. Gun and ammunition sales spiked tremendously last year because people realized that they would no longer be able to relay on police services to protect them from crime, especially robbery and burglary of their homes. Policing shortages mean that completed crimes do not get investigated at all, and most patrol work is conducted by bicycle and horseback, with motorized vehicles kept in reserve for serious public safety emergencies and ongoing major crimes. Likewise, fire departments are now composed mainly of volunteers as well.

My mother still works as a schoolteacher but her school has also changed dramatically. Classes are held only Mondays, Wednesdays, and Fridays, and for only four hours per day. There are no organized extracurricular activities because the school could not afford to keep on any employees other than a few teachers and also because of the cost (and difficulties) involved in obtaining liability insurance. Teachers and students are now responsible for keeping the grounds clean and parents had to sign liability waivers as a condition of continued enrolment.

My older sister is an obstetrician, but she was laid off after people stopped going to hospitals for anything except life-threatening emergencies and acute injuries. She now provides check-ups and some medical services through house calls, either without compensation or in return for home-grown food or promises to return the favor or pay her "someday." She also asks her patients to sign liability waivers because she no longer carries any malpractice or liability insurance of any kind either.

The economic collapse of the United States also precipitated a worldwide depression. Initially, the Chinese and Japanese governments held off on demanding repayment of their outstanding U.S. debts, but as their own economies began to fail, they began seizing American assets to try to stabilize their economic situation. This only exacerbated the already dire conditions in the U.S. By the end of last year, many foreign economic markets had also failed because they were directly (and indirectly) almost entirely dependent on U.S. consumers to generate demand for their products and services.