Great Depression v. Great Recession, United States GDP
Posted on 12/07/2014 9:11:25 PM PST by Nachum
Submitted by Neil Howe - author of The Fourth Turning, originally posted at Forbes.com,
At the close of last week’s G20 Summit, U.K. Prime Minister David Cameron warned that we’re on the verge of another global recession, citing problems like looming deflation, falling prices, and rising protectionist sentiment. This list evokes a sense of déjà vu: not about the Great Recession, but the Great Depression. That was the last time we ever seriously worried about disinflation, along with every practically other aspect of economic performance raising alarm bells today: low interest rates, weak investment, slow productivity growth, and chronic labor force detachment.
To be sure, this isn’t an easy comparison to swallow. The Great Depression is the ultimate measuring rod of economic catastrophe to which every other downturn is compared. But as time goes by and forecasts of full recovery keep getting deferred like an ever-fading mirage, it’s one worth examining. How does the Great Depression of the 1930s compare with the Great Recession of the 2010s? Let’s look at the GDPs of the U.S., U.K., and continental Western Europe from 1929 on and from 2007 on, using the base year as an index.
Great Depression v. Great Recession, United States GDP
(Excerpt) Read more at zerohedge.com ...
You get the feeling, when will they pull the rug out from under us again. They being the manipulators and power brokers of the world economic system.
Yep. At some point, someone pulls the wrong block out of the Jenga tower of shell games and ponzi scams and all bets are off. The financial caste system goes into full survival mode and millions of lives and livelihoods are thrown under the bus. Not sure I want to be around for that one.
Not trying to be a doomsayer, just don’t have any confidence in the glorious successes of Wall Street no matter how ugly it is in the real world. Something ain’t right. It just smells funny. All the time.
Expect global war... and a 3rd and 4th term for Øbama.
Blame the Doofus on the Dime.
well from the charts i would say the the US government is better at manipulating the data and components used in GDP between 1929 and 2007 which would make the current chart look like we are getting better.
There’s some significant differences between now and the 1930s. The Great Depression became what it was because of a massive collapse in the American banking system. The Depression hit hardest in the US because of this.
In order to replay the 1930s we would need one third of American banks to fail, we would need one third of the US money supply to vanish, we would need all of the customers of the failed banks to lose all their money.
None of that is likely to happen because of important changes done in response to the disaster of the 1930s.
We now have FDIC so that customers aren’t ruined if their bank fails. Milton Friedman called that the single most important legislation to come out of the ‘30s.
Today the Fed won’t just sit on the sidelines and let nature take its course which is what they were doing in the 1930s. Today they buy up troubled assets and otherwise provide liquidity to prevent a vicious spiral from getting a head of steam.
That’s what all the TARP and QE junk has been about. Granted they appear to have been done without much oversight, and the very people who helped cause the calamity enriched themselves by stealing from the taxpayers.
FDIC doesn’t have even a quarter of the funds necessary to cover the losses if 1/3 banks go under. It would still be a buve hit.
Today the Fed won’t just sit on the sidelines and let nature take its course which is what they were doing in the 1930s. Today they buy up troubled assets and otherwise provide liquidity to prevent a vicious spiral from getting a head of steam.
That’s what all the TARP and QE junk has been about. Granted they appear to have been done without much oversight, and the very people who helped cause the calamity enriched themselves by stealing from the taxpayers.
I don’t find those two points above to be comforting at all.
I think the big difference between now and 1929 is the federal government was not using the Federal Reserve as a printing press (quantitative easing). For sure, the government WAS spending money it didn’t have - roads, bridges, public works - tangible infrastructure and jobs ala the likes of CCC and WPA. Just not injecting it into the banks and brokers’ pockets like QE.
To me, there is a big disconnect between jobs, production, prices, nearly every indicator that affects me personally (not the government’s concoction of what prices are doing). Anything bad happens, the market may hiccup for a minute or two, or just keep humming - odd, really.
The stock market seems oblivious to nearly any commonly felt indicator. They have seemed perfectly happy to have that 6 years of nearly $1trillion/year QE for mortgage backed securities and the Fed’s purchase of T-Bills (which ‘legitimizes’ the increasing debt it is incurring for us.)
I think the whole thing stinks myself. And, I don’t think it will come crashing down until the QE is stopped (for one reason or another). At that point, all the worthless debt that’s been shuffled off to bad deals, derivatives, payments for debt will come home to roost.
bfl
Fourth Turning bump for later....
Many Americans are still on their asses from the last time it was pulled (2007-08); they’ve never gotten back up.
We are very much in the 1930s in terms of wealth distribution; the lower class has been stirred into a frenzy against the upper class, and the middle class is stuck between them. Racial politics are just thrown in the mix to keep the conflicct boiling.
This is 1935 Europe.
You have to look at the stock market as the performance of companies, not people. The best way a company can drive up its stock price is laying off American workers.
Chartists assume their charts are always predictably meaningful
But, so are sheep entrails when properly arrayed and interpreted
Hoover is on the dime?
Hoover got the ball rolling. FDR turned it into a decade+ disaster.
I recommend “The Politically Incorrect Guide to the Great Depression and the New Deal”.
Yes and the parallels are striking. Both find an idiot in the White House with no idea how an economy works. Both idiots think government creates prosperity. Both think bigger gov’t is the solution. Both hate private enterprise. And both made their respective financial downturns worse.
“FDIC doesn’t have even a quarter of the funds necessary to cover the losses if 1/3 banks go under. It would still be a buve hit.”
The Fed has the ability to keep the FDIC liquid if there was a collapse big enough to wipe out their funds. But it shouldn’t get to that point, the Fed will be acting as the lender of last resort to keep banks under pressure from failing. This is what they neglected to do from 1930-33 and I think that is the one lesson burned into their institutional memory.
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