Where did we get it?
Suddenly we have another definition of depression and it is two years of unemployment at 10% or more. Where did that come from? 10% unemployment a depression? I don't think so.
..."Bradford DeLong, a former Treasury official who is now a professor at Berkeley, says a depression is a two-year period with unemployment at 10 percent or above"... See Bloomberg, 'Depression Dynamic Takes Hold as Markets, Banks Revisit 1930s'In 1982-83 we averaged 10% unemployment for 17 months and there was not a whisper of depression - very bad and ugly recession yes, but no depression. Now with unemployment ratcheted up to 8.1% everyone is in the depression camp. What has happened?
Stoking fear of depression
For one thing fear of depression should be limited by the government's actions to stabilize banks. Although some- also in government - seem determined to undermine that act of stability and support. Over the weekend Senator's Shelby and McCain urged the Obama administration to let some big banks fail. Huh? Yep. Fail. Shelby said...'If they're dead, they ought to be buried." Clearly Shelby is brain-dead, maybe he ought to be buried first... He wants to let Detroit automakers go down, let banks down, of what country is this man a citizen, let alone a senator? Does he represent the best interests of Japan in America? Japan is propping up the Japanese automakers that have plants in his state (where they are getting huge subsidies to operate) why not extend the same helping hand to Detroit? After all it's more a credit problem than an intrinsic auto problem. Cut sales by one third in one fell swoop and what industry could survive?
There they go again... but it's not what you think
But Republicans have a history of misunderstanding the government's role. When Newt Gingrich was a leader in Congress he led a failed attempt to shut down government by trying to restrict its ability to issue debt. Failing to pass debt ceiling legislation in a timely fashion as they did could have forced the US to default on its debt as well, a horrific prospect that Gingrich-led Republicans once were gleeful about. It is something about which Mr Gingrich is now remorseful. Let's hope that this swipe at the banks by key Republican leaders will go away, too without becoming part of some future expose on 'what not to do in a financial crisis'. This is one time that you can take Ronald Reagan's words and turn them back on Republicans, " There they go again."
Brain first, mouth second
In the fragile economic environment we are now in, it is more important for economists and policymakers to watch their words and their language. The WSJ already has published results that qualifies as depression-inflammatory research by Robert Barro. He argues that a depression (defined in a much more draconian way than above) is a 20% probability. See the side links to my comment on this feeble effort by one of Harvard's best and most manipulative economists.
Pessimistic market selling (PMS) has been another hallmark of this downturn. There can be no justification for current market values except in a framework that sees the economy going down the toilet and into the septic tank. In that scenario, government prop-up efforts fail. The only bets in favor of that outcome come from a few Republicans longing to make headlines for themselves and to impede progress of the Obama administration. They seem to have abandoned their quest for family values and proper stock market values as well. Yet there is no reason to bet against either Uncle Sam or Ben-at-the-Fed Bernanke. The Administration has stumbled persistently in its attempt to deal with the financial crisis but it has made clear its objective-to save it and to keep any financial malaise from spreading. The Fed has been both nimble and innovative.
There is no sensible reason to vote or bet on failure in this endeavor.
Forget the lawyers: Kill the Democrats and the Republicans
When the Republicans were in charge of this mess under 'W' they hardly did any better. It's not about partisanship. It's about the economy, the difficulty of dealing with the problem and admitting that this a bi-partisan problem with finger prints from Both Republicans and Democrats all over it. The sooner the TWO parties stop trying to play this for ideological gain and focus on helping American's and the US economy the better off we all will be.
But don't hold your breath waiting for that to happen...
Moreover be wary...
Be very skeptical of all these bad things that are supposed to happen based on FORECASTS. The World Bank has a real doosey of a pessimistic forecast out today. Many economists are now jumping on the 'my forecast is more depressing than your forecast' bandwagon. No one predicted this terrible downturn there is no credibility among those saying how much worse it will get or must get. We are out of economic-land into opinion-land now. So beware whose fairy tale you buy into- be especially wary of tales told by ideological economists.