When does Recession Become Depression?

[raiha]

Is there a magical point when one moves into the other. What are the distinguishing features between the two? I'm an ignoramus in the domain of political economics!

 

[OptionsTrader]

The old rule is an unemployement level greater than 14%.

But, with the enormity of big government, you could see a depression with unemployement lower than 14% because the US gov't would monetize even more debt to try to fix the problem by hiring the unemployed, to work unproductive jobs.

But, as we know, government merely eats, wastes, and consumes capital, it does not create capital, so government will fail when they try that measure.

edit:

I knew I was plagiarizing from memory, here's a source:

http://www.mises.org/journals/rae/pdf/rae3_1_5.pdf

See "Definition of Depression"

 

[AceNZ]

Is there a magical point when one moves into the other. What are the distinguishing features between the two? I'm an ignoramus in the domain of political economics!

Th old rule is an unemployement level greater than 14%.

I can't find the source off the top of my head, but another common definition of a depression is a 10% decline in GDP from the most recent peak.

The official "narrow" (U.3) unemployment rate is currently 4.93%. The broader U.6 unemployment is now 9.0%. If you include the "discouraged workers" that were defined away during the Clinton Administration, actual unemployment is running about 12.5%. That's not far from 14%, and the economy is still getting worse. The Great Depression had 25% unemployment.

 

[OptionsTrader]

A random note:

I'm reading in multiple financial sites that the G-7 is likely to intervene and prop up the dollar and soon, the first action of this type in 13 years. So rumoreth spokesmen from GS and MS.

example:

http://www.ft.com/cms/s/0/8999336c-f168-11dc-a91a-0000779fd2ac.html?nclick_check=1

http://www.bloomberg.com/apps/news?pid=20601100&sid=aJ40wwp7Vzx0&refer=germany

 

[TulsaRevolution]

Comparing unemployment today with historical unemployment (such as during the great depression) would be difficult, since they use "creative accounting" (call it enron accounting) to come up with their figures today.

Unemployment figures, inflation figures - it is totally in the interest of the people in power to fudge the numbers so they look like they are doing better than they really are.

I guess that homeless guy under the bridge harassing people for money isn't "unemployed" because he isn't actively seeking a job? In my world, that guy is unemployed.

 

[scooter]

I don't think a depression is possible unless we had a large contraction of the money supply, like in the 20s and 30s. We all know the money is expanding rapidly today. This could cause massive inflation for us, but I doubt a depression ensues.

 

[Zippyjuan]

Unemployment is the total of people actively looking for work. Military is excluded. If someone has stopped looking for work, then even though they do not have a job they are not counted as unemployed. If someone does not want a job should they be counted as unemployed?

As for depression vs recession, from About.com:
http://economics.about.com/cs/businesscycles/a/depressions_2.htm

The Difference
So how can we tell the difference between a recession and a depression? A good rule of thumb for determining the difference between a recession and a depression is to look at the changes in GNP. A depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn that is less severe.
By this yardstick, the last depression in the United States was from May 1937 to June 1938, where real GDP declined by 18.2 percent.

 

[acptulsa]

Last I heard, the White House drops someone from the unemployed numbers when their unemployment insurance runs out. Might add that the one percent of the population in prison are discounted as well. Charming, eh?

Near as I could tell they decided some time in the '40s to invent the word recession so there'd never, ever be another depression. Reality is in the eye of the spinner these days...

 

[micahnelson]

When? I'm thinking maybe early June?

 

[Zippyjuan]

Last I heard, the White House drops someone from the unemployed numbers when their unemployment insurance runs out. Might add that the one percent of the population in prison are discounted as well. Charming, eh?

Near as I could tell they decided some time in the '40s to invent the word recession so there'd never, ever be another depression. Reality is in the eye of the spinner these days...

It is true that an economic slowdown was called a depression all the time until the Great Depression came along. Then they decided to use a different term to describe lesser downturns (and probably because of the strong connotations from the Great Depression).

And should a prisoner be counted as employed or unemployed- or not counted at all? It makes more sense to not include them. They can't exactly leave where they are to get to work even if they wanted to.

 

[acptulsa]

And should a prisoner be counted as employed or unemployed- or not counted at all? It makes more sense to not include them. They can't exactly leave where they are to get to work even if they wanted to.

Unfortunately, the way the current regime thinks they could, would and probably did go all law and order just to get that number down.

 

[Zippyjuan]

Some divergent ideas here. It is interesting that some people say that the government wants the economy to be bad so that they can take over while others say that the government is trying to hide the state of the economy. Wouldn't they want people to think things are bad if they want to impose more control?

 

[acptulsa]

Some divergent ideas here. It is interesting that some people say that the government wants the economy to be bad so that they can take over while others say that the government is trying to hide the state of the economy. Wouldn't they want people to think things are bad if they want to impose more control?

The game they seem to be playing involves several stages, much different messages for each stage, and careful timing.

 

[Truth Warrior]

It is true that an economic slowdown was called a depression all the time until the Great Depression came along. Then they decided to use a different term to describe lesser downturns (and probably because of the strong connotations from the Great Depression).

And should a prisoner be counted as employed or unemployed- or not counted at all? It makes more sense to not include them. They can't exactly leave where they are to get to work even if they wanted to.

A number of convicts are currently employed as telemarketers.

 

[raiha]

So it appears that when the soup kitchen queues stretch around the corner from all the boarded up businesses it will still be called a recession.

I suspect no-one will take responsibility for the mess. It will be OPEC'S fault, no - make that Iran and Venezuala's fault, and George Bush will be spotted tap-dancing from time to time.

Thanks for the information.

 

[acptulsa]

So it appears that when the soup kitchen queues stretch around the corner from all the boarded up businesses it will still be called a recession.

I suspect no-one will take responsibility for the mess. It will be OPEC'S fault, no - make that Iran and Venezuala's fault, and George Bush will be spotted tap-dancing from time to time.

Thanks for the information.

Yeah--our pleasure (?)

 

[grizzums]

The old rule is an unemployement level greater than 14%.

But, with the enormity of big government, you could see a depression with unemployement lower than 14% because the US gov't would monetize even more debt to try to fix the problem by hiring the unemployed, to work unproductive jobs.

But, as we know, government merely eats, wastes, and consumes capital, it does not create capital, so government will fail when they try that measure.

edit:

I knew I was plagiarizing from memory, here's a source:

http://www.mises.org/journals/rae/pdf/rae3_1_5.pdf

See "Definition of Depression"

Thanks. I enjoyed the reading (misesjournal)

BTW - Is Volker warming up in the bullpen yet?

 

[BW4Paul]

The game they seem to be playing involves several stages, much different messages for each stage, and careful timing.

Never attribute to malice that which can be explained through sheer incompetence.

 

[Original_Intent]

It's a recession when your neighbor loses his job,
it's a depression when you lose yours.

 

[american.swan]

It's a recession when your neighbor loses his job,
it's a depression when you lose yours.

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