Bob Cropf

Great Depression or Great Recession?

In economics on April 7, 2009 at 4:53 AM

There is a lot of debate occurring in the blogosphere on whether we’re in a depression or recession. Some commentators, as mentioned in earlier posts here, have taken to calling our economic crisis, “The Great Recession.” Others are calling it another Depression. The excellent economics site, Vox, falls squarely in the latter camp with its most recent post. The authors support their claim by citing a number of significant trends in the data. First and foremost, they emphasize that the current situation requires a close consideration of global rather than just domestic US data. When one looks at the world economic condition, the sight is not pretty. In nearly every important indicator–industrial production, stock markets and trade–the global trends are tracking the Great Depression. However, I think this gloomy prognosis has to be qualified by two observations, one the authors make themselves and one of my own. First, the data points for the current crisis are fewer so far than the trend lines shown in the post’s graphs. Thus, it is still too early to tell whether this downturn will be as severe as the Great Depression or whether it will last as long. Second, and related to the first point, the governments of the world seem to be responding in a more proactive and effective manner to this crisis. This is the gist of their conclusion, which suggests that through a sustained, global policy response, the world’s intertwined economies can hope to weather this difficult economic storm.


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