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This is Depression 2.0

While it doesn’t quite feel that bad yet here in NZ, the global data suggest we are in a situation as bad (or worse if you take a literal view) than the 1930’s. Industrial output, stock markets and world trade are all declining faster now than during the Great Depression.

Naked Capitalism lays out the figures in an elegant article.

Just as the Great War became known as WWI when superseded, I suspect we’ll be calling the current event Depression II in hindsight. The question now is how much worse will it get and how long will it last? We’ve been in decline for a year while during the Great Depression there were three years of decline before a slow trip back to recovery.

I’m all for positivity and believe we shouldn’t dwell on the negative, but acknowledging and and facing the full depth of the situation at hand will better help us adapt to it. The pundits that confidently tell us things will pick up this year have no basis for their argument – we are in uncharted territory now and their cheery delusions won’t help any of us in the long run.

2 Comments »

  1. Royden said,

    May 26, 2009 @ 8:58 pm

    No question that things are custard out there. However, in terms of making comparisons between 1929 and now there are a couple of things we should take into account. Firstly, all our markets are more responsive to news than they were before. Blame this on rampant technology and shameless journalism. We can expect a quicker decline because everybody has seen Titanic and knows full well that there are not enough lifeboats.

    Secondly, the “Great” depression was so called in part because it lasted so long. This was primarily because nobody tried to do anything about it for, in economic terms, years and years and years. By the time Roosevelt came to power in 1933 the depression was a good 4 years in and then he had to guess his way out of it because economics was still a relatively new idea. Not so now, where the ‘mighty powers that be’ with their massive brains are hard at work borrowing (as opposed to burrowing – yeah right) our way out of this mess.

    Having said all this I fully agree with your sentiment. While markets may be appreciative of the chance to ‘get in’ after something has tanked by 90% I do feel sorry for Obama. That has got to be the ultimate hospital pass. If we take away the arrogance and bravado of cowboy capitalism we are left with an economic flywheel that has lost its driving influence; that is to say, there is still a lot of economic energy still going round but the growth that got it there is now gone. They cannot eat more burgers or drink more Cokes than they already are.

    The Roman Empire lasted a thousand years. The US empire took about 100 years to get where it is today (assuming you start counting say, around the birth of powered flight in 1903). How long do we give it from here?

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