How many down months before we admit we are in a depression?
By Daniel at 11 September, 2009, 3:58 pm
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“A depression is a severe economic downturn that lasts several years. Fortunately, the U.S. economy has not experienced a depression since The Great Depression of 1929, which lasted ten years. The GDP growth rates were of a magnitude not seen since:
1. 1930 -8.6%
2. 1931 -6.4%
3. 1932 -13%
4. 1933 -1.3%.
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As we can see, GDP growth contracted the most in the 3rd year of depression. If the current recession began at the end of 2007, economy could be deteriorated at the next year - 2010 as government begin to withdraw the support from market by Sept. 18.
“During the Depression, unemployment was 25% and wages (for those who still had jobs) fell 42%. Total U.S. economic output fell from $103 to $55 billion and world trade plummeted 65% as measured in dollars.
The Depression was aggravated by poor monetary policy. Instead of pumping money into the economy, and increasing the money supply, the Federal Reserve allowed the money supply to fall 30%. The “New Deal” created many government programs to end the Depression, but government programs alone could not end it. Unemployment remained in the double-digits until 1941, when the U.S. entry into World War II created defense-related jobs.”
Current unemployment rate already hit 20%!!!
By adding these folks back in, William’s SGS-Alternate Unemployment Measure rose to a jaw-dropping 20.6%. Separately, the Center for Labor Market Studies in Boston puts U.S. unemployment at 18.2%. Any way you cut the numbers, the situation is very bad. According to David Rosenberg, one-in-three among the unemployed have been looking for a job for more than six months and still can’t find one.
Withdrawing the support from market could be the most deadly mistake for the current fragile economy. The unemployment rate may not hit as high as 1929 great depression but it so likely to last longer than most economists expected.
“The incredible size of the national debt limits government spending that could be used to stimulate the economy. Both monetary and fiscal policy are needed to prevent a global depression.”
The next depression could trigger by government.
Source from: about.com
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