On the brighter side this should make a good buying oportunity for some of us. All those defaulted cars and homes could be bought cheap. Some people made money off of the depression by buying cheap stocks and property.
What happens to the employees of the service industries when there isn’t the money to pay for the serveces? Service industries only work when things are going well financially. Quite a bit of the stock prices are controlled by fresh monthly 401k money that has to find a home. If fuel prices double again there will be a severe downturn in the economy. The probability of a 30s style depression isn’t real great. With the demeanor of todays public I don’t see anything less than anarchy with a financial crash like 1929.
As has already been mentioned there was a sharper crash that 1929 in 1987. However this did not result in a depression or even a recession. A stock market crash would hurt alot of people but by itself would not tank the whole economy. You have do alot of things wrong. Bad monetary policy, raising interests rates, raising taxes, hiking tariffs. A few of those could happen triggering a recession but the likelihood of them all happening is remote. I think the only way a depression could hit is if somehow the Kyoto treaty is passed, which is highly unlikely.
Collounsbury:
The problem if the euro ups and crashes would be something like what happened over in Asia when the currencies tied to the dollar went belly-up: those countries were unable to repay their dollar-denominated loans. In Euroland, you have a bunch of continental economies that may (emphasis on may) owe money in dollars, pounds, or yen that may be unable to repay them if the euro depreciates too much. Then there’s derivatives used for hedging currency risk which may blow up in the event of a sudden crash.
Finally, you could have a thirties scenario in which each country tries to devalue more than the next. In which case, buy gold!
However, the issue is structurally different. The currencies in Asia were not free floats – their crashes were actually returns to market value after central banks exhausted hard currency reserves trying to support an artificially inflated value. The Euro, like its underlying currencies, floats.
Since most European Union trade is internal to the Union this is actually not possible (I believe something on the order of 8% is extra-European) — you should not compare developing economies on pegged currencies heavily dependant on outside capital with the mature economies of Europe. There are problems, notably in oil pricing in dollars, for a weaker Euro, but given it is on a free float, this will not “crash” – and in fact so long as the underlying economy is sound speculation should be overcome by the fundamentals.
False comparision with the Asian economies, we’re talking a different beast here.
I don’t think that is going to happen but it could I suppose if G7 cooperation totally broke down. I don’t see that happening so…