Cynical New York hotel clerks will soon be asking incoming guests, a refrain quoted from the great depression of the 1930’s. “You want a room for sleeping or jumping?”
The majority of the recent stimulus plan will not find it’s way into the public hands for a few more quarters. At which time if we have not seen some flattening of this down turn be prepared for a very long protracted economy and lost decade measured in GDP under 1%. We currently erased the last 12yrs of wealth creation and my humble opinion is watch for valuations on real estate, buying power and disposable income to pull back to levels of early 1990’s. WHAT! I make my assumption on the real estate barometer and the valuations of the bulk of foreclosures priced at pre-bubble levels. That bubble had its formation in 1990’s.
So with all this governmental programs and the political firestorms over the budget or the deficit, all the $trillions spent on a stimulus (set aside the TARP program) will it work or is it just
“PLACEBO ECONOMICS”?
Dictionary Web site defines an economic depression as a prolonged period of recession, or a significant and prolonged downturn in the economy. Characteristics of an economic depression include declining business activities, falling prices, rising unemployment, increasing inventories, public fear and panic.
Economists differ in their opinion of what exactly constitutes recession and depression. Many define recession as two or more quarters of reduced Gross Domestic Product (GDP). GDP measures national income and output for a country’s economy. Per capita GDP is often used to measure the standard of living, with the thought being that as GDP rises, so too does each citizen’s standard of living. Hence, measuring GDP provides clues as to the overall health of the economy and a glimpse into the health of an individual’s wallet.
When the economy moves into a recession, the country’s economy enters a period of negative growth. Real income declines, unemployment rises, and industrial production wavers. If a recession continues for a long time, the economy moves into an economic depression.
Waves of economic growth and contraction constitute the normal ebb and flow of free market capitalism. Throughout its history, the United States economy has undergone periods of boom and bust, with short and sharp economic downturns followed by growth that is considered normal.
However, in the late 1920s, an event happened that changed the world. From 1929 to the early 1940s, the United States and many industrialized countries worldwide experienced a prolonged and deep economic downturn. The Great Depression forced millions into unemployment, homelessness, and near-starvation.
At its worst point, unemployment in America soared to 25%. A decade of easy credit created a false sense of prosperity, while farmers struggled under heavy debt and declining farm goods prices. The ensuing market correction in 1929 evaporated the fortunes of many, with the entire population suffering as consumer demand dropped, jobs disappeared, and factories shuttered against declining orders.
Government intervention, in the form of public policy changes and job creation, improved conditions. The onset of World War II and rising demand for manufactured goods to support the war effort officially ended the Great Depression.
Is the United States entering another period of economic depression? Some economists point to the housing market bubble burst of 2007 as the start of a prolonged and severe downturn. The sub prime mortgage debacle, coupled with more and more factories turning overseas for cheap labor, has many worried that the United States is entering a dark economic period. Others, however, see the current economic downturn as merely a typical correction in the free market economy. Only time will tell whether this is a bump in the economic road or a major detour.
