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Paul Joseph Watson
Prison Planet.com
Friday, January 2, 2008
Renowned financial publication The Economist reports that, based on the characteristics of the current financial crisis, the U.S. is in a depression, not a recession.
The admission marks the first time that a major international financial news outlet has acknowledged that the scale of the economic mess is unlike anything seen in recent decades.
Under the headline, Diagnosing depression, the article asks, “What is the difference between a recession and a depression?”
A depression is characterized by “falling asset prices, a credit crunch and deflation,” according to the article, all factors that we see unfolding in the current crisis.
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“A depression is the result of a bursting asset and credit bubble, a contraction in credit, and a decline in the general price level,” according to the article. “In the Great Depression average prices in America fell by one-quarter, and nominal GDP ended up shrinking by almost half.”
Fast forward to the start of 2009 and house prices have fallen by at least 17 per cent over the last two years with that number only set to plunge further over the coming 18 months. Overall, American homeowners have lost $2 trillion of equity during what has become the worst housing slump since World War II.
U.S. GDP in the fourth quarter last year fell an estimated six per cent, but that number is expected to accelerate through 2009.
The piece also states that assurances from economists who say that a repeat of the 1930’s is impossible “because policymakers are unlikely to repeat the mistakes of the past,” are coming from the same people who confidently predicted that “a nationwide fall in American house prices was impossible and that financial innovation had made the financial system more resilient.”
The Economist piece makes the argument that the current crisis is far closer to a depression than a recession and that the only question remaining is how deep the downturn will be.
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According to the Economist article, the three factors of a depression are falling asset prices, a credit crunch and deflation. Gold's up, housing prices aren't falling much more. Credit's available, but with tighter rules than in 2008. While gas prices are currently down, food prices are increasing.
The date of the article is January 2008 - but it's now August 2010.
So we were in a depression two and a half years ago but now we aren't? I wonder what happened between January 2008 and now that might have changed that?
According to the Economist article, the three factors of a depression are falling asset prices, a credit crunch and deflation. Gold's up, housing prices aren't falling much more. Credit's available, but with tighter rules than in 2008. While gas prices are currently down, food prices are increasing.
The date of the article is January 2008 - but it's now August 2010.
So we were in a depression two and a half years ago but now we aren't? I wonder what happened between January 2008 and now that might have changed that?
Gold isn't an indicator of prices going up, it is an indicator of people not trusting currency and stocks for their investments. Housing prices might not be falling where you are currently, but here we are expecting the double dip before years end with homes losing another 20+ percent in value. Gas prices are still hovering at $3 which is very high and food prices reflect gas prices.
You really should stop wearing your rose colored glasses so much.
Gold isn't an indicator of prices going up, it is an indicator of people not trusting currency and stocks for their investments. Housing prices might not be falling where you are currently, but here we are expecting the double dip before years end with homes losing another 20+ percent in value. Gas prices are still hovering at $3 which is very high and food prices reflect gas prices.
You really should stop wearing your rose colored glasses so much.
The original post claimed a depression existed in January 2008 and defined a depression by a crash in asset prices, the non-existence of credit and deflation of currency.
Assets: Gold's an asset, just like any other. The DJIA is 3500 points higher now than in 1st Quarter of 2009. Housing prices have stabilized in Detroit, which was in worse shape economically than Vegas. On average, U.S. housing prices actually increased in the second quarter of 2010. That's not a crash in asset prices. That's also not to say that there wasn't a crash in assest prices in 2008-2009.
Credit: You can get credit, if you qualify for it. The unemployed might not be able to get credit right now, but working people with good credit scores have no problem. I got a car loan no problem, my friend refinanced his house and had banks lined up to extend him credit. Credit was non-existent for a few months in 2008, but it's back now.
Deflation: According to this http://www.bls.gov/news.release/pdf/cpi.pdf inflation has held pretty steady at 1% over the past year for everything BUT food and energy. The food prices have also held to 1% inflation in the same time period. Gasoline is up 7.4% for the year, while household energy is up 2.5%. None of this is deflation.
My point is that by the OP's provided definition we're not currently in a national depression.
If, according to the OP, we were in a depression in January 2008 and now we're demonstratably not in a depression in August 2010, what happened between 2008 and now that pulled us out of a depression?
Not the first article to hint at a "depression". Remember the Fed didn't admit to "recession" for one full year after it hit. So the government will be the last to declare "depression". Funny though..they are the first to declare "it's over".
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