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It seems no one can decide what constitutes a depression or not. Some will argue we need unemploment above a certain percentage coupled with a sustained decline in GDP of a specific amount to count as a depression. Others think it should be a large, continuing drop of the DOW. Some seem to feel it's gotta at least be as bad as the Great Depression before we can count it as an "official" depression.
Bottom line, there is no hard and fast rule...so should there be? Or is an economic depression a much less tangible state of mind?
It's mostly a state of mind. That saying "You lose your job, and it's a recession. I lose my job and it's a depression" comes to mind.
One definition I read in The Economist magazine is a drop in GDP growth from peak to trough of 10% or more.
By that definition, the US did not have a Depression.
It doesn't really matter though. People react to things emotionally, not rationally.
People react to economic conditions 'emotionally' after it affects their own state of well-being.
There are many people who say they have to save and are cutting back on things who haven't lost a dime of family income over the last 2 years. They are acting emotionally on fear of what could happen.
i'm not an economist, but to me if the economy contracts by ten percent per annum over a number of years, then this constitutes a depression.
I'll accept that. What we had recently I'd be reluctant to call a major recession. In fact I'd be reluctant to call it a recession at all. It paled in comparison to 1978-1983
As you can see, at its worst, GDP only dropped 4%.
I guess some people will whine and snivel because they think they deserve to wear the Depression Badge proudly displayed on their ass since they don't have a chest.
By comparison, GDP dropped 50% during the Great Depression.
Can you imagine going from a GDP of $14 Trillion to a GDP of $7 Trillion in a matter of months?
There are many people who say they have to save and are cutting back on things who haven't lost a dime of family income over the last 2 years. They are acting emotionally on fear of what could happen.
The really wealthy (old family wealth) are generally quite frugal because they feel (are) secure, not because they are fearful. It's the nouveau-riche and the upper middle class who spend, to make themselves feel secure and "in the right class."
I'll accept that. What we had recently I'd be reluctant to call a major recession. In fact I'd be reluctant to call it a recession at all. It paled in comparison to 1978-1983
As you can see, at its worst, GDP only dropped 4%.
I guess some people will whine and snivel because they think they deserve to wear the Depression Badge proudly displayed on their ass since they don't have a chest.
By comparison, GDP dropped 50% during the Great Depression.
Can you imagine going from a GDP of $14 Trillion to a GDP of $7 Trillion in a matter of months?
....Government statisticians like Landefeld do not push any equivalency between an expanding G.D.P. and national progress. For them, G.D.P. is what it is and nothing more: a description of total national production that can be helpful when setting economic policy. The longtime tendency of politicians to use G.D.P. as a proxy for national well-being is not a practice the Bureau of Economic Analysis endorses or could necessarily control, even if it wanted to. That the Obama administration, for instance, has pointed to rebounding G.D.P. numbers rather than our unusually high unemployment numbers reflects a political calculation rather than a case of economists beating a drum for the glory of G.D.P.
....Government statisticians like Landefeld do not push any equivalency between an expanding G.D.P. and national progress. For them, G.D.P. is what it is and nothing more: a description of total national production that can be helpful when setting economic policy. The longtime tendency of politicians to use G.D.P. as a proxy for national well-being is not a practice the Bureau of Economic Analysis endorses or could necessarily control, even if it wanted to. That the Obama administration, for instance, has pointed to rebounding G.D.P. numbers rather than our unusually high unemployment numbers reflects a political calculation rather than a case of economists beating a drum for the glory of G.D.P.
I'm well aware of the problems of GDP as an economic indicator and have and pointed those problems out in posts from years past.
Still, it is viable measure and if you look at depressions in other countries, you will see the GDP had declined 25% to 50% (or more) during their depressions.
We do not have GDP data for the British Colonial Period, however we do know that during the depression from 1768 to 1779, trade between Britain and the Colonies dropped to a virtual standstill. Granted that period does include the War of Colonial Independence which began in 1776, yet trade was not affected by the conflict itself (in part because the rebels had no navy to blockade ports or take other actions to interfere with trade).
We can infer from the severe decline in trade between Britain and its colonies (and also its other colonies not in the Americas) that GDP, had it been measured, would have shown a drastic decline of 70% or more.
If you recall during the same period, the Luna Heide, the region between east Netherlands and the marches in Poland suffered severe drought which resulted in wide-spread famine killing millions in Scandinavia and the German principalities and stem duchies.
The drought was not as severe in the Colonies (that is it did not create near famine conditions like the period in the late 1600s), but it did result in reduced exports, and then farmers of the period were further harmed by Britain's lack of credit to purchase exports.
Britain's attempt to gain wealth where none existed through the Stamp Tax and Tea Tax directly led to the War of Colonial Independence and then when the Continental Congress defaulted on debts to colonial farmers who had already suffered through both a drought and depression, that led to rebellions later, like Shay's Rebellion and the Whiskey Rebellion.
At 60, I've experienced 4 recessions, and what I'm experiencing this time,
I will not add to that tally of 4. 4 recessions, first depression.
Before, roughly two years, and we snapped out of it, this time all I see is a barely discernible, dim light bulb inside the tunnel. But then, I'm living in a city with the highest unemployment rate in the country, for who am I to say?
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