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.

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College. He's a former Army officer and Desert Storm veteran. Views expressed here are his own. Follow James on Twitter @DrJJoyner.


  1. chum says:

    I have never, in my entire life, wanted someone to be right, Dr. Joyner.

    Let’s hope the adults are in charge this time. I’ve lost hope that adults are even in the govt anymore. I don’t really understand how you can be so confident, though, because we’re in uncharted waters, and extrapolation is worthless in new turf.

    I hope you’re right.

  2. The underlying assumption here is the the government fixed the economy to get us out of the Great Depression. This just isn’t true, unless you want to give credit to the German and Japanese governments for starting WWII, which did more to get us out of the Great Depression than anything else.

    The only similarity between then and now is that the US government had a major hand in causing the Great Depression and the current calamity.