The Great Recession and Great Depression in perspective

Calculated Risk has a great chart showing GDP fluctuations which puts into perspective just how big a downtown the Great Depression represented, and how it compares to the current one. For the population ~30 and under the current downswing is already 3 times more extreme from the peak than any recession they have memory of. In fact, we're already approaching the biggest downswing since World War II and the recession will certainly be the longest as well. On the other hand, we're as far from the commonly accepted definition of a Depression of a 10% decline in GDP as the 1991 one recession was from this one, and, we're about an order of magnitude less than the peak-to-trough of 25% GDP that occurred during the Great Depression. Chart below the fold.


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Yes, so far this recession isn't nearly as bad as the Great Depression. But we're not half out of it yet. There's a second wave of mortgage defaults coming in 2010 they won't be finished until late 2011, the basics of it well covered in the below link.

That means going to be another few years of major bank instability and good likelihood of another round of the credit crunch remembering that, at one point in the current crunch, the US government had to step in and make short-term loans (ones businesses need for day-to-day operations) that the banks wouldn't. And, in the last round of the credit crunch, the banks started from a position of strength. Now, they're very damaged institutions.

By Miguelito (not verified) on 03 May 2009 #permalink