“The Little Depression”? “The Great Recession”?

Think of [the U.S. economy today] as Alien in reverse: lurking inside a dysfunctional, steroid-stuffed “monster economy” is a healthy, sustainable, and yes, market-driven one struggling to get out — albeit a smaller, slower-growing, and certainly simpler and more transparent economy.

–“Financial Crash Instructions; City Lakes Blog (12/12/2008)

Up until the 1940’s, World War I wasn’t known as “World War I,” it was simply “The Great War.”

Similarly, we call what happened in the 1930’s “The Great Depression” because there’s never been a sequel. At least not yet.

The latest batch of economic numbers, for the fourth quarter of 2008, show economic activity falling off the proverbial cliff. Consumption, production, home sales, car sales, retail sales — you name it — all showed declines not witnessed since . . . yup . . The Great Depression.

What we’re experiencing now may very well qualify as “The Little Depression.” Or, as Barron’s Alan Abelson proposes, “The Not-So-Great Depression.”

If it persists, with economic activity continuing in free fall and unemployment rising well above 10%, it may qualify for another, more ominous name.

Alternative Scenario

Personally, I doubt that that will happen, if for no other reason than life today is so different than the 1930’s.

Namely, it’s much faster and interconnected, thanks to technology.

Even if the banking system is in worse shape than is now feared — and the fears are pretty high — it’s hard to imagine modern day Americans raised on PC’s, microwaves, ATM’s, instant messaging, etc. tolerating that degree of economic dislocation that long.

Policymakers also have Japan’s “Lost Decade” (in the ’90’s, following the Nikkei’s crash) to serve as a case study in what not to do.

When a PC crashes, you “re-boot.” Yes, you may lose a lot of data, and it’s a big headache, but it’s not life-altering (usually!).

Similarly, when an over-leveraged, unstable financial system crashes, the solution is to replace it with . . . one’s that better-designed (and to minimize the fallout from the crash).

When President Obama says the country will ultimately emerge stronger from this period . . . I think he’s absolutely right.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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