DU economists, a question about a depression

[steve2470]

I've studied American history and its economic cycles, and in the nineteenth century and early twentieth century there were severe recessions, "panics" or depressions fairly regularly. AFAIK, the last "diagnosed" depression we had ended in 1942(?).

Is another true depression completely impossible, or is it a more real possibility than we wish to contemplate ? Thanks in advance.

[nadinbrzezinski]

1. Not aknlwedlged

but if you look at the numbers we had a mini depresion in the 1950s

Of course there were the recesions of the 1970s and some say 1980s

Part of the problem we are having is that indicators, and how we track them (unemployment anyone?) have been fudged to the point that they cannot be trusted

[steve2470]

2. I'll have to go back and look at those numbers.

Anyone else want to take a stab at this ?

[nadinbrzezinski]

4. Oh and I fogot

we ARE in a rececsion... just watch the sales numbers for this holiday seaon.

Trendy, expensive stores, are doing fine

Walmart, the other day, at five thirty in teh afternoon WAS empty... no wonder, they don't expect to go over 1% from previous years and thier stock has gone down

Oh and is a depresion possible? Not only is it possible, I'm expecting it

[BrotherBuzz]

7. Big ass recession in 1958...

but the rest of the fifties were going gangbusters. Some claim that recession killed the Edsel. :shrug:

[Strelnikov_]

3. Based On The Following Article, Contary To Being 'Obsolete', Depression

may be all we know fairly soon.

The Post-Abundance Era

http://www.atimes.com/atimes/Global_Economy/HL07Dj03.html

Xpost:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x250193

[Target_For_Exterm]

5. Some of the things that were put in place after 1929 to supposedly

avert another Great Depression are bank regulation and stops on stock selling on the exchanges.

This assumes the same scenario for a Depression, where shares rapidly deflate and banks go bust.

Anyone care to speculate on other scenarios for a Depression that might be plausible and that current regulations won't avert?

[WCGreen]

6. An oil shortage....

The collapse of a large bank....

The housing market collapsing in on it's self...

[Recursion]

9. Yeah but the stock market crash was just fluff on the GD

Back then very few people actually owned stock. A lot of companies actually came out pretty well from the crash because they could snap up their own stock at a bargain basement price. Bad money policy and trade policy on the part of the government, very naive planning on the part of corporations, and the failure to address the post-WWI European economic crisis caused the great depression in the US.

[AngryAmish]

8. Not impossible, but quite unlikely

Markets are so much more liquid today and any speculation (in the macro) tends to get punished very severely. Soros put the pound in the corner but even he could not keep it there for long.

[Omphaloskepsis]

10. We are close to the, "natural unemployment rate."

I wouldn't worry about a depression. Our standard of living might go to shit, but we will earn our ramen. Your boss will be eating your tender child. AKA Bobby.Veal

OOP child eating.. Nerd joke.

[roamer65]

11. Yes, entirely possible.

1981-82 was a fairly bad recession, especially in the Midwest. Where I grew up back then, unemployment was around 15%. I expect the next recession/depression will be a hyperinflationary one. I think we are fairly close to a point where even increasing interest rates will not stop the dollar's decline. The safeguards established in the 1930's are geared toward are stopping another deflationary depression. An inflationary depression is a completely different beast. Look at Germany in the 1920's when it was saddled by massive war reparations. Sound familiar to now?;)

[applegrove]

12. Because Keynsian economics taught that government spending

could undo a depression..it would seem almost impossible for another one to occur. For a thousand years "governments" went to war and helped themselves out of depressions. This war is likely why there wasn't a depression in 2001 - 2006. Any sort of government spending will do..including tax breaks or war spending or infrastructure spending or super public programs. The question is always what do you choose to do? Depression occur when growth is negative over about -2%. Less than that and it looks just like a recession which governments get out of by lowering interest rates. In a depression there is no inflation obviously. With the price of oil only going to rise in the future..it seems almost impossible that we will see a a whole market depression in the future (except if oil runs out and there is no technological alternative to replace it, which could happen since cheap oil is the basis of all world economies and has been for 75 years) - though with prices of civil goods falling now(made in China)it seemed like could happen - prices and wages falling. Recessions yes. But there were the ingredients of a depression in early 2001 and massive dumps of government money into the war and to rich people with tax breaks... got the economy going..all the while leaving the middle class out of the loop (as stockholders and real estate holders were the ones who benefitted). By leaving out the middle class and the poor in this partly "raging" economy...there was no worry of inflation and the stock market could go on and on without having a slowdown to fight inflation with higher interest rates (which is how inflation is stopped).

What will happen as AMerica goes into huge debt when Oil prices rise..I don't know.

Fact is that in the 1930s the governments didn't have the policy tools or knowledge to spend their way into a growing economy. They just didn't know any better. It seems asymetric government spending (part of the people benefit but not the middle class in this case) they can spend on war (that is the * choice) and fight inflation at the same time. So perhaps one part of the economy would see depression without the whole economy suffering from it. That may be where we are today. Where the middle class get the "left-overs" of government tax cuts and spending. Otherwise known as trickle down. I don't know. Perhaps there will be an world wide underclass who suffer depression while the financial markets roar on. But instead of the underclass being in the Southern hemisphere like in the 19th & 20th century..the underclass would be economy by economy or country by country.