A Second Great Depression, or Worse?

I don't know what to think here. There seems to be some very obvious issues with his analysis that he didn't even mention. Now this is a very qualified guy so I hesitate to point these out but I can't help but think his agenda (to calm people) is clouding the issue.<p>I'll run down the list...<p>1. The government has goosed numbers that are used to caclulate GDP like the CPI. See here: <a href="http://tinyurl.com/3rxzxhs" rel="nofollow">http://tinyurl.com/3rxzxhs</a><p>2. Unemployment is calculated differently today because we factor out "discouraged workers". See here where Motley Fool put 2009 Unemployment closer to 17.5% : <a href="http://tinyurl.com/3lappx9" rel="nofollow">http://tinyurl.com/3lappx9</a><p>3. Yes the FDIC prevented people's savings from disappearing when the banks hit crisis mode and that prevented the banks from going out of business. But the wealth destruction still happened. All we did is shift it from the banks to the Federal Government thereby saving the banks (who wouldn't have survived with that much debt) while burdening the general populace for decades to come.<p>I'm not saying he's wrong as much as I'm saying he clearly had an agenda here and is making the argument for that agenda without giving the other side of the coin. If you don't believe me ask yourself this: Why didn't he use GNP in his first comparison? We still calculate GNP and using GNP now vs GNP in the 30s (when that's all we tracked) makes a lot more sense than using GDP now and retroactively calculating GDP in the 30s.<p>But economists agree GDP is more forgiving and makes the nation look wealthier in a global market than GNP would (since most manufacturing was still done domestically in the 30s). So again there seems to be an agenda here.

I think the author makes some good points about why this recession (or whatever you want to call it) is different from the great depression, in particular re: the decline in output and the importance of agriculture.<p>Nonetheless, I am concerned about a couple issues not mentioned:<p>a) Lots and lots of unemployed, broke, frustrated young men (for an extended period of time). This is bad on lots of levels, public safety being high on the list.<p>b) The fallout of state cuts to certain services will likely get much worse. This will literally slow down the economy.<p>b2) Related, there will be cuts to police, prisons, fire depts, hospitals, etc. The US (esp. in big cities) could become a bit more dangerous with fewer deterrents to those with nothing to lose.<p>Not to be all doom and gloom, and although we've seen these issues in the past, I'm not sure that we've seen them to the extent that looks likely in the coming years.

&#62;the jobless rate reached around 16 to 17 percent. It’s a jobs disaster, to be sure, but not the same scale as the Great Depression.<p>In many ways this is <i>worse</i> than the Great Depression. People are much more dependent on jobs today-in the thirties fewer people had mortgages they needed to pay and more lived in rural areas where food was more available (gardening or barter).

Deleveraging is never fun, but it usually leaves you with a stronger balance sheet.

I think the best comparison is Japan.<p>Huge real-estate bubble fueled boom times, followed by a lot of spending to try and stimulate the economy Keynesian style. If it does not work, you get 20+ years of recession.<p>At least America's population is growing so that might make a difference. Also America's infrastructure is in bad shape, as opposed to Japan which went into its recession with top notch infrastructure. This means infrastructure spending in the US could be more stimulative then it was for Japan.

Not a depression - a liquidation. It will be painful.

Half the game is mental. If the people think things are going to slow down, they are going to do things(stop or put off purchasing, moving money to safer investments) that WILL make it slow down, which in turn will cause other people to do the same further slowing it down.