In economics there is actually a definition for recession which is as a decline in GDP for two or more consecutive quarters. When it comes to a depression it is a little bit more difficult to describe other than a severe recession that lasts a few years. I call what we are living in now the Bush-Obama Depression and have blogged about it before.
We have 2 current wars (where we are dramatically draining our resources), an unemployment rate in the 10% range (after the government manipulates the reports), and a record of bank foreclosures. For goodness sakes, we have tent cities popping up everywhere. We literally spent trillion of tax dollars bailing out banks, car companies, and wall street and are worse for it. I am not one of those sheeple who buy into the argument that it would be worse if we didn’t spend the money because that is a load of crap.
Everyone likes to compare by percentages, but if you look at the raw numbers of the unemployed people, you can see how massive our current unemployment is in the big picture. Unofficially, we actually have over 30 million people unemployed. Compare that to the raw numbers from the Great Depression and you will realize how bad it really is right now.
Because our population has grown so much, more unemployed people now will tax our resources exponentially more. This is the first time now where people are running out of unemployment benefits before they even find jobs.
Now we even have a pro-Obama economist becoming negative. I have watched Paul Krugman on TV and he always seemed to be selling whatever Obama did as the right course of action. I thought he was and is still wrong about the deficit spending. He wants so spend even more and believes that is the solution to our economic woes. I think he is finally opening his eyes because his latest op-ed contradicts what I heard him previously state.
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.
And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.
In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets. Unlike governments of the past, which tried to balance budgets in the face of a plunging economy, today’s governments allowed deficits to rise. And better policies helped the world avoid complete collapse: the recession brought on by the financial crisis arguably ended last summer.
But future historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression. After all, unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.
In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.
Leonor Varela
Alicia Witt
Charli Baltimore
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