Forgot Password
Pentax Camera Forums Home
 

Reply
Show Printable Version Search this Thread
07-01-2010, 03:31 AM   #1
Veteran Member
Nesster's Avatar

Join Date: Oct 2006
Location: NJ USA
Photos: Gallery
Posts: 13,056
Great Recession vs Great Depression

This was on the front page of yesterday's NY Times... it's a bit sobering to see the global charts of this recession, and some of the paragraphs comparing this one to the Great Depression... and we haven't dodged that bullet yet, as the Depression was a two-dipper: the initial crisis from which the economy recovered led to Roosevelt's spending cuts / tax increases in order to balance the budget. Boom!

They say stocks climb a wall of worry, but this one's pretty damn scary.



http://www.nytimes.com/2010/06/30/business/economy/30leonhardt.html?_r=1&src=me

QuoteQuote:
he world’s rich countries are now conducting a dangerous experiment. They are repeating an economic policy out of the 1930s — starting to cut spending and raise taxes before a recovery is assured — and hoping today’s situation is different enough to assure a different outcome.

In effect, policy makers are betting that the private sector can make up for the withdrawal of stimulus over the next couple of years. If they’re right, they will have made a head start on closing their enormous budget deficits. If they’re wrong, they may set off a vicious new cycle, in which public spending cuts weaken the world economy and beget new private spending cuts.

On Tuesday, pessimism seemed the better bet. Stocks fell around the world, over worries about economic growth.

Longer term, though, it’s still impossible to know which prediction will turn out to be right. You can find good evidence to support either one.

The private sector in many rich countries has continued to grow at a fairly good clip in recent months. In the United States, wages, total hours worked, industrial production and corporate profits have all risen significantly. And unlike in the 1930s, developing countries are now big enough that their growth can lift other countries’ economies.

On the other hand, the most recent economic numbers have offered some reason for worry, and the coming fiscal tightening in this country won’t be much smaller than the 1930s version. From 1936 to 1938, when the Roosevelt administration believed that the Great Depression was largely over, tax increases and spending declines combined to equal 5 percent of gross domestic product.

Back then, however, European governments were raising their spending in the run-up to World War II. This time, almost the entire world will be withdrawing its stimulus at once. From 2009 to 2011, the tightening in the United States will equal 4.6 percent of G.D.P., according to the International Monetary Fund. In Britain, even before taking into account the recently announced budget cuts, it was set to equal 2.5 percent. Worldwide, it will equal a little more than 2 percent of total output.

Today, no wealthy country is an obvious candidate to be the world’s growth engine, and the simultaneous moves have the potential to unnerve consumers, businesses and investors, says Adam Posen, an American expert on financial crises now working for the Bank of England. “The world may be making a mistake, and it may turn out to make things worse rather than better,” Mr. Posen said.

But he added — after mentioning China, India and the relative health of the financial system, today versus the 1930s — that, “The chances we’re going to come out of this O.K. are still larger than the chances that we aren’t.”

....

If anything, the initial stages of our own recent crisis were more severe than the Great Depression. Global trade, industrial production and stocks all dropped more in 2008-9 than in 1929-30, as a study by Barry Eichengreen and Kevin H. O’Rourke found.

In 2008, though, policy makers in most countries knew to act aggressively. The Federal Reserve and other central banks flooded the world with cheap money. The United States, China, Japan and, to a lesser extent, Europe, increased spending and cut taxes.

It worked. By early last year, within six months of the collapse of Lehman Brothers, economies were starting to recover.

...

The parallels to 1937 are not reassuring. From 1933 to 1937, the United States economy expanded more than 40 percent, even surpassing its 1929 high. But the recovery was still not durable enough to survive Roosevelt’s spending cuts and new Social Security tax. In 1938, the economy shrank 3.4 percent, and unemployment spiked.


07-01-2010, 07:16 AM   #2
Veteran Member
GeneV's Avatar

Join Date: Oct 2008
Location: Albuquerque NM
Photos: Albums
Posts: 9,829
The other parallels are also not reassuring, such as a political deadlock that had one branch of government negating many of the attempts to do something about the problem.

So long as the focus is not on the structure of the problem, but on trying to place blame, this may not end well.
Reply

Bookmarks
  • Submit Thread to Facebook Facebook
  • Submit Thread to Twitter Twitter
  • Submit Thread to Digg Digg
Tags - Make this thread easier to find by adding keywords to it!
countries, cuts, depression, economy, growth, percent, policy, stocks, tax, world
Thread Tools Search this Thread
Search this Thread:

Advanced Search


Similar Threads
Thread Thread Starter Forum Replies Last Post
K7 not that great HeavyD Pentax DSLR Discussion 91 09-07-2009 09:05 PM
Hello from the great NW jtron Welcomes and Introductions 7 06-17-2009 11:48 PM
Great news, bad news, great news! Marc Langille Photographic Technique 49 03-01-2008 08:35 AM
Hello everyone. It's great to be here. pggunn Welcomes and Introductions 1 02-15-2008 07:50 AM
not great wildherre Post Your Photos! 3 03-17-2007 10:19 PM



All times are GMT -7. The time now is 03:49 PM. | See also: NikonForums.com, CanonForums.com part of our network of photo forums!
  • Red (Default)
  • Green
  • Gray
  • Dark
  • Dark Yellow
  • Dark Blue
  • Old Red
  • Old Green
  • Old Gray
  • Dial-Up Style
Hello! It's great to see you back on the forum! Have you considered joining the community?
register
Creating a FREE ACCOUNT takes under a minute, removes ads, and lets you post! [Dismiss]
Top