More On What Constitutes A Real "Depression"
I read an interesting piece today in Calculated Risk. What was most interesting to me wasn't CR's stale and worn suggestion that we are far away from a Depression because Peak-to-Trough GDP hasn't fallen by at least 10%, but rather, some of the comments.
One commenter's definition in particular I found especially reasonable.
CR reader Rob_Dawg suggests this, instead:
Peak unemployment + duration in months +
peak decline in GDP [totaling] greater than 40 equals depression.
Using Rob_Dawg's definition, the current slump so far stacks up like this:
Peak Unemployment: 8.1%
Duration in Months: 15
Peak decline in GDP: 3.4% (estimated using -7% annualized rate of decline in Q1 2009)
Thus, by RD's reasonable definition, the recession still-in-progress achieves a total score of 26.5 out of a required 40.1 to qualify.
By our community poll's definition, we still have some way to go, also.
However, even though when one looks around and notes that things certainly don't look much like those grim black and white stills and movies of the Great Depression, several points are worth mentioning:
First, the Great Depression didn't start out as a Depression, either, let alone -The Great Depression-. Between 1929 and 1931, most were still expecting the economy and financial system would turn around "any time now." But once it was all said and done, and the economic and social historians had a chance to look at the whole picture, they didn't just start counting the Great Depression from when unemployment briefly topped 25%. No, they dated its start back to late 1929.. to the start of what was then still just the start of what was initially a seeming garden-variety panic.
Second, given the grand improvements in standards of living we have achieved in the last 100 years, a depression today probably would (or -does-) look a lot different than a depression of equal intensity hitting the US (or world) back in the 1930s.
Yes, we can indeed thank "capitalism" and the great American spirit of ingenuity for a lot of this blessing! And while we're at it, we can also thank "socialism" and the great American New Deal and Great Society for a lot of this blessing! Can you imagine going through this current downturn without people receiving unemployment insurance or food stamps? How about going through this without the FDIC? Hmmm? Can you also even just imagine going through this slump without a heater? Or, as it is indeed getting closer to summer, without an air conditioner? How about without your car? Assuming you still have a job, how about getting to work on your horse and buggy, instead of in your car? Or, if you've lost your job and don't have a car but usually take the city bus instead, how about looking for a job by jogging from one interview to another? In the rain? On an especially hot and muggy day? In a snow storm? How about a blizzard?
With a silver lining in mind, what it possibly comes down to, is that in the end, thanks in no small part to both modern-day capitalism and modern-day social engineering, an arguably far greater falloff in GDP may actually be required for a comparable level of human tragedy to occur now, than what was necessary for the exact kind of human tragedy unleashed during the 1930s... (See also: " Depression 2009: What might a modern-day depression even look like?")
Last, prior to the Great Depression, lots of slumps were called either "Depressions" or "Panics." The US dropped calling nasty downturns depressions however, and renamed them "recessions," instead, so as to not "panic" the masses with memories of The Great Depression. We are only now, in this time of darkness, and as a society, trying to grapple with what really constitutes a "depression," regardless of whether it "Great," or not-so-great.
Meanwhile, economists and historians are also struggling with what to call this thing. Ask almost any economist or historian, and unless they have an agenda to push, most will concede that this is no mere recession... no garden-variety slump. Which brings me to posting some related articles:
-Related-
Telegraph UK:World in grip of 'Great Recession', IMF warns
The world is now in the grip of the "great recesssion" and global
economic growth could dip below zero for the first time in sixty years,
said Dominique Strauss-Kahn, the head of the IMF.
Mr Strauss-Kahn, the managing director of the International Monetary Fund, made the comments at the opening of a conference in Tanzania on the impact of the world financial crisis on Africa on Tuesday.
He said: "The global financial crisis, that might now be called the great recession, provides a sobering backdrop to our conference. The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes,"
Domestic demand across the world was being hit by continued deleveraging by world financial institutions and a collapse in consumer and business confidence.
"When we release our next package of forecasts at the spring session, that is to say in April, everything leads us to believe that it will indeed reveal a negative global growth for the first time in 60 years," he said
It is the first time that the IMF chief had predicted an actual global contraction. Last month he said the IMF expected zero growth in 2009 and the month before that the fund released data including a 0.5pc global growth forecast.
He said last week he saw no chance of a global recovery before 2010.
Worst collapse in UK manufacturing in four decades
The “horrendous” scale of Britain’s industrial recession has been laid bare
by figures showing that manufacturing output is declining at the fastest rate since records began more than 40 years ago.
In figures labelled by analysts as “shocking” and “a horror show”, Britain’s industrial production dived at record speed, underlining how hard the global downturn has hit producers and exporters. The statistics are doubly surprising because many economists had expected the weakness of the pound over the past year to have boosted their fortunes...
New York Times: Taking a Depression Seriously
By David Brooks
The Democratic response to the economic crisis has its problems, but let’s face it, the current Republican response is totally misguided. The House minority leader, John Boehner, has called for a federal spending freeze for the rest of the year. In other words, after a decade of profligacy, the Republicans have decided to demand a rigid fiscal straitjacket at the one moment in the past 70 years when it is completely inappropriate...
One commenter's definition in particular I found especially reasonable.
CR reader Rob_Dawg suggests this, instead:
Peak unemployment + duration in months +
peak decline in GDP [totaling] greater than 40 equals depression.
Using Rob_Dawg's definition, the current slump so far stacks up like this:
Peak Unemployment: 8.1%
Duration in Months: 15
Peak decline in GDP: 3.4% (estimated using -7% annualized rate of decline in Q1 2009)
Thus, by RD's reasonable definition, the recession still-in-progress achieves a total score of 26.5 out of a required 40.1 to qualify.
By our community poll's definition, we still have some way to go, also.
However, even though when one looks around and notes that things certainly don't look much like those grim black and white stills and movies of the Great Depression, several points are worth mentioning:
First, the Great Depression didn't start out as a Depression, either, let alone -The Great Depression-. Between 1929 and 1931, most were still expecting the economy and financial system would turn around "any time now." But once it was all said and done, and the economic and social historians had a chance to look at the whole picture, they didn't just start counting the Great Depression from when unemployment briefly topped 25%. No, they dated its start back to late 1929.. to the start of what was then still just the start of what was initially a seeming garden-variety panic.
Second, given the grand improvements in standards of living we have achieved in the last 100 years, a depression today probably would (or -does-) look a lot different than a depression of equal intensity hitting the US (or world) back in the 1930s.
Yes, we can indeed thank "capitalism" and the great American spirit of ingenuity for a lot of this blessing! And while we're at it, we can also thank "socialism" and the great American New Deal and Great Society for a lot of this blessing! Can you imagine going through this current downturn without people receiving unemployment insurance or food stamps? How about going through this without the FDIC? Hmmm? Can you also even just imagine going through this slump without a heater? Or, as it is indeed getting closer to summer, without an air conditioner? How about without your car? Assuming you still have a job, how about getting to work on your horse and buggy, instead of in your car? Or, if you've lost your job and don't have a car but usually take the city bus instead, how about looking for a job by jogging from one interview to another? In the rain? On an especially hot and muggy day? In a snow storm? How about a blizzard?
With a silver lining in mind, what it possibly comes down to, is that in the end, thanks in no small part to both modern-day capitalism and modern-day social engineering, an arguably far greater falloff in GDP may actually be required for a comparable level of human tragedy to occur now, than what was necessary for the exact kind of human tragedy unleashed during the 1930s... (See also: " Depression 2009: What might a modern-day depression even look like?")
Last, prior to the Great Depression, lots of slumps were called either "Depressions" or "Panics." The US dropped calling nasty downturns depressions however, and renamed them "recessions," instead, so as to not "panic" the masses with memories of The Great Depression. We are only now, in this time of darkness, and as a society, trying to grapple with what really constitutes a "depression," regardless of whether it "Great," or not-so-great.
Meanwhile, economists and historians are also struggling with what to call this thing. Ask almost any economist or historian, and unless they have an agenda to push, most will concede that this is no mere recession... no garden-variety slump. Which brings me to posting some related articles:
-Related-
Telegraph UK:World in grip of 'Great Recession', IMF warns
The world is now in the grip of the "great recesssion" and global
economic growth could dip below zero for the first time in sixty years,
said Dominique Strauss-Kahn, the head of the IMF.
Mr Strauss-Kahn, the managing director of the International Monetary Fund, made the comments at the opening of a conference in Tanzania on the impact of the world financial crisis on Africa on Tuesday.
He said: "The global financial crisis, that might now be called the great recession, provides a sobering backdrop to our conference. The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes,"
Domestic demand across the world was being hit by continued deleveraging by world financial institutions and a collapse in consumer and business confidence.
"When we release our next package of forecasts at the spring session, that is to say in April, everything leads us to believe that it will indeed reveal a negative global growth for the first time in 60 years," he said
It is the first time that the IMF chief had predicted an actual global contraction. Last month he said the IMF expected zero growth in 2009 and the month before that the fund released data including a 0.5pc global growth forecast.
He said last week he saw no chance of a global recovery before 2010.
Worst collapse in UK manufacturing in four decades
The “horrendous” scale of Britain’s industrial recession has been laid bare
by figures showing that manufacturing output is declining at the fastest rate since records began more than 40 years ago.
In figures labelled by analysts as “shocking” and “a horror show”, Britain’s industrial production dived at record speed, underlining how hard the global downturn has hit producers and exporters. The statistics are doubly surprising because many economists had expected the weakness of the pound over the past year to have boosted their fortunes...
New York Times: Taking a Depression Seriously
By David Brooks
The Democratic response to the economic crisis has its problems, but let’s face it, the current Republican response is totally misguided. The House minority leader, John Boehner, has called for a federal spending freeze for the rest of the year. In other words, after a decade of profligacy, the Republicans have decided to demand a rigid fiscal straitjacket at the one moment in the past 70 years when it is completely inappropriate...