Not a Depression?

In one of the few pieces I have seen in recent days about the turmoil in our nation’s financial system, Irwin Kellner on MarketWatch says we are not seeing a second Great Depression, and that we should not refer to what the US House of Representatives failed to do today as a “bailout.”  Odd that I tried to link to the actual US House of Representatives web site ( and couldn’t get it to come up – must’ve crashed or something.  Hmph.

Anyway, Kellner’s point is that the market turmoil we’ve seen over the last couple of weeks, certainly worrisome and cause for action, is not the death knell some would claim it to be.  I have no way of knowing, of course, but I have wondered for some time about the use of increasingly sensationalistic language on the part of “news” organizations.  I even emailed CNNMoney once complaining about their use of terms like “slammed,” “crushed,” “tanked,” and the like in describing what had become run-of-the-mill losses on Wall Street.  A hundred points in the Dow here, a hundred points there.  One day down, the next day up.  The psychological whipsaw was working overtime.

So how much of this is more of the kind of sensationalism and fear-mongering to which we have become accustomed over the last seven or so years?  On the part of the media?  On the part of our public officials?  Just how do we know how big a problem this is?  And how do we know what is (was?) before our Congressmen was the solution?  I’m not sure (m)any of us know the real answers to these questions. 

Looking at some of the figures Kellner uses in his column, there may not be as much immediate comparison to the Great Depression as we think.  Then again, several of the figures he’s used for comparison took several years to manifest themselves.  Who’s to say that unemployment won’t decline between now and 2012 (like it did between 1929 and 1933) or that GDP won’t slump over the next few years?  Only time will tell, of course, whether Dr. Kellner is right or wrong.  On October 30, 1929 I wonder how many people expected the global economic decline that persisted through the 1930s?

Even if this is not the start of a second Great Depression it needs to be a wake-up call to stop living beyond our means and start investing in things that matter.


5 thoughts on “Not a Depression?

  1. Yes, all the Congressional websites have been slammed since the vote this afternoon.

    The tendency to ball up all the financial catastrophes AND their possible (probable?) outcomes and just say “Hey kids, it’s Depression 2.0!” is a bit facile. There are yet many different things that could play out. It’s the historical parallels and the 20/20 vision of hindsight that make it so easy to see what happened beginning with the Crash of ’29 and assume it’s all going to happen again.

    The market swings aren’t in and of themselves indicative of The End Of The World As We Know It. We’ve seen the market swing a lot, and a 700-point drop in an index that is generally between 10,000-12,000 isn’t the same catastrophe that it was in the Crash of ’87 or ’29. But the stock market is only one element of a far more complex picture.

    The problem at the moment isn’t really the market, it’s the bank failures and the resulting problems that they create for lending and credit, particularly housing, which has been the linchpin of the economy for over a decade. There are a lot of people losing their homes right now, and most knowledgeable people say that the trend has another 12-18 months to go. If, at the same time, businesses take a downturn due to unavailable credit, people will also lose jobs…again, probably over the span of a year and a half to two years. THAT is how we get to a depression.

  2. Thanks. There’s certainly no lack of reading material around here.

    Clearly there are some parallels to the present situation and the events that brought on the Great Depression. Part of what I was objecting to is the overuse of apocalyptic language by the media. But I agree that there are opportunities here, not unlike the days following September 11, for us to learn some hard lessons and move forward. It seems like we’ve become too much of nation defined by what we won’t do and bickering amongst ourselves rather than do what it takes to resolve the problem – to put country first, I guess you might say.

  3. Well, I think we’ve established that the media aren’t happy unless there is something to whip people into a frenzy over.

    Two weeks ago it was pigs and lipstick. They’re not fussy.

  4. Well, here’s another spin to put on recent events: In a piece about the spreading economic meltdown on NPR (or the Marketplace Morning Report) this morning, I heard it said, “Remember, even in the Great Depression most people kept their incomes, most people kept their homes,” etc., etc.

    Well, that makes me feel a whole lot better. How about you?

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