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“This is Not Another Great Depression”

May 13, 2009

At Freakonomics, economic historian Price Fishback, an expert on the Great Depression, writes the first of his three part guest post about the current economic crisis relative to the depression of the thirties. An excerpt:

How does this compare to the Great Depression? We won’t know the final outcome of this recession for a while, but I can safely say that the current situation is nowhere near as bad as the situation during the 1930’s. There may be surface similarities on some dimensions, but there are far more differences than there are similarities.

One Comment leave one →
  1. Rick permalink
    May 13, 2009 10:38 am

    Mr. Fishback could be right and I hope that this is so but I have reason to believe that this Depression will be much more devastating than the last one. For one thing, the nation benefited from a huge trade surplus during the last Depression as opposed to this one thanks in part to the Smooth-Hawley Tariff Act of 1930. Secondly, the United States always enjoyed a solid manufacturing base to fall back on during the 1930’s but is tragically missing today. Moreover, this country had a nominal national debt of roughly $18 billion dollars in the early 1930’s as opposed to the whopping $11 trillion dollars that is on the books at the moment. In addition, the staggering losses in the financial industry during the last Depression were at least limited in scope although arguably it was still enough to cripple the country. By comparison, what we have today is a complete financial meltdown magnified by obscenely huge credit default swaps and derivatives that were not present during the Great Depression. In sum, the United States was virtually bankrupted during the 1930’s but is bankrupted many times over in the Depression that we have today. Sure we have programs today that were unavailable during the 1930’s such as unemployment insurance, Social Security and Medicare but these are only backstops that will only serve to delay the ultimate devastation and suffering rather than to prevent it.

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