I honestly believe we are about to experience the worst economic conditions in the U.S. since WWII. It is going to get absolutely brutal, and Americans are going to see and experience things over the next several years they never thought possible during the milk & honey days of just a few years ago.
John Hussman doesn't think so, and his intelligence, credentials and track record far outweigh any of the gloom-and-doomers. (For the record, he was quite bearish in 2007). A few quotes from his latest update: "We continue to hear remarks that the current economic downturn is the worst since the Great Depression. While the prices of stocks and other financial assets have certainly suffered a great deal, by any reasonable measure of output and employment, this isn't even close to being the worst economic downturn since the Depression. Even after November's awful job report, and including all of the downward revisions, the U.S. economy would have to lose twice as many jobs as it has already lost even to be on par with the 1981-82 recession (measuring job losses as a percentage of the labor force). While we do expect fourth-quarter GDP to come in at a loss of -4% to -6%, it is important to recognize that this is a quarterly change at an annual rate. The overall contraction in U.S. output will be somewhere about 1-1.5% in the fourth quarter. In the Great Depression, actual GDP dropped by 30%. Ben Bernanke was correct in remarks he made last week that there is 'an order of magnitude' (10 fold) of difference between the current downturn and the Great Depression. For the record, the worst overall drawdowns in GDP since the Depression â not just bad quarterly growth rates â were in 1954 (-2.65%), 1958 (-3.75%), 1975 (-3.10%), and 1982 (-2.87%). This is not to minimize the prospects for a further economic downturn, but to say that this is âthe worst economy since the Great Depressionâ is like blowing up a crate of dynamite on the Nevada Testing Grounds and saying it is the worst explosion since the detonation of the atomic bomb there. Even if the statement is accurate, the comparison is absurd. http://www.hussmanfunds.com/wmc/wmc081208.htm
I didn't say I thought that the economy will fare worse than at any time since the Great Depression; I said that I thought the economy would fare worse than at any time since WWII. There is a big difference. And on the relative scale of pain, or misery index, most Americans are going to act and feel as if we're in a quasi-Depression.
The comparative gdp figures suggesting that the 1930s depression was much bigger (so far anyway) do raise an interesting issue: In the 1930s the US had a big manufacturing sector and was exporting to the world. Collapse of world demand for US goods will have been a significant contributor to gdp decline. Now its importing from China. Would you have to combine the US+China to get the equivalent economic entity? I put this up just to suggest another way in which 2008 differs from 1930.
Yes, in the 30's the US was a huge net exporter. Now we're a massive importer. My guess is our "severe recession" will cause a full blown "depression" in China. They're the US of the 30's right now, in my opion.
The Chinese government have already got a handle on their problems. They will inject as much money as needed to stabilize their economy. There will not be a "severe depression" there as they will not adopt restrictive trade practices as the US did back in the 30's. The government is going to have their hands fool as the people have got used to a higher standard of living and a lot of them are going to have to go back to working on the farms for their survival. The bigger concern will be if the Chinese will continue to support the US deficit ...if they do, it will be on a smaller scale than in the past as the balance of payments will narrow and the Chinese, while they have the loot now, will look after their own infrastructure and economy before anything else.
The Chinese will continue to buy bonds for the same reason the U.S had to bail out the banks - they have no choice. A collapse of the U.S. dollar what cause a concomitant collapse of their economy. So we are all in this together. The Chinese will probably move more toward internal growth rather than rely on the American consumer to buy and pay back debts, but this will take place over a longer term. In any case, the massive government spending in the U.S. practically assures there will be no Depression, though it is not clear how much as been lost and for how long.
they will because they are soft. western europeans are no better. better marry a government worker. the private sector will be paying the price for years for the excesses of prior years.