A Not So Great Depression?

By Big Tent Democrat, Section Economy
Posted on Wed Nov 18, 2009 at 07:44:16 AM EST
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Brad DeLong is optimistic for where I sit:

For 2 1/4 years now I have been saying that there is no chance of a repeat of the Great Depression or anything like it--that we know what to do and how to do it and will do it if things turn south. I don't think I can say that anymore. In my estimation the chances of another big downward shock to the U.S. economy--a shock that would carry us from the 1/3-of-a-Great-Depression we have now to 2/3 or more--are about 5%. And it now looks very much as if if such a shock hits the U.S. government will be unable to do a d----- thing about it.

(Emphasis supplied.) 5%? That's all? That is clearly unduly optimistic. Of course, we probably have to define our terms. If GDP is your bible, then the question is how do you describe a double dip recession with the second dip lasting 18 months or so? Cuz there clearly is more than a 5% chance of that right now. And for the more populist among us, the unemployment rate is certainly getting us to 2/3 of a Great Depression. In a way, the economic situation really illustrates the great disconnect between elites and the general population.

Speaking for me only

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A Not So Great Depression? | 39 comments (39 topical)

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Your last (5.00 / 2) (#2)
by Ga6thDem on Wed Nov 18, 2009 at 08:24:34 AM EST

sentence sums it all up.

Which sentence? (5.00 / 1) (#3)
by Militarytracy on Wed Nov 18, 2009 at 08:43:51 AM EST

The one where he says that the situation clearly points out the disconnect between the serfs and the squires, or the one where he makes it clear that this is only his opinion....and it isn't Jeralyns.....and it is the opinion of almost nobody else out there right who is busy pulling rainbows out of their rears :) I only know ONE THING for certain, and that is that our kitchen table economic situation WILL worsen. I don't know how bad it has to get before leaders could come to the conclusion that we must do something completely different as quickly as possible.


And independants (5.00 / 1) (#7)
by hookfan on Wed Nov 18, 2009 at 09:10:49 AM EST

continue to abandon Obama. CBS poll has Obama down 7% from last month. Not good going into an election year. Not to worry. I'm sure Obama can makeup the loss by a few pretty speeches to working class America without the ideas he's proposed to garner afterwards from his panel to study the problem. Or maybe he can make it up from the women the Democrats are allowing Stupak to insult. . .The one thing I haven't seen is Obama actually proposing to do anything for "Appalachia". But "Appalachia" continues to grow. I wonder how happy "Appalachia" is going to be when they realize hcr for them will mean an increased tax on them even if they are unemployed?


I read a headline last night stating (5.00 / 2) (#21)
by oculus on Wed Nov 18, 2009 at 11:52:02 AM EST

Pres. Obama isn't talking about unemployment in U.S. whilst he is touring the Far East. Why would he? But it seems much more important at this time from my point of view for his admins. to concentrate on job creation at this point than to tour Japan and China. Maybe I feel this way because my daughter remains unemployed, my property taxes are due soon, and my water bill has shot up to the stratosphere.


But (none / 0) (#27)
by hookfan on Wed Nov 18, 2009 at 12:51:58 PM EST

your comment would require him to actually do something rather than only talk. I'm not convinced that Obama actually wants to do anything much about ue, only avoid blame for it. It can very well be that the corporations he's so closely aligned with for money, actually prefer ue over 10%. They can continue to reduce wages that way, and we're beginning to hear the meme "American workers are over paid". Unions will continue to be weak at this level of ue, workers will just have to be thankful to have a job-- even a crappy paying one, while we continue our race to compete with third world starvation wages and ceo's continue to celebrate their bonuses. Obama's opposition isn't republicans. It's American workers.


: Just giving my opinion. No expectation (5.00 / 1) (#28)
by oculus on Wed Nov 18, 2009 at 12:57:49 PM EST

anything will change.

: Wait...he already DID do something (5.00 / 1) (#33)
by Inspector Gadget on Wed Nov 18, 2009 at 01:30:26 PM EST

and we can just wait for anything more.
Buuuttttttt....maybe he didn't really do anything since the lies have been exposed by ABC World News.

To be fair, .. . (none / 0) (#30)
by nyrias on Wed Nov 18, 2009 at 01:00:34 PM EST

he did talk about equalization of trade, and the strengthening of the yuan against the dollar.

Both will increase export from US to China, and presumably help the employment situation over here.


I'm so typo friendly, I'm sorry (none / 0) (#4)
by Militarytracy on Wed Nov 18, 2009 at 08:44:37 AM EST

I used to think that it would be odd for (5.00 / 1) (#5)
by Militarytracy on Wed Nov 18, 2009 at 08:49:34 AM EST

our family to take a direct hit. I've done all the right things and seen the field more clearly than almost anybody in my real life vicinity. I thought I could prepare. Now I realize that this is going to be so devastating that my past preparations are almost comic.

I have had no excuse for not preparing (none / 0) (#9)
by ruffian on Wed Nov 18, 2009 at 09:15:48 AM EST

and my sleepless nights are spent beating myself up over it. I should be in a position to weather it, but I am not at all. Any prolonged period of unemployment would wipe me out. But maybe there really is no way to prepare for the worst.


Our economic situation has been (5.00 / 1) (#10)
by Militarytracy on Wed Nov 18, 2009 at 09:39:10 AM EST

one big feeding frenzy for quite awhile. My daughter got a notice that because she made a late payment on her credit card last month that now the interest rate is going up to 30%. It is her first credit card. She couldn't understand how that could happen that quickly. I explained to her that the banks had themselves in such a bind now that their solution is to rape everyone. She asked me what she could do. I told her to not use it anymore, pay the balance. Then I realized that I was preaching "responsibility" to my child but I'm literally making her "the only" responsible player in this whole situation. I'm thinking about teaching her how to build credit and good habits when the whole system has nuked itself so I turned to her and said, "You know what, I really honestly don't know what you should do right now so scratch my pearls of wisdom....the guys with the power out there are only about raping the other guy but there will be no blood from turnips". I don't trust anyone issuing credit out there right now. At Christmas I usually shop completely on credit and then pay it off in January after the holidays have run their course. I don't spend a whole lot of time contemplating each purchase. I won't be doing that this year. I will be contemplating the purchase of each gift because I will be paying directly out of our checking account. If I'm living like that, having done a complete turn around in behaviors from last year......I don't fancy that I'm alone here. That will have a HUGE impact on the holidays this year in my opinion.


Happened to me too (5.00 / 2) (#13)
by ruffian on Wed Nov 18, 2009 at 10:44:44 AM EST

last year. Unintentionally got a payment in a couple of days late and wham - 30%. She can call them up and protest and they may lower it at least a few points - worked for me. Worth a try until she can get it paid off altogether. Your advice was good. Wish my mom had taught me better about credit, but she really never had a chance.

You sound exactly like me this Christmas. The nieces and nephews may not be getting as good of gifts, but they won't have to share a room with me when auntie goes bankrupt and moves in!


: Right now you don't even have to pay late, (5.00 / 1) (#34)
by Inspector Gadget on Wed Nov 18, 2009 at 01:36:54 PM EST

they are kicking up interest rates to 30% on as many customers as they can get away with before the new regulations become effective.

Yep, cut up the credit card. (5.00 / 1) (#19)
by Cream City on Wed Nov 18, 2009 at 11:32:05 AM EST

Really. I had to do so for my daughter a couple of times, in return for rescuing her from the hounding, until she got it. Today, only a few years later, she is so conscious of credit ratings and so good at budgeting -- especially helpful now that she is laid off. And today, she thanks me . . . and she passes it forward by explaining it all to friends, other great young people who get lured in by the unconscionable targeting of them by credit card companies. Do you realize that it got so bad that college students were committing suicide over this?


I saw the report on the college kids offing (5.00 / 1) (#24)
by Militarytracy on Wed Nov 18, 2009 at 12:32:32 PM EST

themselves. The credit industry couldn't wait to issue them all credit cards, just because they were in college. It is very irresponsible on their part to do such a thing and they won't quit doing things like that until there are consequences for them too and not just the kids. Those consequences are coming, they are about to knock the whole industry headlong.


Are you confident changes to benefit (5.00 / 1) (#25)
by oculus on Wed Nov 18, 2009 at 12:42:12 PM EST

the consumer, as opposed to the financial industry, will ever be implemented? Aren't there newsaccounts the White House is worried Congress is talking about being "too hard" on the financial industry?


Oh Yeah (5.00 / 1) (#29)
by Militarytracy on Wed Nov 18, 2009 at 01:00:04 PM EST

The Village is clueless as to what is going down. The people are dry though. Not all of us but a number of us large enough to collapse the whole system. Very very soon the only reason why those of us who aren't bust aren't isn't going to have much to do with how responsible we were for our financial actions. The financial industry has become a raptor....that's it's only chance for survival at this point. Flesh and blood people won't tolerate it though, and they actually can't tolerate it for any serious length of time. This administration and the one before this one has allowed corporations to matter more than the people, they can't even see the little people - don't even know who they are. If a whole system has become so dysfunctional though that none of us can use it with any degree of trust....it has killed itself. This 30% interest is a symptom of the cancer that is taking over the whole organism. They continue to use creative bookkeeping to prove to themselves on paper that things aren't that bad, but there will be no blood from turnips. The whole system in the West rebuilt itself after the oil and gas bust. I knew people who were supposedly "ruined" but not ruined forever by any stretch of the imagination. Washington D.C. can think what it wants....it is going to anyhow....but the Goose is cooked and we are having Goose.


You are talking Hooverville. I was thinking (5.00 / 1) (#32)
by oculus on Wed Nov 18, 2009 at 01:27:20 PM EST

regulation.


I saw an interview with Obama (none / 0) (#37)
by Militarytracy on Wed Nov 18, 2009 at 04:16:37 PM EST

this morning where he said that when they handed out the bailout money they wished they had attached more strings. Now the banks are "well" and they paid it back and there is no recourse. This is largely B.S. though when one remembers that the regulations already exist, they just aren't enforced right now. And the banks aren't "well". They are "well" enough if you participate in creative bookkeeping with them.


: He wishes? He wants a do-over (5.00 / 1) (#38)
by Cream City on Wed Nov 18, 2009 at 04:28:26 PM EST

on how many billions of our hard-earned bucks? Jeesh.
I am giving him a little more time to dump Geithner, Summers, et al. I'll let him let them save face by filling out their first year . . . but I do hope that Obama is not listening to them anymore and has better advisors in the wings.

Are you preaching responsibility (none / 0) (#16)
by hookfan on Wed Nov 18, 2009 at 11:11:57 AM EST

or self preservation? If she doesn't pay it, and on time, she'll be turned over to collections. There she'll face unjustified fees and harrassment at work, home, and even from neighbors they'll contact (tho it's supposedly illegal). They'll not so legally roll over the starting date of when the debt was attained so they can prolong the harrassment. How much hounding can she take? Her credit will be ruined and if she gets flagged, getting it off her credit ratings will take an act of congress. Watch what happens when she tries to buy anything on time, oh say, like a car. More interest, more money she likely wont have.
Naw, for self preservation sake, she needs to get off the financial chain around her neck. Just remember if she goes too far, and pays off all her debt she won't be able to get credit either. The trick is to be a "pretend" financial slave, rather than a real one-- establish enough reserves to pay off cc debt at any time, and still maintain a card to build credit. No reserve, no cc usage. It's helped me reestablish credit after my bankruptcy. And I still don't owe any cc debt, tho I maintain two. However, remember I spent six months sleeping on a floor with no bed to accomplish this too. . .


Your post is all very responsible (none / 0) (#23)
by Militarytracy on Wed Nov 18, 2009 at 12:28:50 PM EST

But 30% is outrageous and is nothing but a ripoff to consumers because the banks are full of toxic assets. Our old credit system is going to blow huge and that will be credit scores and all. She is hardly going to be anybody's first priority when it comes time to ruin people. In fact, so many people will be ruined it will be fashionable and new markets and products catering to the ruined will pop up. I weathered the oil and gas bust while living in Gillette WY. Anybody facing fanancial ruin right now should only worry about their health needs, food, and shelter, particularly if you don't have a job (which she doesn't). By the time jobs are available you can arrange to buy a clean slate from those you owe for a quarter on the dollar, just get that clean slate in writing lawyer style....maybe even a better buyout rate will be attainable. The upcoming overall meltdown is going to melt what we have come to know as our financial realities.


: I agree (5.00 / 1) (#31)
by hookfan on Wed Nov 18, 2009 at 01:03:39 PM EST

it's a rip off from the predator corporations, and it can't keep going. I didn't think I was preaching responsibility, only survival as we don't know when this turd of an economy will get completely flushed. Until then what can one do? Only what one can to avoid being in their noose. Those who don't can be hung befor it blows. Caveat emptor. . .

Yup -- agreed (5.00 / 3) (#8)
by DancingOpossum on Wed Nov 18, 2009 at 09:14:59 AM EST

In the past I always knew that, come what may, I could weather any financial storm, job loss, and so on. I lived through two Republican recessions, laid off both times, and yet never felt desperate--worried, but not desperate. Not anymore. The axe is hanging over everybody's head at my workplace and it's made it an unpleasant place to be but there is NOTHING else out there. And if I lose my job this time I will be desperate. It could be months before I find something even at half my pay, as has happened to many, many, many people I know.

And, of course, although ... (5.00 / 1) (#11)
by Robot Porter on Wed Nov 18, 2009 at 10:21:59 AM EST

the unemployment rate may be only 2/3 of what we saw in the Great Depression, it represents a lot more people, because our population is much larger.

And not paying more attention to this group is not only morally suspect, but politically dumb.

i find it interesting (5.00 / 1) (#12)
by cpinva on Wed Nov 18, 2009 at 10:29:12 AM EST

that mr. delong entirely discounts the disasterous effects the coming next big wave of forclosures will have, on the banks and the economy as a whole, when opining. as an econ prof., he should be well cognizent of the popping of the next group of ARM's.

krugman knows. maybe that's why he has that nobel, and delong doesn't.

{{headdesk}} (5.00 / 3) (#14)
by Spamlet on Wed Nov 18, 2009 at 10:53:31 AM EST

President Barack Obama says he's worried that spending too much money to help revive the economy could undermine a fragile U.S. recovery and throw the economy into a double-dip recession.

In large part (none / 0) (#1)
by andgarden on Wed Nov 18, 2009 at 08:10:54 AM EST

we can thank the Fed for spending huge sums. But as Atrios put it the other day, what we really need is real helicopter money, where random citizens get bundles of cash from Uncle Sam for no reason whatsoever. Just giving it to the banks won't produce a recovery.

: As I ranted at the time (5.00 / 3) (#6)
by ruffian on Wed Nov 18, 2009 at 09:05:19 AM EST

Giving that money to the people instead - even with rules that it had to be used to pay their bank debts - would have been an infinitely better way to fix the "bank crisis".

Couple of things not accurate ... (none / 0) (#15)
by nyrias on Wed Nov 18, 2009 at 11:03:23 AM EST

here.

The unemployment rate during the depression hit a height of around 25%. So we are still at less than 1/2 of that (10.2%).

http://wiki.answers.com/Q/What_was_the_unemployment_rate_during_the_Great_Depression

And I quote:

"The unemployment rate for the years 1923-29 was 3.3 percent. In 1931 it jumped to 15.9, in 1933 it was 24.9 percent. It then steadily decreased until 1941 when it stood at 9.9%. In 1942, after U.S. entry into World War II, the rate dropped to 4.7%. "

Secondly, the recession is TECHNICALLY over while the labor market is still pretty bad.

http://www.newsweek.com/id/208633

"Macroeconomic Advisers, the St. Louis-based consulting firm, says the economy is expanding at a 2.5 percent annual rate in the current quarter. Economic activity "will increase slightly over the remainder of 2009," Federal Reserve chairman Ben Bernanke told Congress."

Apples and oranges (5.00 / 1) (#17)
by cenobite on Wed Nov 18, 2009 at 11:22:45 AM EST

You're comparing unemployment numbers that were counted in different ways. The 25% number during the great depression is more like our U6 unemployment number, which was 17.5% in October, not our U3 number, the 10.2% figure you're using.


If you discount the money the government is (5.00 / 1) (#18)
by cawaltz on Wed Nov 18, 2009 at 11:30:39 AM EST

spending then ther isn't a GDp increase by the way. I wish Barack Obama lots of luck with turning off the government spigot when it is the only thing keeping the GDP afloat. But Hey! It's his funeral.


There is no reason not to count ... (none / 0) (#20)
by nyrias on Wed Nov 18, 2009 at 11:48:48 AM EST

government spending.

In fact, government spending, historically, is one of the for-sure way to increase economic activities.

In fact, by 2010, US government spending is over 40% of GDP, and an important part of the economy (OBVIOUSLY).

http://www.usgovernmentspending.com/us_20th_century_chart.html


There is a reason to discount government (5.00 / 1) (#22)
by cawaltz on Wed Nov 18, 2009 at 12:28:30 PM EST

spending when you are making the case that you should stop it in order to work on the deficit as Obama and Co are suggesting.

I've taken econ 101 and am well aware that efficent government spending is a way to turn the economy around. The problem is the guy you elected doesn't seem to get that- not me.

Then again this harkins back to when he first thought sending everyone a check was going to stimulate the economy and mocked his opponent for suggesting more money be spent on infrastructure.

Interesting tidbit by the way, despite the massive government spending, government jobs are stagnant. So basically the government money is going to private companies who don't necessarily need to add jobs if it doesn't suit them.


hmm ... (none / 0) (#26)
by nyrias on Wed Nov 18, 2009 at 12:50:12 PM EST

I never make any case about "should stop it in order to work on the deficit as Obama and Co are suggesting".

I am merely pointing out technically, we are no longer in a recession. And no one can "stop it" when government spending is around 40% of our economy.

And i don't think i also need to point out that jobs and unemployment rate, is NOT perfectly correlated with GDP growth.


: GDP 101 (none / 0) (#35)
by Samuel on Wed Nov 18, 2009 at 03:00:23 PM EST

If I buy a carton of eggs for 2 dollars and do nothing else my household GDP can be considered 2 dollars. If I overpay and give 1 trillion dollars for the same carton of eggs, my GDP is 1 trillion.
?????? Can we stop talking about this number now? Especially if you're going to talk about US GDP in dollar terms, come on.

My kid just called in tears (none / 0) (#36)
by Cream City on Wed Nov 18, 2009 at 03:24:41 PM EST

after a call from one of our Senators' offices. The kid called the other day to ask both Senators to please do something about an emergency extension of the discounted cost of COBRA for the unemployed, as it is running out on her and others we know, laid off but back in school -- doing what Obama said. The kid is learning in poli sci class all about calling your members of Congress to push them on issues, so I suggested that the kid try it.

The Senator's office called back to say that he can do nothing about it, there is no extension, etc. My kid explained again that the issue is what is the Senator going to do about it? The staffer just kept not listening and -- I listened to part -- then got really rude, putting my kid in tears.

I told the kid who to call about it to get that staffer laid off and coping with COBRA, too . . . but then I said, nah, the best revenge is to get back to work on your schoolwork to get a much better job than that self-important fool in a federal office.

And of course, I said I'll pay for the extra cost of health insurance, and the car insurance, and more . . . as what the heck, now that the last of the employed kids got laid off last week, what's one more? There goes retirement again and again and again.

Oh, and there goes a vote for the Senator, I bet. And maybe for Obama, if this keeps up for the kid, who has been so proud of voting for liberals. The kid is getting quite an education.

no, it isn't. (none / 0) (#39)
by cpinva on Wed Nov 18, 2009 at 06:17:27 PM EST

it's artifice, solely due to increased gov't spending. i minored in econ, so i have half a clue what i'm talking about. i'm not getting paid to tell people how wonderful things are, because, well...............they aren't.

absent additional stimulous spending, improved employment, and no material increase in foreclosures, the economy will take a nosedive in the next few months. like FDR in 1937, tightening the government's belt, and increasing taxes will simply exacerbate a pre-existing condition.

it truly isn't necessary to constantly repeat bad history, especially when you have people around who, if asked, will be happy to help you avoid doing so.

pres. obama might have a 3 hour core econ class under his belt (econ for non-business majors), and admittedly is deficient in that area. why he would take advice from people (republicans) even more deficient is a mystery.