What Happened to the 'Depression'?

The Wall Street Journal ^ | 09/01/09 | Allan Meltzer

[MissesBush]

Day after day, economists, politicians and journalists repeat the trope that the current recession is the worst since the Great Depression. Repetition may reinforce belief, but the comparison is greatly overstated and highly misleading. Anyone who knows even a bit about the Great Depression knows that this is false.

The facts we face today are very different than the grim reality Americans confronted between 1929 and 1932. True, this recession is not over. But it would have to get improbably worse before it came close to the 42-month duration of the Great Depression, or the 25% unemployment rate in 1932. Then, the only safety net was the soup line.

The current recession is also much less severe than the 1937-38 Depression. A more accurate comparison is to the 1973-75 recession. Today's recession is as deep and most likely won't be much longer than the one we experienced some three decades ago. By pointing this out, I do not intend to minimize the damage that the economic crisis has had on individuals and businesses. But as policy makers make decisions in order to alleviate the recession, they are not helped when economists overstate its severity.

The table nearby compares the current recession, the 1937-38 depression and some past severe postwar recessions. If the recession ends this summer—as many experts predict—the record will show that it was not very different from other postwar recessions, but very different from the 1937-38 and 1929-32 Depressions.

So why do many opinion makers insist on inaccurate and frightening analogies that overstate the severity of present conditions? I believe there are several reasons.

First, there is a strong political motivation to make this recession out to be worse than it actually is. The Obama administration wanted to make it appear as though it saved us from...disaster

[MissesBush]

The chart comparing the current recession to past recessions and the Great Depression can be accessed by clicking the WSJ link.

[agere_contra]

The Great Depression was immediately preceded by a ‘false’ stock market rally such as we have had in the last few months.

[pointsal]

Hey...42 months in the GREAT DEPRESSION.
In California, this wreck started in Sept. 2005. That’s when the market peaked and started the great slide back to REALITY.

[TheDailyChange]

False Sense of Security Issue?

[ClearCase_guy]

So, three years after the crash of 1929 unemployment was at 25%. Here we are, in early days, and the honest numbers show unemployment at 16%.

Nothing to see here. Move along.

[rolling_stone]

Real unemployment, U-6 is 16% and rising, does anyone see more hiring by anyone but Obama? Back to school sales are down!

[rolling_stone]

4 seconds...lol...I had more to type!

[woodbutcher1963]

What happened was a change in the resident of the White House.
The MSM changed its whole reporting strategy when Obama won.
It is just like the people on this site that now cannot say anything good about the economy because they want to see Obama fail.
I do not like Obama but I have seen signs over an economic recovery that others will not admit.

[FromLori]

It’s coming

http://market-ticker.denninger.net/archives/1395-The-Tsunami-Is-Curling-Over-CRE.html

http://www.econlib.org/library/Columns/y2009/Hummeltbills.html

http://www.cnbc.com/id/15840232?play=1&video=1173993659&play=1

http://www.economicpolicyjournal.com/2009/09/beware-september-and-october.html

http://wallstreetpit.com/9938-banks-not-looking-that-healthy-at-all

http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/

www/story/08-28-2009/0005084471&EDATE=

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/08/31/financial/f020608D08.DTL#ixzz0PmXorlDs

http://market-ticker.denninger.net/archives/1390-Impending-Crash.html

http://finance.yahoo.com/tech-ticker/article/312114/In-the-Tank-Forever:-U.S.-Consumers,-Retailers-in-a-”Death-Spiral,”-Davidowitz-Says

http://globaleconomicanalysis.blogspot.com/2009/08/as-of-friday-august-14-2009-fdic-is.html

http://market-ticker.denninger.net/archives/1389-The-Intentionally-Misleading-Mainstream-Media.html

http://online.wsj.com/article/SB125166830374670517.html

http://www.bloomberg.com/apps/news?pid=20601087&sid=aRrVloZqEO.w

http://market-ticker.denninger.net/archives/1392-Congress-Where-Are-The-Subpoenas.html

[RobRoy]

They didn’t have unemployment benefits in ‘32. We do now.

Wait’ll americans in droves meet the end of their unemployment benefits. Somewhere in that timeframe is when things will get yet more interesting.

[MissesBush]

Wood, despite my posting this piece I really don’t think it’s over yet. Will it get to the levels of the Depressions in the 30s? No. But I think there is more pain to come. Foreclosures are up, banks are still failing at a fast pace, and consumers just aren’t spending. Add to that coming tax hikes when the Bush tax cuts expire and whatever Obama and the Democrats ad into the mix and there’s just not a sustainable foundation for a solid recovery even with the few positive signs out there. At best, we’re looking at a jobless recovery with anemic growth.

[MissesBush]

Wood, despite my posting this piece I really don’t think it’s over yet. Will it get to the levels of the Depressions in the 30s? No. But I think there is more pain to come. Foreclosures are up again at record rates, banks are still failing at a fast pace, and consumers just aren’t spending. Add to that coming tax hikes when the Bush tax cuts expire and whatever Obama and the Democrats ad into the mix and there’s just not a sustainable foundation for a solid recovery even with the few positive signs out there. At best, we’re looking at a jobless recovery with anemic growth.

[ex-snook]

Maybe Wall Street thinks the financial recession is ending but the Main Street JOB recession lingers on. Depending on government stimulus money to goose up consumer purchasing power is running out of steam. Only JOBS can sustain continuing customer purchasing power.

[KarlInOhio]

One of the big problems starting the Depression was the Fed cutting money supply right after the 1929 crash. In this case Helicopter Ben has been dumping trillions of dollars of cash into the system, so whatever we have won't be a duplicate of 1929-1941. It will be bad in an entirely new and different way. I'm betting on some pretty bad inflation ahead.

[Pietro]

Great depression my butt.

Anyone living through the periods 1974-76, 1978-79 and 1981-82 knows that those years were far tougher than whats happening today.

[MissesBush]

As the article points out, there really wasn’t much in the way of stimulus for consumer in the “Stimulus” bill. Consumers have pulled way back and aren’t helping bring the economy back to life. Credit is tight and they’re not going to spend us out of recession as happened with the last 3 or 4 with recessions, certainly not with their paychecks.

[Question Liberal Authority]

I guess “this is the worst economy since Jimmy Carter” didn’t have the same ring.

[Turbo Pig]

I do not like Obama but I have seen signs over an economic recovery that others will not admit.

Would you care to list these signs out?

[mr_hammer]

IMO, just another “pump monkey” trying to prime the pump...well is dry boys. May as well face, till Americans start working and contributing to their portfolio's the market is going nowhere!

[LibLieSlayer]

Those of us that actually own and operate businesses know that we are in a depression and headed into deeper water.

LLS