Recession or Depression? Part 2

 

“The Great Depression was a worldwide economic downturn starting in most places in 1929 and ending at different times in the 1930s or early 1940s for different countries. It was the largest and most important economic depression in modern history, and is used in the 21st century as a benchmark on how far the world’s economy can fall.” – Wikipedia.

From the PBS’s Nightly Business Report, October 9th here is Allan Sloan, Senior Editor-At-Large at Fortune magazine:

Everything has been so gloomy lately, I thought I’d play against type, and find something reassuring to say. The problem, though, is that it looks like things will keep getting worse for a while, as the economy and the banking system inflict more and more pain on more and more people.

The one cheerful thing I have to say is that this isn’t going to turn into another Great Depression. That’s the comparison you keep hearing. And it’s wrong. The Great Depression had 25 percent unemployment. It had millions of people losing their life savings when their banks failed and took their money down with them.

Old people had no income and no health insurance. Neither did unemployed people.

Now we have federal insurance on bank deposits. We have Social Security and health care for old people. We have unemployment insurance and other safety nets.

What’s going on now isn’t any fun. It’s not fun to see your retirement accounts get hammered. It’s not fun to have your mortgage foreclosed or lose your job. And it’s not fun if you can’t borrow money except at rates that would make a loan shark blush.

But trust me, no matter how bad this gets, it won’t be a second Great Depression. And remember that sooner or later, this mess will work itself out. Just as booms don’t last forever, neither do busts. And in this case, that’s a good thing.

I’m Allan Sloan.

photo credit: Eoghan OLionnain