These days, it seems that among the common folk, economic “depression” seems to be defined as “whenever I feel like it’s a depression.” Of course, pundits aren’t immune to declaring depressions imminent or here; the article mentioned in the OP of this thread does so too. Making things worse is the often-mentioned fact (which I’m not 100% sure on its accuracy) that economists don’t really have a definition for a depression, unlike the much more common recession. This makes it a lot harder to judge things, especially when (as in the mentioned article), we can’t have a back-and-forth conversation with the writer or whatever to find out what goes into his or her personal definition of “depression.”
Those with economic insight: if we were to define “depression,” what do you think the definition should be? How close are we to your personal definition? Obviously, the more detail, the better.
I’d say 30% unemployment for starters, and another decline of 40-50% in the market would do it too (DOW 4000). The Depression, as we know in the late 20’s early 30’s, the market dropped 90%. We’re at -50% today. If people thought we were in a true depression today, and if what I mention happened, I wonder what they’d call it then. IMO, we’re teetering on the edge, but it will take a lot to go over that edge still.
I asked my Grandmother about this and she said the main deciding factor here that changes things over the Great Depression is Social Security and Unemployment insurance, that they make all the difference.
To a point, yes. Unemployment Insurance and Social Security prevent a downturn from becoming a self feeding panic.
But if you have 30% unemployment and there is more an more political pressure to just indefinitely extend unemployement benefits, and you have something like 60% of the working age population supporting the other 40%, then you are in the position of just printing money like crazy to make the system work, or pauperizing the working.
I would say that once people start taking to the streets in massive numbers to express their economic grievances, then we’re in a depression. So parts of Europe are in a depression already, but the United States is not.
Yeah, I agree with the unemployment rates. Anything approaching 20% and higher is pretty scary. 30% is a full blown depression against which no one can argue.
If we had 20% unemployment in the US currently, we’d be in a depression in most economists opinions.
There’s no textbook definition of a depression. Frankly, there’s no textbook definition of a recession, either. Dow and Jones came up with one, but I don’t like theirs and I don’t have to accept it.
The term “depression” was invented because referring to every downturn as a market “panic” sounded too harsh. The term “recession” came about because people formed bad associations with the term “depression” after we’d had a couple.
A recession for me is about economic growth - any time that real GDP per capita shrinks for a measurable timeframe (which is generally a quarter), I’d fit that as a recession. A depression is a recession that’s likely to be self-sustaining, after allowing for the effects of natural stabilisers.
I was at the mall the other day, and all of the department stores’ down escalators were turned off. It took me a few stores to realize this was deliberate (“Another one is broken! Are they all on the same circuit or something?”) When I realized it could be a cost-saving measure due to the light foot traffic, I thought, “They’re asking Americans to walk. Sales must be pretty damned bad.”
Then I thought, “When they switch off the up escalators, well, that’s when we’re officially in a depression.”
