What is a depression and are we in one?

DQ here.  In a comment to another post, Charles Martel says we are in a “depression economy” and that Obama is prolonging the depression.  I’d be interested to know how Bookwormroom readers define “depression” (and “recession” for that matter) and whether they agree we are in one.  Also, if we are in one, how does an economy get out of a depression/recession and what, if anything, is Obama doing to prolong whatever it is we are in now?

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Comments

  1. Zoltan says

    I believe the textbook definition of a recession is two consecutive quarters of negative GDP; so technically we are not in a recession. However, the present recovery has been so anemic, not only in GDP growth, but particularly in job creation and lowering unemployment; it seems to many that we have been in one long recession.
    For my two cents, I believe that it is only a matter of a few quarters before we are in negative GDP territory and in another recession. I also believe that because this recession will be starting from a much lower economic level than the last one; it will be much more severe. Add the factors of a possible EU breakup and a slow down in the Chinese and Indian economies, I see a world-wide depression on the horizon. Governments and central banks will make efforts to stave off this depression, but I think their efforts will only serve to delay its onset. My take: bad times are coming…prepare now.

  2. Danny Lemieux says

    A Depression is an extended period of economic anemia: during the Great Depression of the 1930s, there were plenty of periods of economic growth – the problem is that they were all small increases from a very low baseline.

    One sign of depression is a chronically high level of unemployment which, according to the official statistics, is in the 8.0% range but, in reality when you consider those that have dropped-out of the labor force or are underemployed, hovers in the 15-20% range. 

    As Reagan said, “recession” is when your neighbor is unemployed, “depression” is when you are unemployed. 

  3. jj says

    Funny you ask.  I’ve been thinking about this, so here are thoughts.  Somewhat inchoate, not a fully-formed essay to go on my own blog as yet – but getting there.
     
    There are the textbook definitions – devised by economists and various gaggles of various other sorts of “experts” – and then there are the real-world effects with which we all live, and which cause people to suppose that the condition exists whether the textbook agrees or not.  Textbooks often live in a disconnect from the real world, and plenty of people die every day who do not have cancer, AIDS, pneumonia, or heart disease, or any other leading cause of death – and haven’t wrapped the car around a tree at high speed, either.  They just die.  By somewhat the same token – the analogy doesn’t require that much stretching – the textbook definition would not allow that we’re in a recession; we just are.
     
    I think you get at it less by what the experts say – a recession is defined by two consecutive quarters of no or negative growth, blah-blah-blah, and a partridge in a pear tree – than by the visible effects.  The two quarters thing works as a computer model, but that isn’t something people can see, taste, or feel.  What they see, taste, and feel – live with, in other words – is the result, or effect, or consequence of that definition on their community.  The definition’s slippery, and applies unevenly.  Right now, things are tough in Chicago and Richmond, but Corpus Christi and Dallas are booming.  My father, who led an interesting life, once told me flatly that during the Great Depression there was no depression in Palm Beach.  Well, he was there every twenty minutes through those years; I wasn’t born yet – I have no reason to doubt him.  (And I have a trove of old clippings and programs and things, and what it seems they mostly did through the thirties was play polo, same as they did in the twenties.  In the summers they went north, and played polo on Long Island.)  So it’s a mutable definition, and doesn’t apply with the same force, or in the same way, everywhere.  When you say the whole country suffered through the Great Depression – no, they didn’t.  Palm Beach County didn’t; Los Angeles County didn’t (those were Hollywood’s growth years); Nassau County on Long Island didn’t, and I’m sure there were other places.
     
    So how you recognize it depends at least in part on where you are.  I personally live in an anomaly right now.  Seattle is run by dopes, and there are a plenitude of “homeless” around, (but there always are, even at the best of times.  We do have a pretty severe tribal/substance abuse issue, and it’s plainly apparent even at full employment and in boom times), so to the untutored eye it’s obvious Seattle’s in a recession.  Except that all you can see on the horizon are building cranes.  Everywhere you look, all directions – and it’s been that way nonstop right from 2005 through this morning.  I don’t know what the hell they’re building, or from where the people to occupy all these places are supposed to come, Seattle’s just not that crowded; but my God have they been building!  Like the recession never happened, or is happening, or whatever.  So – for construction workers, carpenters, concrete cutters, plumbers, electricians, architects, etc. in Seattle: no recession.  (Palm Beach, 1934: “what?  Depression? What are you talking about?”)
     
    Out on the Peninsula it’s small farms and tourists.  The Olympic National Park is still there, we’re still up to our ass in out-of-state RVs, I notice, and the small farmer is his own dynamic.  April is not for paying taxes, it’s for getting the potatoes in the ground, and if Wall Street falls on its ass or they stop manufacturing widgets in Minneapolis, well, the potatoes still have to get in the ground.  There’ll certainly be an effect on what it costs to get them there, and how the market is for selling them in a bit – but it doesn’t change this afternoon’s work.
     
    So it seems to me that whether you’re in a recession or not is at least in part a function of where you are, and what goes on locally.  Individuals in a farming community may be damaged – but the dirt’s not going away, it’ll remain fertile to whatever extent it ever was, and it’ll get worked.  Stuff will be grown.  Our town grows, the whole county does; and that, interestingly enough, is largely a function of people from California coming here.  That hasn’t slowed much, and the Olympic Peninsula is becoming a vast retirement home for escapee Californians.  (My wife just sold a $700,000+ house to a couple from Encino last week, we did the inspection yesterday.)  They bring the stuff they need, and Sequim – with a total population under 8,000 – has three huge assisted-living complexes.  (I will bet quite a bit there isn’t anyone living in any of them who was born in Washington.)  So it’s hard for me to say we’re in a recession.  I can see that the country isn’t doing well, the GDP is going nowhere, the cost of everything is going up, manufacturing is nearly a dead issue, the Yankees aren’t in first place – but my three-town community (in a county bigger than the state of Rhode island) is doing pretty well.  Real estate prices have certainly fallen, but the other way to look at that is to suppose they’ve gotten back down to where they bear some relationship with reality.  What they were six years ago was absurd.
     
    Recession is a period of no economic growth.  But can an economy only grow, and grow, and grow, and grow, and then grow some more?  At some point has GE not succeeded in putting a toaster-oven into every home?  What do they do on that day – raise a glass, followed by seppuku?  That’s total recession, or depression, for GE: their workers stand idle, nothing to do, no reason to pay them.  Victims of success.  idle is idle, doesn’t matter how you got there.  So I don’t know, I guess I’ll  buy the textbook definition, but only in national terms.  Otherwise the definition’s too shifty.  New York starves, Fort Worth booms.  Texas is not having a recession.
     
    And FDR did practically everything wrong, as Obama is doing.  Democrats learn nothing.  I guess they aren’t historically-inclined.  If unemployment is the measure, then everything Roosevelt did – everything, all of it, the whole alphabet soup – was an abject failure, because unemployment in 1940 was about a point lower than it was in 1933.  Amazing how democrats to this day will still tell you: “Roosevelt ended the depression, and he put people back to work.”  Really?  What was the unemployment rate in 1933?  What was it when Japan marched into Nanking?  or Hitler marched into Poland?  They don’t know, so you tell them.  Oh.  Tabula rasa.  What ended the Depression was the war, plain and simple.  Tojo put people back to work, with a large assist from Hitler.  A recession may be seen as a market problem.  Government may also be seen as a market problem – or at least a pro0blem to markets.  Can one problem repair another problem, or do the two simply combine, like great atmospheric lows, to form a mega-problem?  You’d have thought Roosevelt proved the answer to that one.  Evidently democrats weren’t paying attention.  As usual.

  4. says

    Both “recession” and “depression,” as these terms are normally used, refer to *cyclical downturns*. What has people worried now is fear that the current situation is not purely cyclical, that it is a secular decline…or, as Tom Petty put it in a (probably) different context:

    The good old days
    May not return
    The rocks might melt
    And the sea may burn

    Surveys show that a high % of people believe their children’s lives will be harder and less-affluent than their own.

    I think that getting Obama’s foot off the airhose of the economy would make a huge difference, especially if coupled with Republican control of both houses of Congress. But the fact that there are STILL a significant % of people supporting Obama indicates that we have some definite cultural and thought-process problems in this country.

     

  5. SADIE says

    It’s the variables, where you live, what you need, what you want, projecting down the road. For seniors, like me, on a fixed income, it’s rising health and food costs. Call it “D” or call it “R” – both leave you feeling in animated suspension. It’s the absence of a plan and for that matter nothing seems to be defined anymore, including taxes on businesses and individual tax payers. Don’t plan on a plan from the “wizards of waste” in DC – they’re all very busy running for reelection.
     
     
    To jj’s point, “it depends at least in part on where you are…”
     
     
    www.housingpredictor.com

  6. groman says

    I live in the southeast and the economy in my area slumped along with everyone else right at the end of 2007. The Democrats had taken over the House and Senate in 2006 and were busy enacting new rules and regulations on business. Chuck Schumer was letting everyone know that he had it on good authority that Indy Bank was going under. Gas prices suddenly started climbing and people received nothing but doom and gloom from the MSM. All of it the fault of GW and those evil Republicans, many who deserved criticism for abandoning conservative principles in an attempt to win votes. Enter 2008 and The Won. Obama was going to fix everything, except like a true Marxist he’s made it worse. Intentionally ? I don’t know. What I do know is that business has picked up slightly. Enough to keep the lights on but if the EU collapses, all bets are off. We will enter a world of hurt as the resulting effects will spread around the world. Of course if Romney is elected, it will be all his fault. Just ask the lamestream media.

  7. Mike Devx says

    jj said: What ended the Depression was the war, plain and simple.  Tojo put people back to work, with a large assist from Hitler.

    david foster said: I think that getting Obama’s foot off the airhose of the economy would make a huge difference, especially if coupled with Republican control of both houses of Congress.

    What interests me about 1940, mid-1940 to be exact, is that is when Roosevelt did a 180 degree turn on the economy.  He did this to change America’s policy in WWII, to shift us from non-involvement to becoming “The Arsenal Of Democracy”.  No troops, not yet.  But our economy shifted to war-time footing, as if we were ourselves at war.  It was a planned economy, true, but…

    David talked about “getting OBama’s foot off the airhose of the economy”.  Until mid-1940, Roosevelt’s New Dealists were in charge of the economy.  Roosevelt shunted them all off to the side, then, and appointed two men who were EXTREMELY pro-business, to run the economy.  He had to do this, because up until that point the hostility, hatred and mistrust between business and the administration was sky-high.  For ‘The Arsenal of Democracy’ to work, business would have to trust the administration, and the only way to do that was to go whole-hog into a pro-business environment.  And boy oh boy, to Roosevelt’s credit, that’s exactly what he did.  Those two guys now running the economy were as friendly to big-business as you could be, and America was off and running.  In mid-1940, America went to war, but no one knew it, because we weren’t supplying troops.

    So, did Hitler and Tojo cause the end of the Depression?  Or did Roosevelt inadvertantly cause it, when he switched economic and business policies by 180 degrees?  From being radically hostile to business, to being radically, crazily friendly to business?  From mid-1940 on, the economy slowly improved.  And after WWII, when the planned war-time economy ended, and we switched to much more of a hands-off free market approach, America just EXPLODED upward economically.
     
    To me a depression is a recession that doesn’t end.  You don’t know you’re in a depression until you’re actually in it.  Economic indicators on a national level just don’t recover.  As someone above noted, the Great Depression lasted for ten years, even though there were periods within those ten years where the indicators themselves were positive.  But they were anemically positive, the baseline from which they were positive was desperately low, and the positive indicators didn’t last but more than a very short time.  

    I’m sure with each positive indicator the administration crowed that “The Situation Is Improving”!   Only a few months later to have to eat their words, and then admit, “We are still facing strong headwinds in our battle to improve the economy.”   And yes, if I hear Obama talk, one more time, about those fricking “Headwinds” that he is facing, I am going to upchuck.  Obama is own Headwind when it comes to the economy.

  8. Mike Devx says

    jj said: Funny you ask.  I’ve been thinking about this, so here are thoughts.  Somewhat inchoate, not a fully-formed essay to go on my own blog as yet

    jj, do you have a blog?  If so, what’s the link.  I would love to visit the jj blog!
     

  9. Gringo says

    Texas is doing comparatively  well, and my self employment earnings  this year will  help average out some previous lean years. I will put as much as I can into a safe dividend stock for retirement. I will keep my old clunker of an automobile. Thus far the only concession to good times has been to get a print subscription to Commentary. [You don't have to be Jewish..   :)   Do I have a Rye sense of humor, Sadie? ]
     
    groman
    Obama was going to fix everything, except like a true Marxist he’s made it worse. Intentionally ? I don’t know.
    I doubt Obama knew enough about economics to mess it up if he wanted to.  This is the guy who talked about the profit/earnings ratio. The best he could do for the economy would be to do nothing and get out of the way. Unfortunately, he is of the opinion that his doing something will be of assistance. Like the Stimulus. Yeah, right. That Stimulus graph says all we need to know about Obama’s stewardship of the economy.
     
     
    http://pjmedia.com/richardfernandez/2012/06/01/all-in-a-days-work/  Update of the Stimulus graph.

  10. gpc31 says

    On one level, it’s very simple:  This is not a normal recession; it is, to be more precise, a debt depression due to the build up of debt since the 1960s.  We are facing a currency crisis.   Steve Keen, an Australian economist, is a lucid guide to the subject.
     
    We can’t service the debt under current conditions, let alone under Obama’s disastrous policies.  Debt is in the numerator, growth in the denominator.  (Guess where taxes go.)  You can either grow your way out, inflate, or default.  Ask yourself, does increased government really increase the productivity needed for growth?
     
    These are qualitative distinctions that transcend the usual quantitative definition of a recession as two consecutive quarters of negative GDP growth, etc.
     
    As a matter of fact, the national income statistics as devised in the post WWII years are outdated and misleading.  The concepts behind them are obsolete and flawed.  How do you calculate GDP when Honda operates factories in Alabama?  When Apple outsources to Asia?  How do you value intellectual property?  How do you measure productivity in a software and service economy?   (Used to be easier when you knew how many man hours it would take to produce a Chevy.)  How does monetary policy operate and what does “Money Supply” mean in an age of the shadow banking system?
     
    Faulty instruments are causing us to fly blindly into the mountain.
     
    We have reified theoretical concepts that were devised in an ad-hoc manner by dedicated scholar practitioners in order to deal with the aftermath of World War II and Pax Americana.  The entire field of economic metrics needs to be re-examined and completely reconceptualized, but the subject of actual, real world money flows is not sexy enough for the high priests of today’s macro-economists.  One Charles Biderman (TrimTabs) or John Williams (ShadowStats) is worth a hundred Larry Summers’.
     
    It is not clear to me what the current basis of the dollar standard is, other than “winner by default”, or “last man standing”.  Looking back at past eras with the benefit of hindsight, we can see that mercantilism was backed by the acquisition of gold, the long 19th century gold standard by the British Navy, and Bretton Woods by smokestack America.  Ultimately, I believe that the capital value of a currency is created by the twin factors of national productivity and institutional integrity.  (Any wonder why the Euro is on the rocks?  Any wonder why Germany is doing comparatively well?)  Hard things to measure by existing statistics in a globalized, digital age.    
     
    [In my more paranoid moments I have wondered whether Obama, Soros & Co. are deliberately running up debts in a a Cloward-Piven scheme to blow up the present dollar standard in order to introduce a more international, "one world" type of currency regime.] 
    Anyway, we are in a debt depression.
    Thus endeth the rant.

  11. bizcor says

     
    Depression for me is waking up to the current administration still occupying the White House, Harry Reid is still the Senate Majority Leader and Nancy Pelosi still gets her mug on TV from time to time. There are people out there who think Genderside (Gender selected Abortions) is OK, Sarah Palin is a pariah and that “Cherokee” Warren is a champion of justice. Let’s just overlook the fact that she is lying through her teeth about her Cherokee heritage. Talk about doubling down she has even gone so far as to suggest to the Massachusetts electorate that she will be the first “Native American” ever elected by Massachusetts to the US Senate. I have also just learned that the US DOJ is sending the New Black Panther Party to Wisconsin to “monitor” the recall election. Boy that is a relief.
     
    I am currently reading a book titled “Back to Basics for the Republican Party” by Michael Zak. Zak describes why and how the Republicans came to be which was primarily to end slavery and to limit government growth. He goes on to tell how the Southern Democrats fought tooth and nail to keep slavery. In fact under President Buchanan they tried to make it illegal to make it illegal for any state to ban slavery. They lied, cheated  and went to any length to stop the abolition of slavery. When the Dread Scott case came before the Supreme Court seven of the nine judges were democrats and they found that negroes were not worthy of human status and therefore had no right to bring suit in front of any court. I only bring that up because the Democrats today are suggesting the Republicans want us to return to Dread Scott days and of course it is they who want that to happen. Obama is such an idiot he doesn’t even understand that if the Democrats of 1860 had had their way he wouldn’t be allowed to walk past the White House much less live in it. What irritates me even more is that when the Democrats say such things the Republicans don’t put out the real facts.
     
    When Lincoln won the Presidency in 1860 with a majority in both the house and senate the south seceded in order to keep slavery. So although my initial comment here was cutsie in regard to the depression my point is that unless and until we turn Obama out of the White House and Reid loses his Majority Leader status we will be in a depression.
     
    Businesses will do what they have to do for survival and a lot of that will be to move as much as they can offshore to avoid Obama Care and other business crippling mandates and regulations. Jobs will continue to go away. Obama Care looms on the horizon and will not go away if Obama remains in the White House. I started to say in charge but he is not in charge. George Soros is in charge. Obama is just the “groomed for the job” puppet that is in there. Hell, Valerie Jarrett has more power than Obama. Commenters here have alluded to perhaps Obama is doing this on purpose. Someone else suggested he doesn’t know enough about economics to be able to do this. What is happening is this coalition (Rush refers to it as the Regime) is out to change the world but in order for it to happen the United States of America has to be reduced to an “also ran” status. Soros wants the world to be run by the United Nations. An organization he is quite capable of controlling.
     
    Finally, and I do have to go to bed now because I have business to run and I am the only employee I can afford at the moment, when you walk into the grocery store tomorrow imagine that the selves are bare like the Soviets found back in the eighties and you will have to find food elsewhere. What will you do?
     
    So now get active, go out and explain, not argue, explain why the direction the left is taking us is wrong. You like your Xbox, great, but what if the power goes out, forever? Can your Xbox feed you? I know I am preaching to the choir here but we need to get the word out. Tell your kids why Obama is wrong. Tell your neighbor too. Explain don’t argue. Same sex marriages don’t produce children. OK a Lesbian can be artificially inseminated but two men cannot. To the Lesbians of the world how do you know what genes you are sharing with your child?
     

  12. SADIE says

    gpc31 – An illuminating rant.

    Gringo – Yes, you do. It’s seeded with lots of humor.

    I have a question. The DJ hit 10,000 in March 1999 (it seems like light years ago). Today it’s 12,000 +/- or a 20% increase or less than 2% a year. Is there a product or service that hasn’t exceeded a 2% increase annually. I hope I am making myself clear. What I am asking/stating, “Haven’t we been in a hole for over a decade”. 

       

  13. Ron19 says

    gpc31 #10:

    [In my more paranoid moments I have wondered whether Obama, Soros & Co. are deliberately running up debts in a a Cloward-Piven scheme to blow up the present dollar standard in order to introduce a more international, "one world" type of currency regime.]

    If Greece gets gets kicked out of Euro currency, may we have their place at the Eurodollar table?  Can we use that as a gateway to become a member of the European Union?

  14. Mike Devx says

    gpc10 writes: In my more paranoid moments I have wondered whether Obama, Soros & Co. are deliberately running up debts in a a Cloward-Piven scheme to blow up the present dollar standard in order to introduce a more international, “one world” type of currency regime.

    - Obama has run up the national debt more than the last four or five presidents combined.
    - Obama has deliberately insulted nearly EVERY traditional ally of the United States, and broken good faith with nearly all of them as well.  In their place he has tried to befriend traditionally hostile countries, who remain hostile.
    - Obama has apologized repeatedly for the USA, at nearly every opportunity, when he is on international soil (outside the USA).  What, hoping we’re not paying attention?
    - Obama is downsizing the military and disrespecting them (note that on Memorial Day he gave a speech clarifying who HIS heroes were, and they were people like Maya Angelou.  Not one mention of the military on Memorial Day, from what I hear.)

    and so on.  The question is, is he doing all this out of blind ideology, because he doesn’t know any better?  Or is it a deliberate strategy to reduce the USA?
     

  15. gpc31 says

    James Piereson has written a “must read” essay that integrates the topics raised in BW’s original “Entropy” post and DQ’s post here.  It’s at The New Criterion; I accessed it via the powerlineblog at
    http://www.powerlineblog.com/archives/2012/06/article-of-the-year-the-fourth-revolution.php
    It deserves the superlatives.
    Piereson, along with Wilfred McClay, is a stop, drop, and roll writer:  their stuff is so incandescently good that when you come across it, you have to stop everything, drop what you’re doing, and roll with the text.

  16. gpc31 says

    Ach du meine Gute!  Can’t even write proper English:  Should be “Piereson, along with Wilfred McClay, is a … writer: HIS stuff is….”
     
    Sorry about that.  Write in haste, re-edit at leisure.
     
     

  17. SADIE says

    Mike Devx #14  The question is, is he doing all this out of blind ideology, because he doesn’t know any better? Or is it a deliberate strategy to reduce the USA?

    I long ago gave up trying to split hairs to determine the difference.  He was barely there while playing senator. From no less than the NYT Dec. 2009 ….

    “An examination of Illinois records shows at least 36 times when Mr. Obama was either the only state senator to vote present or was part of a group of six or fewer to vote that way.  In more than 50 votes, he seemed to be acting in concert with other Democrats as part of a strategy”     

       

    Obama never wanted to be president, he just wanted to play one on TV, which follows the same pattern as the quote above, “acting” in concert….”

  18. says

    The Left has had a generations long campaign of reducing American power and prestige for a century, if not more. The time for asking whether they intend for the consequences of their plan to be real or not, is long over and done with.

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