The Economy is Depressing but Not an Economic Depression
Barry Eichengreen notes that the globalization and diversity of the current economy makes it much less amenable to easy government fixing than its Great Depression counterpart. On the other hand, we’re simply not going to see anything close to the economic devastation we saw during that era:
[W]e are not going to see 25% unemployment rates like those of the Great Depression. Then it took breathtaking negligence by the Fed, the Congress and the Hoover Administration to achieve them. This time the Fed will provide however much liquidity the economy needs. There will be no tax increases designed to balance the budget in the teeth of a downturn, like Hoover’s in 1930. Where last time it took the Congress three years to grasp the need to recapitalise the banking system and provide mortgage relief, this time it will take only perhaps half as long. Ben Bernanke, Hank Paulson and Barney Frank are all aware of that earlier history and anxious to avoid repeating it.
The Great Depression talk is just crazy. We’re not in a depression and we’re incredibly unlikely to come even close. Indeed, we’re technically not even in a recession.