

A Second Great Depression, or Worse? - chailatte
http://economix.blogs.nytimes.com/2011/08/18/a-second-great-depression-or-worse/

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TomOfTTB
I don't know what to think here. There seems to be some very obvious issues
with his analysis that he didn't even mention. Now this is a very qualified
guy so I hesitate to point these out but I can't help but think his agenda (to
calm people) is clouding the issue.

I'll run down the list...

1\. The government has goosed numbers that are used to caclulate GDP like the
CPI. See here: <http://tinyurl.com/3rxzxhs>

2\. Unemployment is calculated differently today because we factor out
"discouraged workers". See here where Motley Fool put 2009 Unemployment closer
to 17.5% : <http://tinyurl.com/3lappx9>

3\. Yes the FDIC prevented people's savings from disappearing when the banks
hit crisis mode and that prevented the banks from going out of business. But
the wealth destruction still happened. All we did is shift it from the banks
to the Federal Government thereby saving the banks (who wouldn't have survived
with that much debt) while burdening the general populace for decades to come.

I'm not saying he's wrong as much as I'm saying he clearly had an agenda here
and is making the argument for that agenda without giving the other side of
the coin. If you don't believe me ask yourself this: Why didn't he use GNP in
his first comparison? We still calculate GNP and using GNP now vs GNP in the
30s (when that's all we tracked) makes a lot more sense than using GDP now and
retroactively calculating GDP in the 30s.

But economists agree GDP is more forgiving and makes the nation look wealthier
in a global market than GNP would (since most manufacturing was still done
domestically in the 30s). So again there seems to be an agenda here.

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RyanMcGreal
> Unemployment is calculated differently today because we factor out
> "discouraged workers"

The author addresses that:

> Even by the highest estimates - which include people discouraged from
> looking for a job, thus not registered as unemployed - the jobless rate
> reached around 16 to 17 percent.

~~~
TomOfTTB
Your point (and jabits below) is valid but my issue is he didn't spell out the
fact that "discouraged workers" were counted in the Great Depression. Also (if
you follow the link provided) you'll see we didn't hit the 20%+ numbers until
4 years after the crash and by that measure we still have over a year.

I concede we're talking semantics I just think a more accurate way to say it
would be "unemployment rose above 20% in the Great Depression while by that
same standard we're only at around 17%". Rather than comparing their 20% to
our 10% and then mentioning the real unemployment rate as an addendum.

~~~
trevelyan
17 percent is very much in the range of the Great Depression. Especially since
the higher unemployment statistics from the 1930s included workers who were
actually employed. Scroll down for the details:

[http://edgeofthewest.wordpress.com/2008/10/10/very-short-
rea...](http://edgeofthewest.wordpress.com/2008/10/10/very-short-reading-list-
unemployment-in-the-1930s/)

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dave_sullivan
I think the author makes some good points about why this recession (or
whatever you want to call it) is different from the great depression, in
particular re: the decline in output and the importance of agriculture.

Nonetheless, I am concerned about a couple issues not mentioned:

a) Lots and lots of unemployed, broke, frustrated young men (for an extended
period of time). This is bad on lots of levels, public safety being high on
the list.

b) The fallout of state cuts to certain services will likely get much worse.
This will literally slow down the economy.

b2) Related, there will be cuts to police, prisons, fire depts, hospitals,
etc. The US (esp. in big cities) could become a bit more dangerous with fewer
deterrents to those with nothing to lose.

Not to be all doom and gloom, and although we've seen these issues in the
past, I'm not sure that we've seen them to the extent that looks likely in the
coming years.

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billswift
>the jobless rate reached around 16 to 17 percent. It’s a jobs disaster, to be
sure, but not the same scale as the Great Depression.

In many ways this is _worse_ than the Great Depression. People are much more
dependent on jobs today-in the thirties fewer people had mortgages they needed
to pay and more lived in rural areas where food was more available (gardening
or barter).

~~~
a3camero
Although people today are far more wealthy as a result of astonishing
increases in productivity that have led to much lower prices for goods.
Consider how much you can buy at a dollar store for one hour's labour today.

Then there are the much harder to calculate ways in which you are better off
such as new medicines and technologies (e.g. the internet [Hacker News]).

~~~
billswift
Most people are better off, especially in what they can buy -- but in the
context of _NOT HAVING A JOB_ , and therefore not being able to afford
anything, that doesn't matter.

~~~
a3camero
That's true, and although I don't know much about the US welfare system, I
assume you're better off on welfare than many people were not on welfare 80
years ago (economically).

~~~
yummyfajitas
I'm willing to bet that the fraction of people with flush toilets is higher
among people on welfare today than it was in the general population during the
20's or 30's.

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MikeCapone
Deleveraging is never fun, but it usually leaves you with a stronger balance
sheet.

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bh42222
I think the best comparison is Japan.

Huge real-estate bubble fueled boom times, followed by a lot of spending to
try and stimulate the economy Keynesian style. If it does not work, you get
20+ years of recession.

At least America's population is growing so that might make a difference. Also
America's infrastructure is in bad shape, as opposed to Japan which went into
its recession with top notch infrastructure. This means infrastructure
spending in the US could be more stimulative then it was for Japan.

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patrickgzill
Not a depression - a liquidation. It will be painful.

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recoiledsnake
Half the game is mental. If the people think things are going to slow down,
they are going to do things(stop or put off purchasing, moving money to safer
investments) that WILL make it slow down, which in turn will cause other
people to do the same further slowing it down.

