Now comes Judge Richard Posner, claiming it is just that, a Depression.
This comes about in the Becker-Posner Blog, which this week is about China and our trade imbalance and financial reserve imbalances with that nation.
First up is Professor Gary Becker talking to the issue of China and trade. In his response to Professor Becker, Judge Richard Posner makes the point that our economic crisis is a depression.
One reason that we are in a depression and not merely the "severe recession" that is the preferred euphemism is that, because of those deficits, we cannot spend our way out of the depression without increasing the national debt to a point at which either horrendous inflation or huge tax increases will be required to pay it down.Maybe we are in a Depression after all. Worse, maybe Keynes doesn't hold the key to the exit.
Regards -- Cliff
Quacks like a duck, and a rose by any other name.
ReplyDeleteThe systemic waves of unemployment that will keeps us spiraling down over the next several years are going to put us in an ugly hole. Whether it reaches the dire destitution spawned by the 30's depression with all our current socialist safety nets to offset it has yet to be determined. But I'd say it's pretty obvious there's been nothing like it if not the crash of '29 and its aftermath.
In '29, the stock market reached bottom within 3 weeks. (We're still working on ours three months in). Unemployment the first year of the Great Depression was hardly serious, either. (Rising from around 3% in '29 to just around 8% in '30). It was the next three years after that during which things really got ugly. (unemployment peaked at 25% in '33, though it reached as high as 80% in some cities). In '39, TEN YEARS IN, it was still around 18%.
We're kidding ourselves if we think we've seen the worst of this. Judging by the pace of things, I'd say we're dealing with something at least as dire as the 30's, if not worse for all the debt we're incurring right now which will create its own crisis to have to repay.