Posted on 03/04/2009 6:20:36 AM PST by Zakeet
International evidence suggests there is a 20% chance our stock-market crash will lead to much worse.
Central questions these days are how severe will the U.S. economic downturn be and how long will it last?
The most serious concern is that the downturn will become something worse than the largest recession of the post-World War II period -- 1982, when real per capita GDP fell by 3% and the unemployment rate peaked at nearly 11%. Could we even experience a depression (defined as a decline in per-person GDP or consumption by 10% or more)?
The U.S. macroeconomy has been so tame for so long that it's impossible to get an accurate reading about depression odds just from the U.S. data. My approach uses long-term data for many countries and takes into account the historical linkages between depressions and stock-market crashes. (The research is described in "Stock-Market Crashes and Depressions," a working paper Jose Ursua and I wrote for the National Bureau of Economic Research last month.)
The bottom line is that there is ample reason to worry about slipping into a depression. There is a roughly one-in-five chance that U.S. GDP and consumption will fall by 10% or more, something not seen since the early 1930s.
[Snip]
The 59 nonwar depressions in our sample have an average duration of nearly four years, which, if we have one here, means that it is likely recovery would not be substantial until 2012.
(Excerpt) Read more at online.wsj.com ...
From the article:
Given our situation, it is right that radical government policies should be considered if they promise to lower the probability and likely size of a depression. However, many governmental actions -- including several pursued by Franklin Roosevelt during the Great Depression -- can make things worse.
I wish I could be confident that the array of U.S. policies already in place and those likely forthcoming will be helpful. But I think it more likely that the economy will eventually recover despite these policies, rather than because of them.
Mr. Barro is a professor of economics at Harvard and a fellow at Stanford University's Hoover Institution.
Nice picture
Nice picture
What Are the Odds of a Depression? 99 out of 100
~~Harvard Economic Society, October 19, 1929
"Business will turn for the better this month or next, recovering vigorously in the third quarter and end the year substantially above normal."
~~Harvard Economic Society, May 17, 1930
What Are the Odds of a Depression?
100% for those that are now impacted and the list is growing daily it seems.
Cap and Trade . 90% of jobs lost by firms with 500 employees. People with money hiding it. Pretty high..... Obama Cultist continue to lie.
What are the odds that the media and the Democrats will blame the Republicans and Bush? 100 out of 100.
Ironic. Obama didn't create this situation. It's been coming for a long time. But he is making matters worse.
It’s silly to blame Bush or Obama. This is systemic, and both parties have supported the policies that brought this to us. Namely, easy credit, easy money.
Given that it took our Leaders almost a year to acknowledge that we were in a severe Recession, I might argue that, in many important respects, we are already in a Depression. Certainly in the hardest hit Areas and Sectors, this case can already be made.
And look at Europe! Or Japan! When the Markets are cut to less than half their Peak in less than a tear there is certainly something more severe than a mere Recession in play. (BTW the Nikkie had an historic high at about 39,000 and closed yesterday at 7,290)
I want off of this ride.
The more the government intervenes in a recession the longer and deeper it becomes. This is why the Great Depression lasted 11 years only to end because of the massive need for war production. There was even a recession within the depression in ‘37 and 38.
How FDR used the government to intervene was only a drop in the bucket compared to what Obama is doing. The question is not, “Could this lead to another great Depression” the question is “Who will stop this madness’!?
The cover of his budget is titled “The Era of Responsiblity”. Everything from this Administration is a deliberate attempt to deceive.
Obama’s goal is not economic recovery. His goal is a centrally planned government economy, Socialism which is a step away from Communism.
He gets asked a lot of questions. The one question President Obama needs to be asked is this, “Are you able to demonstrate a time in history when how you are using government to intervene has ever improved economic conditions?”
“...the odds...?” Well, I’m going to hold out for using dirt in place of paper money. ;-)
But aren't those two little daughters Malia and Sasha (namesakes for fallen leaders of the Bolshevik Russian revolution) cute? And how nice for the lovely, silken-armed Michelle who has stopped hating America now that it's her country.
I believe we are at the beginning of a depression, the “threshold” so to speak....we are walking right into it. I hate to sound like a pessimist, in reality I am more of a realist, but it will get worse when Americans wake up. I believe a GOOD number of people are in denial and that scares the CRAP out of me!
Also, I believe the unemployment numbers are higher than stated because after a year of not finding a job you are no longer considered unemployed....thank you Clinton!
However, there is a twist I want to add. Could the 525 billion that was lost (in 2 hours) in the market during 2007 re-appear when things seem hopeless? Then as stocks slowly rise, the government makes up any numbers they want and they’ll look like saviors and the general public will once again be blinded? It could happen for the nutjobs to have “absolute” power and rid of conservatism forever? Just throwing that out there.
To make things even funnier... the day I got certified to be a substitute teacher is the same day the Superintendant of the schools asked teachers to really cut back on using subs, due to financial woes.
My mom found a letter her grandmother wrote to her father during the 1930's depression. Very loving, very encouraging... was pretty cool.
you mean that the school could have cut back on substitute teachers all along and just did not? hmmmmmmm?
Guns, ammo, food, etc. is the order of the day.
>> Could we even experience a depression (defined as a decline in per-person GDP or consumption by 10% or more)?
The way it’s defined here, of course we could.
Note that there is no accepted standard definition of “depression”.
By tweaking the definition of depression, I could come up with a metric the probability of which was anywhere from 0% to 100%. What number would you like?
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