Depression, not Recession

[Angel Eyes]

http://www.cnbc.com/id/38831550

Synopsis: Gluskin Sheff economist David Rosenberg says the U.S. economy is caught in a 1930s style depression, not a recession as commonly believed.  He cites parallels with the stock market gains in 1930, which turned out to be a false indicator that the worst had passed.

I'm afraid he's right.

[Headless Thompson Gunner]

I saw this article yesterday, and ended up discussing it with some coworkers over lunch.

Our general conclusion is that we probably are in a depression, though not for the reasons Rosenberg cites.  Rosenberg's prime reason seems to be stock market performance similar to the '30s, whereas we think stock prices can't define a depression.  GDP action might, though it depends on how you define a depression as to just how much lost GDP you need before it's official.

It brought up an interesting question: how do you define a depression?  There doesn't seem to be a definitive formal academic definition.

We came up with the following general characteristics for a depression:
- Shrinking credit, defaults, bank failures
- Falling prices in some (not all) major asset classes
- Deleveraging, frugality
- Prolonged business slowdown, businesses unwilling to invest or expand
- High unemployment
- Populist government policies that cater to the masses but actually make matters worse

A recession is a temporary disruption in the normal flow of resources within the economy, we all mostly agreed on that.  We didn't agreement on whether a depression was just a deeper, more pronounced recession, or something else entirely.  I fall int he "something else entirely" camp

Anyway, it was a great discussion.  We didn't get much done that afternoon.

I'm curious what the peanut gallery here thinks.  How would you define a depression, and do you think our current situation fits your definition?

[Perd Hapley]

I would answer, but I am still awaiting my Peanut Gallery credentials. 

[Headless Thompson Gunner]

Wisecrack remarks are sufficient credentials here.

 

[vaskidmark]

I think that you might have all of the elements of a depression listed, plus one that is not an indicator but a result.

- Populist government policies that cater to the masses but actually make matters worse

This does not come about until after the actual economic collapse.  Admittedly it makes matters even worse, and delays any recovery.  But I am just not convinced, reviewing all the depressions that the world has suffered through, that this is necessary in order for the situation to be a depression.  (In other words, if by some miracle the gooberment did not take a populous bend that catered to the masses - 2 distinct possibilities of what might not happen, although very low probability of avoiding either one - there could still be a depression.)

I posit this based on some of the European depressions when they still had monarchs running things.  Those folks avoided populist policies like the plague, until they got run out on a rail or lost their heads.

Comment?  Rebuttal?

stay safe.

[MillCreek]

I am reminded of the old saying: when your neighbor loses his job, it is a recession; when you lose your job, it is a depression.

[RoadKingLarry]

Recession: When your neighbor loses his job.
Depression: When you lose your job.
Recovery: When Obama loses his.

[RoadKingLarry]

Occam's razor.

Either the people that are pushing the policies that are driving this country in to ruin really are just that stupid.
Or
The people that are pushing the policies that are driving this country into ruin have an agenda that is best served with a country in financial ruin.

I really don't know which way to come down on this anymore.

[Ryan in Maine]

Well, I'm only 26, so I'm not sure I can say with any real accuracy without a lot of studying.

But we can agree that you can have a recession without a depression, but you can't have a depression without a recession, right?

At first glance, I'd say it feels like a depression for a great many people in the US and many more outside the US influenced by our decisions. But I've got to say, this doesn't feel like a depression. You can still find work if you can do something to set yourself apart from the pack.

Also, we've been hovering over a severe worsening of the economy for awhile. We could go up or down, it seems. My guess is, if Obama sees reelection, we'll go into a depression. If we keep him out of the White House, we can keep hovering long enough to take off again.

[drewtam]

Semantics!

A recession is just the new word for depression. Until the 30's, every thing we called an economic "recession" is what our fore bearers call a "depression". Politicians changed the word after the "Great Depression" so that every hiccup in the economy wouldn't harken back to 'that' time.

[Monkeyleg]

RoadKingLarry, I (and many others) been saying for over a year that it certainly seems like the administration is doing everything possible to drive the economy further into the ground.

They're following the FDR playbook, spending gobs of (borrowed) money on do-nothing projects, raising taxes, scaring businesses, increasing deficits, and piling on regulations. Everything the Roosevelt administration did wrong, Obama is doing again.

Either they can't read history books, or they can read them so well that they think they can replicate the 1930's.

[S. Williamson]

I'm as mad as hell...

 

[Hutch]

Monkeyleg, someone much smarter than me said: "Never attribute malice what can be explained by stupidity"

Another applicable aphorism: "The only reason this has never worked before (socialism) is that there's never been anyone quite as smart as me in charge".

If our economy really does crash and burn, and makes people really think (I know, a dubious proposition), then the phoenix that rises may not at all resemble the bird the architects of the crash wished for. I don't for a minute believe that the chattering classes really understand the inherent "leave me alone" mindset of the majority of Americans.  They see people lining up for "the dole" (however you define that) and believe that .gov owns them, just because .gov buys them.  Let .gov really try some social engineering here in my neck of the woods.  Tarred and feathered, if they're lucky.  Disappeared, if they're not.

[MicroBalrog]

Hasn't the Great Depression only really become a Depression when FDR started trying his tricks?

I remember that Australia and some other countries which have not responded with social engineering have not experienced it as badly.

[makattak]

Hasn't the Great Depression only really become a Depression when FDR started trying his tricks?

I remember that Australia and some other countries which have not responded with social engineering have not experienced it as badly.

No, it was a depression already.

Other countries don't talk abou the Great Depression because theirs didn't go on for 12 years.

FDR didn't cause the depression. He did transform it into the Great Depression, though.

[Headless Thompson Gunner]

I am reminded of the old saying: when your neighbor loses his job, it is a recession; when you lose your job, it is a depression.

By that measure, it's definitely a depression.  At least it is/was for me.

 

 

[Headless Thompson Gunner]

Monkeyleg, someone much smarter than me said: "Never attribute malice what can be explained by stupidity"

It takes an awful lot of stupid to make the kinds of "mistakes" they're making now.  They don't seem that dumb, they seem smart enough to know better.

[longeyes]

If they have no disingenuous intent they should be smart enough to listen to the people who actually create wealth.  The fact that they don't and won't says all we need to know.

[makattak]

If they have no disingenuous intent they should be smart enough to listen to the people who actually create wealth.  The fact that they don't and won't says all we need to know.

There's a problem with that line of thinking.

Liberals don't believe people "create wealth". They believe rich people get that way off the work of other people.

They believe the economy works like magic. Growth and innovation just happen: the people who "discover" or "create" some new process or technology were just lucky. Without them, someone else would have done it.

So, who cares what some guy that won "life's lottery" thinks? He's only wealthy because he got lucky.

They want REAL thinkers in charge.



That's the mentality we have to deal with. It's not that they are trying to destroy the country, but that will be the result.

[longeyes]

I am aware of what liberals believe; I know a few.  What I have learned is that almost all I talk to, regardless of their level of education, seem unable to reason and are largely bereft of facts.  They get their information from only a few dubious sources.  This is not about real thinking at all, just wishful thinking.  But I was talking about the people with glittering resumes who work deep inside this administration, not friends who watch MSNBC and read the NY Times.  If you are Geithner or Summers or Reich you OUGHT to have learned what works and what doesn't in terms of the criteria of the debate.  This isn't an administration, it's a cabal.

[Monkeyleg]

If you are Geithner or Summers or Reich you OUGHT to have learned what works and what doesn't in terms of the criteria of the debate.

Quite right, and why I really do wonder if this could all be intentional.

Even Hizzoner Mayor Bloomberg warned the city council that raising taxes on the top earners would reduce tax revenues big-time.

[Ned Hamford]

I don't think its a depression until we see more Hoovervilles.

[MillCreek]

I am aware of what liberals believe; I know a few.  What I have learned is that almost all I talk to, regardless of their level of education, seem unable to reason and are largely bereft of facts.  They get their information from only a few dubious sources.  This is not about real thinking at all, just wishful thinking.  But I was talking about the people with glittering resumes who work deep inside this administration, not friends who watch MSNBC and read the NY Times.  If you are Geithner or Summers or Reich you OUGHT to have learned what works and what doesn't in terms of the criteria of the debate.  This isn't an administration, it's a cabal.

I have heard the exact same thing said, but substituting 'conservative' for 'liberal' and inserting various Republican names in place of the Democratic ones.

I guess it all depends on whose ox is being gored, eh?  I have been around long enough to know that such sweeping generalizations, regardless of which end of the political spectrum you fall, are rarely valid.  But they make great sound bites.

[Headless Thompson Gunner]

I don't think its a depression until we see more Hoovervilles.

What would a Hooverville look like these days?  What would life in one look like?

With unemployment, food stamps, free medical care, free housing (go ahead, skip your mortgage payments - Obama will help you stay in your house and the bank can't keep up with the volume of foreclosures), there's no need for the indigent to congregate in shantytowns.

Your neighbor could be a modern Hoverville-ian and you'd never know unless you catch him swiping his EBT card or the bank finally gets around to booting him out.

[BridgeRunner]

I don't think its a depression until we see more Hoovervilles.

It is definitely a problem of what a modern Hooverville looks like.

We have more renter- and home-owner friendly eviction and foreclosure rules, so now tenants and landlords are both hurting.  We have also substantially criminalized homelessness, have heavily regulated construction standards for dwelling-places, and have experienced the middle-class-ifying of America.  It's not out of avarice that homeless people own cellphones and laptops, it's out of a sense of survival and the desire to improve one's situation.

A Hooverville would be a viable living option for many people in Lansing if it was legal, and I'm not entirely sure if I'm one of them yet (one runs up against the whole "if things were different, they'd be different" phenomenon), but I'm close.

The shelters locally are all full, and have been for a couple years. Every night.  There are people keeping cars running instead of buying food, just so they can keep moving and not get ticketed for parking in the wrong spot.  Rack up enough tickets and your next shelter is jail, which is also full.  Lots of people--including me--living in fear of getting a traffic ticket because that puts one a couple weeks out from bench warrant or license suspension territory, and if you can't drive, you are stuck competing for far fewer jobs against many more applicants, and the jobs don't pay a livable wage.

 Let us not forget too, that CPS has determined it's not legal to have children in a dwelling without hot and cold running water, finished flooring, separate bedrooms for adults and children of different sexes, or a functional heating system.  If one is unable to independently provide these things, one is required to seek public assistance and/or risk losing custody of their children to the state.  We've criminalized poverty, but we've REALLY criminalized being an impoverished parent.

Yes, it's a depression.  If it was legal, there would be Hoovervilles.