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Old 11-22-2010, 10:46 AM
 
Location: Sinking in the Great Salt Lake
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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?

Last edited by Chango; 11-22-2010 at 11:05 AM..
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Old 11-22-2010, 11:35 AM
 
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Interesting topic, thanks. Surely hard to define, I look forward to hearing others' thoughts on it.
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Old 11-22-2010, 03:30 PM
 
Location: Sinking in the Great Salt Lake
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It must be a slow posting day. Here is what I think anyway...

We are in a very interesting situation. There seems to be two economies; the la la land of Wall St and the real world.

Wall Street isn't doing so bad... the government subsidizes their gambling losses and the numbers are fairly good. GDP is up slightly, "official" unemployment isn't too terribly bad from a historical perspective and investors are making money.

But back in the real world it is a totally different story. Real unemployment is South of 20%, bankruptcies and forclosures are at record highs, personal wealth is WAY down. Small businesses are folding right and left.

It's a "peripheral depression" where the only good place to be is in the center of the spinning merry-go-round of life, and those on the edges are being shoved off the ride all together, dizzy and nauseous. The common man just isn't living in the same world as the elite anymore, just like back in the good old days.
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Old 11-22-2010, 03:38 PM
 
Location: Near a river
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Quote:
Originally Posted by Chango View Post
It must be a slow posting day. Here is what I think anyway...

We are in a very interesting situation. There seems to be two economies; the la la land of Wall St and the real world.

Wall Street isn't doing so bad... the government subsidizes their gambling losses and the numbers are fairly good. GDP is up slightly, "official" unemployment isn't too terribly bad from a historical perspective and investors are making money.

But back in the real world it is a totally different story. Real unemployment is South of 20%, bankruptcies and forclosures are at record highs, personal wealth is WAY down. Small businesses are folding right and left.

It's a "peripheral depression" where the only good place to be is in the center of the spinning merry-go-round of life, and those on the edges are being shoved off the ride all together, dizzy and nauseous. The common man just isn't living in the same world as the elite anymore, just like back in the good old days.
Boy are you going to get flak for this. And, remember, we can't mention the 'good old days' when the middle class was strong and at the center of our economy. You will be "statistically" challenged, I promise!
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Old 11-22-2010, 03:46 PM
 
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I'm sure a lot of personal wealth has been wiped out, and if I had to guess I'd say the majority is from the decline in home values. I think in a lot of areas those 40% home price drops aren't coming back any time soon, it will be at best a slow steady increase and at worst sideways for awhile.

On the small businesses folding side, that has actually been improving steadily for some time now.

Equifax Study Shows Drop in Small Business Bankruptcies for Fifth Consecutive Quarter

October 26, 2010) – Small business bankruptcy filings declined more than 11 percent in the third quarter of this year compared to a year ago and have decreased nearly 19 percent since their peak in Q2 2009, Equifax Inc. (NYSE: EFX) announced. The decrease is the fifth consecutive quarter in which commercial bankruptcies have declined based on data from the company’s quarterly research on small business activity.

Analysis from the Equifax study shows that the number of small business bankruptcy filings peaked at 37,299 during Q2 2009, compared to 30,392 during Q3 2010. There were 34,257 bankruptcies in Q3 2009.

“For more than a year, we have seen a decline in the number of small business bankruptcies but this is the biggest percentage decrease during that period,” said Dr. Reza Barazesh, senior vice president, Equifax Commercial Information Solutions. ”Small businesses are still having a tough time. But the numbers are beginning to indicate that some of the stresses may be abating.”

Last edited by slackjaw; 11-22-2010 at 04:03 PM..
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Old 11-22-2010, 03:52 PM
 
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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 don't think there is any firm answer, it's just rule of thumb and not precise.
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Old 11-22-2010, 04:05 PM
 
Location: Near a river
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Originally Posted by samston View Post
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 don't think there is any firm answer, it's just rule of thumb and not precise.
Definitions of the past often do not always work as definitions in the present. Trying to use the economic collapse model of the Great Depression and worse, trying to apply statistics to the situation yields nothing but polarized opinions. With the Great Depression it was relatively easy to compute the actual numbers of unemployed. Jobs were generally full time (and generally men) and you either had a job or you didn't, period. Today lost jobs result in many in hiding (from creditors including student debt), the vastly underemployed, people who have stopped looking, and college grads coming out unable to find jobs but who were never employed. It is much more complex and as always the government spins the numbers it wants to show. IOW, we need new definitions instead of applying outdated ones to contemporary times.
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Old 11-22-2010, 04:13 PM
 
5,409 posts, read 10,348,565 times
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Quote:
Originally Posted by slackjaw View Post
I'm sure a lot of personal wealth has been wiped out, and if I had to guess I'd say the majority is from the decline in home values. I think in a lot of areas those 40% home price drops aren't coming back any time soon, it will be at best a slow steady increase and at worst sideways for awhile.
Make that a L--O--N--G while.



Quote:

On the small businesses folding side, that has actually been improving steadily for some time now.

Equifax Study Shows Drop in Small Business Bankruptcies for Fifth Consecutive Quarter

October 26, 2010) – Small business bankruptcy filings declined more than 11 percent in the third quarter of this year compared to a year ago and have decreased nearly 19 percent since their peak in Q2 2009, Equifax Inc. (NYSE: EFX) announced. The decrease is the fifth consecutive quarter in which commercial bankruptcies have declined based on data from the company’s quarterly research on small business activity.

Analysis from the Equifax study shows that the number of small business bankruptcy filings peaked at 37,299 during Q2 2009, compared to 30,392 during Q3 2010. There were 34,257 bankruptcies in Q3 2009.

“For more than a year, we have seen a decline in the number of small business bankruptcies but this is the biggest percentage decrease during that period,” said Dr. Reza Barazesh, senior vice president, Equifax Commercial Information Solutions. ”Small businesses are still having a tough time. But the numbers are beginning to indicate that some of the stresses may be abating.”
Ok that is some dark comedy. Now we are down to the folks who are broke and cannot even afford to file for bankruptcy.

This is like a News Flash that says --- Breaking --- The Titanic Has Stopped Sinking. -- (of course a little further down the story would reveal that is because it is now over 2 miles deep and sitting on the bottom -- BUT at least it stopped sinking.

Really coming down to either we are going to have to kill the Banks and the Transnational Corporations -- or they are going to kill US. Either way, something is going to die.

Back to Chango's starting question.

A "Depression" was a euphemism for a "Panic" or "Collapse." After the Great Depression (1930's) that word was so tainted, we started calling downturns "Recessions." This current mess has now evolved into the Great Recession.

All just marketing. Probably time for a name change, again?
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Old 11-22-2010, 04:14 PM
 
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If we use the Great Depression as a reference point, here via wiki:

Industrial Production -46%
Wholesale Prices -36%
Foreign Trade -70%
Unemployment +607%

They also had 5000 bank failures.
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Old 11-22-2010, 04:44 PM
 
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I think it comes down to how the terms came into being. Prior to the Great Depression any economic downturn was labelled as a "depression". Of course given the severity of the "Great Depression" it made little sense to call the earlier declines "depressions" so we minted the term "recession". The NBER defines a recession as the time between when business activity has reached its peak and starts to fall until it bottoms out and starts expanding (measured by employment, industrial production, real income and retail sales). Most recessions last about a year in this definition.

So, what's the difference? It really just comes down to severity. Using the GDP as the measure, any decline in real GDP of more than 10% is considered a depression, anything less is a recession. I think GDP declined at an annualized rate of around -6.5% in 2008, grew nominally (less than +2%) in 2009 and has stagnated at around +2% in 2010. By that definition the "Great Recession" lasted from the end of Q2 2008 until the end of Q3 2009. Of course, that is only one measurement and would be the textbook definition. Technically we are no longer in a recession, but the fear of a double dip as happened in the Great Depression (29-33 and then 37-38) is very real.
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