I keep seeing all these great depression references, but really, apart from the basic similarities is this appropriate?? (question- not statement) Every time I hear these comparisons I cannot help but consider if this is really apple-to-apples. Isn’t the world economic environment a little bit different after ~80 years of technological/ political/ financial developments? I never see ppl put in a qualifier- just making straight comparisons and I would think that the world economy today is more interconnected/ nimble/ elastic/ whatever. I’m not saying its better, nor am I saying its worse- I honestly don’t know, but it just doesn’t make sense to me that there are so many our there using the great depression as a straight template for what is happening today and what will happen going forward. Thoughts?
Wasn’t there a massive midwestern draught and a lot of hungry folks? Everywhere I look I see fat people.
Here’s an article emailed around yesterday at my firm. Gives another pov. Specifically, it compares this crisis with the panic of 1873. http://chronicle.com/temp/reprint.php?id=477k3d8mh2wmtpc4b6h07p4hy9z83x18
Unemployment today is 6%…back then it was 80%
80%? I don’t think so. I believe unemployment was more like 25% in the great depression. Also, 6% is almost certainly an undercount.
If we are entering a depression, it’s not going to look anything like the last one. I really don’t believe that unemployment will reach 25%. 10%, maybe, and that would be really bad, but it isn’t going to be nearly as painful as the depression of the 30’s. This depression will not be accompanied by the “Dust Bowl” either.
steph96 Wrote: ------------------------------------------------------- > This depression will not be accompanied > by the “Dust Bowl” either. We hope… though there is global warming, hurricanes, and the fact that our production systems are more tightly coupled today than back then.
projectplatnyc posted an excerpt from a Gary Becker article showing how the Great Depression was impossibly worse than anything going on today, 25%+ unemployment enduring for 10 years, etc.
> steph96 Wrote: > > This depression will not be accompanied > by the “Dust Bowl” either. Actually, Swiffer has decided to sponsor one of the college bowl matches this year. They’re going to play 4 quarters on freshly swiffered linoleum… in socks.
bchadwick Wrote: ------------------------------------------------------- > 80%? I don’t think so. I believe unemployment > was more like 25% in the great depression. > > > Also, 6% is almost certainly an undercount. Right it just sounds like 80% everytime my grandfather talks about it. “I was so poor…” It gets to the point where I have to say “…I can’t pay attention”
bchadwick Wrote: ------------------------------------------------------- > 80%? I don’t think so. I believe unemployment > was more like 25% in the great depression. > > > Also, 6% is almost certainly an undercount. and what makes you think the 25% isn’t? Just seems like data mining to me. Yeah, there are parallels but the environment its happening is apples and oranges no? Instead of focusing on the similarities notice the differences. eg- in 1930 how would a dude in beijing decide that he wants to long the dollar? Silly but true- just think of how radically different the times are.
virginCFAhooker Wrote: ------------------------------------------------------- > Wasn’t there a massive midwestern draught and a > lot of hungry folks? This is what a lot of people miss. We probably won’t experience the same weathe r problems we did back then. The great depression was maybe a once in a millinium type of event…Several different things had to happen to create that perfect storm.
akanska Wrote: ------------------------------------------------------- > bchadwick Wrote: > -------------------------------------------------- > ----- > > 80%? I don’t think so. I believe unemployment > > was more like 25% in the great depression. > > > > > > Also, 6% is almost certainly an undercount. > > and what makes you think the 25% isn’t? It might be. My point was that the right figure is substantially less than 80%. > > Just seems like data mining to me. Yeah, there > are parallels but the environment its happening is > apples and oranges no? Instead of focusing on the > similarities notice the differences. > > eg- in 1930 how would a dude in beijing decide > that he wants to long the dollar? Silly but true- > just think of how radically different the times > are. I agree that there are some important differences. I think the depression references are simply a wake-up call to point out that there is enough similarity that the consequences could be on a similar order of magnitude. Remember than in the 1930s they didn’t have global outsourcing and offshoring. My biggest concern is that the US doesn’t appear to produce all that much that we can consume, and therefore will have trouble employing people to produce it. That means that it can be difficult to put people back to work doing things other than selling each other houses, and lots of unemployed people will lead to low consumption, making it difficult to create businesses. Fortunately we produce a lot of food, but only about 3% of the population are working in that sector.
akanska Wrote: ------------------------------------------------------- > I would think that the world economy today is more > interconnected/ nimble/ elastic/ whatever. I’m curious about how much more or less interconnected we are today. I’ve heard/read that the period leading up to 1914 was actually I time of incredible interconnectedness, with global trade levels higher than they are currently (as a % of gdp). Can anyone provide some background on the difference in interconnectedness today vs. 80 years ago?
bchadwick Wrote: ------------------------------------------------------- > Remember than in the 1930s they didn’t have global > outsourcing and offshoring. (I think the current interlinked-ness of the world economy will help PREVENT not cause a downturn as devastating as the GD.) > Fortunately we produce a lot of food, but only > about 3% of the population are working in that > sector. (3% producing large portion of international food basket= more time resources for other enterprises no?) Maybe I’m just dumb but these seem like benefits to me.
bchadwick Wrote: ------------------------------------------------------- > 80%? I don’t think so. I believe unemployment > was more like 25% in the great depression. > > > Also, 6% is almost certainly an undercount. Yeah, maybe, but even it is, it’s not likely to be by more than a percent or two. Even if it is say 8%, in 1982 it was in the 10.5%. I’m so sick of all the depression references, I’m sick of all the main street arm chair market analysts doomsday bears, I’m sick of the media perpetuating this crap. This is no different than the tech bubble only now its financials that are tanking and dragging down the ship instead of tech companies. Also , compared to some countries on the earth (Somalia, Myanmar, N. Korea) we are doing pretty damn good to say things are so bad. I’m not sure who said it, but I agree – we truly are a nation of whiners.
Gouman Wrote: ------------------------------------------------------- > bchadwick Wrote: > -------------------------------------------------- > ----- > > 80%? I don’t think so. I believe unemployment > > was more like 25% in the great depression. > > > > > > Also, 6% is almost certainly an undercount. > > > Yeah, maybe, but even it is, it’s not likely to be > by more than a percent or two. Even if it is say > 8%, in 1982 it was in the 10.5%. > > I’m so sick of all the depression references, I’m > sick of all the main street arm chair market > analysts doomsday bears, I’m sick of the media > perpetuating this crap. This is no different than > the tech bubble only now its financials that are > tanking and dragging down the ship instead of tech > companies. Also , compared to some countries on > the earth (Somalia, Myanmar, N. Korea) we are > doing pretty damn good to say things are so bad. > > I’m not sure who said it, but I agree – we truly > are a nation of whiners. phil gramm
akanska Wrote: ------------------------------------------------------- > bchadwick Wrote: > -------------------------------------------------- > ----- > > > Remember than in the 1930s they didn’t have > global > > outsourcing and offshoring. > > (I think the current interlinked-ness of the world > economy will help PREVENT not cause a downturn as > devastating as the GD.) Maybe. My thinking was that if we need to start to have home-grown industries to employ people, then we somehow need to figure out what all these people are going to do that adds value. I do think we’re likely to have more calls for protectionism - and it’s going to be hard to resist those. The consequences are usually higher prices and lower productivity, but a (very) short term boost in jobs that will make politicians want to bite the protectionist apple. > > > Fortunately we produce a lot of food, but only > > about 3% of the population are working in that > > sector. > > (3% producing large portion of international food > basket= more time resources for other enterprises > no?) This is mostly a benefit - my point about that is that we DO produce agricultural products (I had been asking “what do we produce”), but the total number of people employed in all of US agriculture is probably smaller than the number that’s unemployed, so we’re not going to have the agricultural sector absorbing them. > Maybe I’m just dumb but these seem like benefits > to me. I don’t think you’re dumb. 
This mess makes all of us feel like we might be dumb.
Gouman Wrote: ------------------------------------------------------- > > I’m so sick of all the depression references, I’m > sick of all the main street arm chair market > analysts doomsday bears, I’m sick of the media > perpetuating this crap. This is no different than > the tech bubble only now its financials that are > tanking and dragging down the ship instead of tech > companies. Also , compared to some countries on > the earth (Somalia, Myanmar, N. Korea) we are > doing pretty damn good to say things are so bad. > 1) Comparing the US to Somalia, Myanmar, and N. Korea to say that we aren’t in such bad shape is really grim. 2) I don’t think this is much like the tech bubble at all. The tech bubble was about equity financing in the wrong place. It mostly impacted stocks and mostly tech ones. This is about a massive disruption in financing anything. I think this is serious. The tech bubble bursting I thought was funny. This isn’t funny at all. 3) I also think the Great Depression thing is not a good comparison and I think the 1873 Crisis isn’t appropriate either (btw - contrary to that article, I think 1929 Depression was worse). The big difference between now and 1873 is that a huge portion of the economy in 1873 was aimed at keeping people fed, clothed, and housed. That’s not true anymore because we can do those things very efficiently. In the Great Depression, GDP dropped by 20%. Think we could see a 20% drop in GDP? I do.
“This is no different than the tech bubble only now its financials that are tanking and dragging down the ship instead of tech companies.” You couldn’t be more wrong. “Also, 6% is almost certainly an undercount.” We are only at the beginning of this deep downturn. The people who have gotten this cycle correct foresee unemployment north of 15% at the climax of this tsunami. That’s as close to a depression as you can get. The biggest leveraged bubble in world history has popped. Our leveraged service economy bubble has popped. The days of easy credit are long and gone. Private sector credit will contract for several years resulting in ramping unemployment, higher savings rates, and massive corporate downsizing and bankruptcies. Any company who expanded aggressively based on the assumption that asset prices will continue going up and this global consumption boom will continue unwavered are dead in my opinion. Restaurant chains are most vulnerable here.