Worse than the Great Depression?

[eagleseven]

Here are some startling datasets from the past several months, and their Great-Depression counterparts...

A Tale of Two Depressions

New findings:

*World industrial production continues to track closely the 1930s fall, with no clear signs of ‘green shoots’.

*World stock markets have rebounded a bit since March, and world trade has stabilised, but these are still following paths far below the ones they followed in the Great Depression.

*There are new charts for individual nations’ industrial output. The big-4 EU nations divide north-south; today’s German and British industrial output are closely tracking their rate of fall in the 1930s, while Italy and France are doing much worse.

*The North Americans (US & Canada) continue to see their industrial output fall approximately in line with what happened in the 1929 crisis, with no clear signs of a turn around.

*Japan’s industrial output in February was 25 percentage points lower than at the equivalent stage in the Great Depression. There was however a sharp rebound in March.

As you can see, the world is tanking far faster than it did in the beginning of the Great Depression. While this may be a case of "the larger they are, the harder they fall," there's no pleasant way to spin those charts.

If you check the link for the full set up analyses, it appears that Europe has been hardest hit, with the Americas and the Far East taking the second largest hit, and the developing world taking the smallest proportional hit.

Now, as Dr. Pavan, an Italian economist, explained to me, the European social economic structure does not allow the continent to recover quickly from any recession. The combination of strict hiring/firing regulations and thick safety nets makes for a rigid labor market that will ensure Europe's depression for at least the next half-decade.

For comparison, from the same site as above,

Italy's economy, with its tough labor regulations, has effectively flatlined, collapsing far faster than it did in the 1930s. By comparison, the US has fallen a third as far, and is out-performing the US of the Great Depression, if only marginally.

If history is any indication, we are in for a long, deep depression, and we shouldn't be fooled by unreliable lagging indicators.

Your thoughts?

 

[Oddball]

Interesting.

Even though all of one's yesterdays don't add up to one tomorrow, it appears that those who've re-written the history of the Great Depression have bought into the fable.

Looks to me like they're traveling down the same road with the attitude that this time it'll be different.

 

[Baruch Menachem]

Well, we do have a choice. We seem to be making the wrong one all the time, but it doesn't have to follow the same course.

0bama needs to look at where he wants to go. We have the example of how things work well, and how things work badly. He can make the right choice if he wants.

As for things being as bad, well right now they aren't. I have been out of work since May 1st. The department where I used to work has reduced staff by 30%. But I still get severance, and after that is over I get unemployment for 30 weeks. this is not like the conditions in 1929 where out of work meant no food or shelter immediately.

Of course, it all depends on what congress does in the next month. If they pass Cap and Trade and the new health care bill, then we will be eating rice if we are lucky.

We may have hit the iceberg, but I am confident of my place in the rowboat.

 

[wimpy77]

i dont see cap and trade being passed anytime soon. and the healthcare bill isn't probably gonna be passed for a while either.

 

[Oddball]

0bama needs to look at where he wants to go. We have the example of how things work well, and how things work badly. He can make the right choice if he wants.

For everything I've seen from the guy, he really, really isn't that smart.

 

[etouffe123]

I missed the source of the data?
Social Security and unemployment are in place where they were not in the 1930's.
Its easier to rebound when manufacturing is not the base of your GDP.
Mismanaged companies can survive in a booming economy and cannot in a falling one thus a recession is a process whereby the lean and mean survive and the others do not. This results in a more efficient capitalistic system.
Obama was smart enough to get elected to President. If he is smart enough to select and listen to good advisers (vs listening to Cheney and Rumsfeld) he should weather the storm.

 

[Baruch Menachem]

Smart enough to get elected.... I think most of the smarts were Alinsky's. And most of the dollars were Soros'. 0bama was smart enough to get elected in the same way Harding was smart enough to get elected.

 

[eagleseven]

I missed the source of the data?

I cited the original article written by Dr. Eichengreen of Berkeley and Dr. O'Rourke of Trinity College Dublin in my OP. If you want to read further, here are their cited references.

References
Eichengreen, B. and K.H. O’Rourke. 2009. “A Tale of Two Depressions.” In progress.

Bernanke, B.S. 2000. Bernanke, B.S. and I. Mihov. 2000. “Deflation and Monetary Contraction in the Great Depression: An Analysis by Simple Ratios.” In B.S. Bernanke, Essays on the Great Depression. Princeton: Princeton University Press.

Bordo, M.D., B. Eichengreen, D. Klingebiel and M.S. Martinez-Peria. 2001. “Is the Crisis Problem Growing More Severe?” Economic Policy32: 51-82.

Paul Krugman, “The Great Recession versus the Great Depression,” Conscience of a Liberal (20 March 2009).

Doug Short, “Four Bad Bears,” DShort: Financial Lifecycle Planning” (20 March 2009).

Netherlands Bureau for Economic Policy Analysis

Social Security and unemployment are in place where they were not in the 1930's.
Its easier to rebound when manufacturing is not the base of your GDP.
Mismanaged companies can survive in a booming economy and cannot in a falling one thus a recession is a process whereby the lean and mean survive and the others do not. This results in a more efficient capitalistic system.

So why is Obama busy injecting billions of dollars (financed by China) into failed companies such as GM and Chrystler? He's directly interrupting the regenerative flow of the free market...and I suspect UAW campaign contributions may be the cause.

Rather than letting them collapse, Obama is embalming and zombifying failed business, throwing our good money after bad.

Obama was smart enough to get elected to President. If he is smart enough to select and listen to good advisers (vs listening to Cheney and Rumsfeld) he should weather the storm.

This is no longer hypothetical. Obama has been President for almost six months. He chose this guy.

Geitner, the man who "couldn't learn turbotax," doesn't exactly inspire confidence...

 

[American Horse]

0bama needs to look at where he wants to go. We have the example of how things work well, and how things work badly. He can make the right choice if he wants.

For everything I've seen from the guy, he really, really isn't that smart.

He's an ideologue with an agenda. He will, if allowed to, move forward based on his ideology, practical problems along the way...be damned.

 

[Midnight Marauder]

If he is smart enough to select and listen to good advisers (vs listening to Cheney and Rumsfeld) he should weather the storm.

Thanks for the belly laugh.

Obama has surrounded himself with useful idiots, like TurboTax Tim... and about 30 "czars" so he won't have to take the heat for this mess. Oh yeah and mostly Clinton retreads.

If Cheney and Rumsfeld were economic advisers, Obama had best listen to them. Until the Democrat-manufactured crash, they presided over the most vibrant, healthy and growing economy in the history of the planet.

 

[etouffe123]

Cheney and Rumsfeld advised Bush to go to war.....a expensive past time...ask Great Britian.
The recession did not begin during the Obama watch. It began under Bush. As the great depression began under the leadership of three Republican Presidents. Not bias...just facts.
Recessions usually follow a boom period. Its referred to as the business cycle.
Paulson was the father of TARP not Geitner.

 

[etouffe123]

Smart enough to get elected.... I think most of the smarts were Alinsky's. And most of the dollars were Soros'. 0bama was smart enough to get elected in the same way Harding was smart enough to get elected.

He was then smart enough to listen to Alinsky.
He was elected by a majority of USA citizens voting.
Prove Soros remark....I cannot locate any foundation for it. Funding for his election came from a extremely wide base.
Harding, as with all politicians, was part of a political machine. Independents stand no chance for election.

 

[Midnight Marauder]

Cheney and Rumsfeld advised Bush to go to war.....a expensive past time...ask Great Britian.

It wasn't ten years of Dems saying we needed to stop Saddam? It wasn't the Iraq Liberation Act which Clinton signed into law? Which by the way is the FIRST time ever in our history it was made the law of the land to remove a foreign leader. It wasn't the almost unanimous Congressional approval?

The recession did not begin during the Obama watch. It began under Bush. As the great depression began under the leadership of three Republican Presidents. Not bias...just facts.

No doubt you blame the sinking of the Titanic solely on Captain Smith. Right?

Recessions usually follow a boom period. Its referred to as the business cycle.

The "invisible hand" of the markets is responsible for the recession?

Paulson was the father of TARP not Geitner.

Study up. Geithner was brought in to advise on it. And since then has been a disaster. And the current budget, the bailouts of the auto industry, the stimulus? C'mon now.... Blaming Booooosh ran out of capital a long time ago.

 

[Toro]

No, today is not worse than the Great Depression.

Employment fell far faster in the 1930s, the money supply fell far faster, and economic output as a whole fell far faster. Thus far, 18 months into the recession, GDP has declined by about 3% (though probably about to go lower). GDP fell 19% in 1930.

So it is not even close.

Also, industrial output as a percentage of the economy is far less today compared to 1930. Services have not fallen anywhere near as far as industrial output.

In terms of severity, this will be more like the 1980s even though the cause is more similar to the 1930s.

 

[etouffe123]

[After completing his studies, Geithner worked for Kissinger and Associates in Washington, D.C., for three years and then joined the International Affairs division of the U.S. Treasury Department in 1988. He went on to serve as an attaché at the US Embassy in Tokyo. He was deputy assistant secretary for international monetary and financial policy (1995–1996), senior deputy assistant secretary for international affairs (1996-1997), assistant secretary for international affairs (1997–1998).[5]

He was Under Secretary of the Treasury for International Affairs (1998–2001) under Treasury Secretaries Robert Rubin and Lawrence Summers.[5] Summers was his mentor,[10][11] but other sources call him a Rubin protégé.[11][12][13]


Treasury Secretary designee Geithner meets Finance Committee Chairman Max Baucus on November 25, 2008In 2002 he left the Treasury to join the Council on Foreign Relations as a Senior Fellow in the International Economics department.[14] He was director of the Policy Development and Review Department (2001-2003) at the International Monetary Fund.[5]

In October 2003 at age 42,[15] he was named president of the Federal Reserve Bank of New York.[16] His salary in 2007 was $398,200.[17] Once at the New York Fed, he became Vice Chairman of the Federal Open Market Committee component. In 2006, he also became a member of the Washington-based financial advisory body, the Group of Thirty.[18] In May 2007 he worked to reduce the capital required to run a bank.[15] In November he rejected Sanford Weill's offer to take over as Citigroup's chief executive.[15]

In March 2008, he arranged the rescue and sale of Bear Stearns;[10][19] in the same year, he played a pivotal role in both the decision to bail out AIG as well as the government decision not to save Lehman Brothers from bankruptcy, though claims were made after Geithner's nomination that distanced him from both AIG and Lehman Brothers.[20] As a Treasury official, he helped manage multiple international crises of the 1990s[12] in Brazil, Mexico, Indonesia, South Korea and Thailand.[13]

Geithner believes, along with Henry Paulson, that the United States Department of the Treasury needs new authority to experiment with responses to the financial crisis of 2008.[10] Paulson has described Geithner as "[a] very unusually talented young man...[who] understands government and understands markets."[19]



Geitner, the man who "couldn't learn turbotax," doesn't exactly inspire confidence...[/QUOTE]

After completing his studies, Geithner worked for Kissinger and Associates in Washington, D.C., for three years and then joined the International Affairs division of the U.S. Treasury Department in 1988. He went on to serve as an attaché at the US Embassy in Tokyo. He was deputy assistant secretary for international monetary and financial policy (1995–1996), senior deputy assistant secretary for international affairs (1996-1997), assistant secretary for international affairs (1997–1998).[5]

He was Under Secretary of the Treasury for International Affairs (1998–2001) under Treasury Secretaries Robert Rubin and Lawrence Summers.[5] Summers was his mentor,[10][11] but other sources call him a Rubin protégé.[11][12][13]


Treasury Secretary designee Geithner meets Finance Committee Chairman Max Baucus on November 25, 2008In 2002 he left the Treasury to join the Council on Foreign Relations as a Senior Fellow in the International Economics department.[14] He was director of the Policy Development and Review Department (2001-2003) at the International Monetary Fund.[5]

In October 2003 at age 42,[15] he was named president of the Federal Reserve Bank of New York.[16] His salary in 2007 was $398,200.[17] Once at the New York Fed, he became Vice Chairman of the Federal Open Market Committee component. In 2006, he also became a member of the Washington-based financial advisory body, the Group of Thirty.[18] In May 2007 he worked to reduce the capital required to run a bank.[15] In November he rejected Sanford Weill's offer to take over as Citigroup's chief executive.[15]

In March 2008, he arranged the rescue and sale of Bear Stearns;[10][19] in the same year, he played a pivotal role in both the decision to bail out AIG as well as the government decision not to save Lehman Brothers from bankruptcy, though claims were made after Geithner's nomination that distanced him from both AIG and Lehman Brothers.[20] As a Treasury official, he helped manage multiple international crises of the 1990s[12] in Brazil, Mexico, Indonesia, South Korea and Thailand.[13]

Geithner believes, along with Henry Paulson, that the United States Department of the Treasury needs new authority to experiment with responses to the financial crisis of 2008.[10] Paulson has described Geithner as "[a] very unusually talented young man...[who] understands government and understands markets."[19]

Seems Geithner was qualified enough to serve in substantial roles under both Republican and Democratic tenures. Paulson seems impressed....as was Obama.

 

[Midnight Marauder]

Seems Geithner was qualified enough to serve in substantial roles under both Republican and Democratic tenures. Paulson seems impressed....as was Obama.

Your un-linked paste from Wiki belied your earlier point, and shows Geithner WAS the daddy of TARP.

Or, did you not catch that?

And Obama is the ONLY person sufficiently impressed with this "wunderkind" to put him in charge of the Fed!

 

[etouffe123]

The "invisible hand" of the markets is responsible for the recession?

During boom times production is stepped up to meet demand. The needs prompting the demand are filled. Production continues. Purchases decline. A recession ensues. Production slows down, layoffs follow (less payroll money in the economy), gradually inventories are depleted and the economy begins to recover.

BTW giving money to GM and Chrysler was a poor demonstration of how to ease the payroll money drop...but it gets UAW votes and votes is what politics is all about.

 

[eagleseven]

No, today is not worse than the Great Depression.

Employment fell far faster in the 1930s, the money supply fell far faster, and economic output as a whole fell far faster. Thus far, 18 months into the recession, GDP has declined by about 3% (though probably about to go lower). GDP fell 19% in 1930.

So it is not even close.

Also, industrial output as a percentage of the economy is far less today compared to 1930. Services have not fallen anywhere near as far as industrial output.

In terms of severity, this will be more like the 1980s even though the cause is more similar to the 1930s.

1. The graphs speak for themselves. Cherry-pick your stats, but they don't tell the whole story.

2. We do not calculate unemployment the same way today as we did during the 1930s. If you use pre-1994 formulas, true unemployment is reaching 20%. Note that true unemployment capped at 24% during the 1930s, and we're already past 20%.

Don't let the government yes-men pull the blanket over your eyes. You cannot compare today's "official" unemployment numbers with the unemployment numbers of past decades, because the Government has fundamentally changed the formulas.

 

[Toro]

No, today is not worse than the Great Depression.

Employment fell far faster in the 1930s, the money supply fell far faster, and economic output as a whole fell far faster. Thus far, 18 months into the recession, GDP has declined by about 3% (though probably about to go lower). GDP fell 19% in 1930.

So it is not even close.

Also, industrial output as a percentage of the economy is far less today compared to 1930. Services have not fallen anywhere near as far as industrial output.

In terms of severity, this will be more like the 1980s even though the cause is more similar to the 1930s.

1. The graphs speak for themselves. Cherry-pick your stats, but they don't tell the whole story.

2. We do not calculate unemployment the same way today as we did during the 1930s. If you use pre-1994 formulas, true unemployment is reaching 20%. Note that true unemployment capped at 24% during the 1930s, and we're already past 20%.

Don't let the government yes-men pull the blanket over your eyes. You cannot compare today's "official" unemployment numbers with the unemployment numbers of past decades, because the Government has fundamentally changed the formulas.

You cherry-picked your own graphs. Here are some graphs.

GDP from 1930 to 1932

GDP from 2007 to 2009

GDP is the broadest measure of all production. The decline during the Depression far, far outweighs the decline today. The comparisons are not even close.

The idea that today's unemployment as measured by how they measured unemployment during the Great Depression is simply untrue and was effectively refuted here.

 

[eagleseven]

You cherry-picked your own graphs. Here are some graphs.

GDP from 1930 to 1932

GDP from 2007 to 2009

GDP is the broadest measure of all production. The decline during the Depression far, far outweighs the decline today. The comparisons are not even close.

1. GDP during the great depression was largely industrial output. By comparison, the US is largely a service economy.

2. The income generated through the service sector must be used to purchase goods produced by the industrial sector to see an increase in the standards of living. As world industrial output is falling as rapidly as it did during the Great Depression, there are simply fewer goods being made for us to consume.

3. Because the success of service sector depends upon the strength of the industrial sector, GDP is a lagging indicator. Further, unlike industrial output, GDP includes government spending, regardless of the spending's ability to produce meaningful changes in the economy.

We do not see the shock in our GDP because our President has spent upwards of 1/7th of our GDP within the first six months of this collapse.

Notice on your graph that GDP fell by less than 10% during the first year of the depression? We've already borrowed nearly 14% of GDP to temporarily boost our economy. Of course GDP won't show the damage, as we've covered it up with debt. GDP doesn't include capital depreciation or debt.

There wouldn't be any dip in GDP for the first year of the Great Depression had the government borrowed 14% of GDP back then, as well! I think you underestimate the sheer size of the government interventions performed in the past 6 months.

4. Hence, those economists in the article use industrial output as the preferred indicator of the world's economy. And they conclude that it is as severe as the Great Depression.

The idea that today's unemployment as measured by how they measured unemployment during the Great Depression is simply untrue and was effectively refuted here.

1. That thread hammers out the changes, and yet I fail to see anything refuted? And I'm not sure exactly what your statement is saying?

"idea that today's unemployment as measured by how they measured unemployment during the Great Depression"

What does this mean? Perhaps you made a typo and forgot a verb? It happens, but I'm still not sure what you are arguing?

2. It seems both posters in that thread agree that there was no effective standard in the 1930s and 1940s. So, as I was saying, you cannot compare the unemployment statistics of 1930 and 2009 and come to any valuable conclusions.

Instead, we have to use measures that were standardized and effective at the time, such as GDP or industrial output. And I discussed above why industrial output is a better indicator than GDP for the current depression.