Financial Times: The recession tracks the Great Depression

The recession tracks the Great Depression
By Martin Wolf

Published: June 16 2009 19:41 | Last updated: June 16 2009 19:41



Green shoots are bursting out. Or so we are told. But before concluding that the recession will soon be over, we must ask what history tells us. It is one of the guides we have to our present predicament. Fortunately, we do have the data. Unfortunately, the story they tell is an unhappy one.

Two economic historians, Barry Eichengreen of the University of California at Berkeley and Kevin O’Rourke of Trinity College, Dublin, have provided pictures worth more than a thousand words (see charts).* In their paper, Profs Eichengreen and O’Rourke date the beginning of the current global recession to April 2008 and that of the Great Depression to June 1929. So what are their conclusions on where we are a little over a year into the recession? The bad news is that this recession fully matches the early part of the Great Depression. The good news is that the worst can still be averted.

First, global industrial output tracks the decline in industrial output during the Great Depression horrifyingly closely. Within Europe, the decline in the industrial output of France and Italy has been worse than at this point in the 1930s, while that of the UK and Germany is much the same. The declines in the US and Canada are also close to those in the 1930s. But Japan’s industrial collapse has been far worse than in the 1930s, despite a very recent recovery.

Second, the collapse in the volume of world trade has been far worse than during the first year of the Great Depression. Indeed, the decline in world trade in the first year is equal to that in the first two years of the Great Depression. This is not because of protection, but because of collapsing demand for manufactures.

Third, despite the recent bounce, the decline in world stock markets is far bigger than in the corresponding period of the Great Depression.

The two authors sum up starkly: “Globally we are tracking or doing even worse than the Great Depression ... This is a Depression-sized event.” ...........(more)

The complete piece is at: http://www.ft.com/cms/s/0/b31c06a2-5a7a-11de-8c14-00144feabdc0.html

when Bear Stearns collapsed. While that may not be the 'official' beginning, I see it (and saw it then) as the first sizable indicator that bad things were on the way.

Its important.

"We timed this perfectly. Smirk."
- xCommander AWOL & Republicon Cronies

:kick:

All that deregulation sure let the invisible hand do what it, um, does, no?

First of all, Reagan's Supply Side economics makes a hit with everyone - Dems and Repugs alike during the 1980's.

It is the beginning of the Money Party club, and their insidious activities, and like George Carlin said, "You and I are not members of that club!"

Supply Side leads to NAFTA and Gatt under Clinton. If the major leading economic theory does not consider creation of local jobs important, what else could we expect?

The 1999 Banking Reform Act is signed by Clinton. To this day, public interest law firms are not even sure of all the ramifications of this bill, nor how to defend people from those ramifications.

Credit Modernization Act - again signed by Clinton.

During this same era, Glass Steagall is repealed. Only eight Senators vote against the repeal.
The Dem Senator from Nebraska warns that within a decade, the American people could be facing a huge and complete financial reversal due to this repeal.

And so on and so on.