"A Tale of Two Depressions"
Economist's View — Want some discouraging news about the economy?: In this column, two leading economic historians show that the world economy is now plummeting as it did in the Great Depression; indeed, world industrial production, trade and stock markets are diving faster now than during 1929-30. Fortunately, however, they also note that "the policy response to date is much better," but the "question now is whether that policy response will work": A Tale of Two Depressions, by Barry Eichengreen and Kevin H. O’Rourke, voxeu.org: The parallels between the Great ...

Time to Use the D-Word
J. Bradford DeLong's Grasping Reality with All Eight Tentacles — Barry Eichengreen and Kevin O'Rourke argue that it is time to use the D-word: The world economy is tracking or doing worse than during the Great Depression: To sum up, globally we are tracking or doing even worse than the Great Depression, whether the metric is industrial production, exports or equity ...

It's 1930 time
Paul Krugman — Barry Eichengreen and Kevin O’Rourke have an alarming paper in Vox EU , showing that if you take a global view, the world slump since early 2008 is as bad or worse than the slump from 1929-30. It’s full of pictures like this one, showing monthly volume of world trade: What this says is that the world economy right now is more or less at the point Keynes described in his essay The Great Slump of 1930 . What hasn’t happened — at least not yet — is any counterpart to the catastrophes of 1931: the wave of bank runs in the US, the failure of Credit Anstalt in Austria, and the great perverse response of central banks that ...

World Economy Falling Faster Than in 1929-1930
naked capitalism — Barry Eichengreen, an expert on the Great Depression, and Kevin O'Rourke, take issue with the notion that the current downturn is less severe than the Great Depression. While the slump in the US is not as bad, that mis-states the global picture. Note that many economists expect the US to suffer less than the big exporters, namely China, Germany, Japan. The reason is that the economic adjustment required of surplus nations is greater than that of debtors. Similarly, in the Great Depression, the US, then a major exporter, was harder hit than the overconsuming importers such as Britain, who defaulted on their ...

Lunchtime Links 4-7
Rolfe Winkler — (Send links, videos, pics to optionarmageddon at gmail with subject “link” … Thanks to Lisa H.—$20—for her donation!) Today’s Must Read–‘No-Risk’ Insurance at FDIC (NYT)  Andrew Ross Sorkin tears apart FDIC’s rationalizations for participating in Geithner’s partnerships.  FDIC told him they expect zero losses for instance, which they have to say because their charter wouldn’t allow them to take on balance sheet risk if they expected losses.  He also notes that FDIC is getting this gig because it allows the administration ...

Now vs the Great Depression
The visible hand in economics — Matt says the QSBO makes things look pretty bad. A couple of economic historians over at VoxEU think it’s not just bad, it’s worse than the Great Depression: World stock markets, Now vs GD However, they do concede that the policy response is better now ...

it's a depression, alright
Decline and Fall of Western Civilization — barry eichengreen and kevin o'rourke at vox eu sketch out graphical comparisons in industrial output, work stock markets and trade, as well as measures of policy response. To sum up, globally we are tracking or doing even worse than the Great Depression, whether the metric is industrial production, exports or equity valuations. Focusing on the US causes one to minimise this alarming fact. The “Great Recession” label may turn out to be too optimistic. This is a Depression-sized event. ... The good news, of course, is that the policy response is very different. The question now is whether that ...

Green shoots and tea leaves
Paul Krugman — INSERT DESCRIPTION Beware the bumps The crisis is over! Or so some are saying . OK, a couple of things. One is that even in the Great Depression, things didn’t head down all the time. The chart above, from Eichengreen and O’Rourke , shows world industrial production in months from the previous peak, in the Depression and in the current crisis. Notice that there were several upturns along the way; each of those could have been — and was! — heralded as the beginning of recovery. Meanwhile, about those great numbers from Wells Fargo: remember, reported profits aren’t a hard number; they involve a lot of assumptions. And ...

Interesting Articles From The Past Few Days
Daily Markets — David Kotok (Cumberland Advisors): Does the stock market rally have legs? April 11, 2009. George Magnus (Times Online): Political courage is vital for a real recovery , April 13, 2009. John Hussman (Hussman Funds): Green shoots over thin ice , April 13, 2009. Financial Times: Britons turn to religion over debt worries , April 12, 2009. The growing demand for financial and legal advice from places of worship is prompting many to launch a new type of service in the downturn John Sylvia (Wachovia): Economics as strategic input to business decision-making , April 13, 2009. Often the biggest ...

Stocks on Tear, But Krugman Isn't Convinced Worst Is Over
Yahoo! Finance: Tech Ticker — Things are still getting worse. "The most you can say is that there are scattered signs that things are getting worse more slowly — that the economy isn’t plunging quite as fast as it was. And I do mean scattered." Some of the good news isn’t persuasive.  Goldman's "excluding December" quarter.  Wells Fargo's best quarter ever. There may be other shoes yet to drop. "Even in the Great Depression, things didn’t head straight down ...

it's a depression, alright -- cont'd
Decline and Fall of Western Civilization — following on april's article, barry eichengreen and kevin o'rourke update on the global depression track.

"A Tale of Two Depressions"
naked capitalism — Posts like this one at VoxEU, from Barry Eichengren and Kevin O'Rourke, make me feel less of perma bear and more of an objective observer, as far as my skepticism of the "green shoots-recovery in 3Q-4Q 2008" theory is concerned. This is a follow up to an April post by the two economists, No country (at least based on reports I have seen) has ever recovered from a severe financial crisis as quickly as a 3Q-4Q timetable would suggest. And the speedy recoveries generally featured having banks take writedowns and restructuring/writing off the underlying bad debt, plus seriously devaluing ...

links for 2009-06-05
Economist's View — The problem with bailouts - The Boston Globe Italy, before and after Lehman Brothers - voxeu.org Banks Show a Diminished Yet ...

Lunchtime Links 6-5
Rolfe Winkler — (Send links, videos, pics to optionarmageddon at gmail with subject “link”) Layoffs Slow Considerably, jobless rate now at 9.4% (AP)  345,000 job cuts reported in May is significantly better than the 600,000+ registered the previous few months.  This is clearly good news as the recession appears to be slowing.  But is this indicative of a true recovery?  Or is it just a fiscal/monetary sugar high?  And by the way, 9.4% unemployment is a 25-year high and well ahead of the “more adverse” stress test scenario.  Also by the way, the real unemployment rate (when you count folks who’ve ...

The Second World Depression
Moon of Alabama — This is depressing: World industrial production continues to track closely the 1930s fall, with no clear signs of ‘green shoots’. World stock markets have rebounded a bit since March, and world trade has stabilised, but these are still following paths far below the ones they followed in the ...

Is 2009 tracking a 1930 Great Depression scenario?
naked capitalism — Submitted by Edward Harrison of the site Credit Writedowns. With more and more major economists predicting recovery sometime later this year, many have forgotten that downside risks remain.  Berner, Roubini, Volcker, Krugman and Bernanke have all come out essentially saying they would not be surprised to see a ‘technical’ recovery at some point later this year.  Robert Gordon has gone as far as to suggest we could be in recovery already – at least in the United States. I too have called for a Q4 or Q1 recovery.  So, is it off to the races? ...

Depression tracking, graphic edition
FT Alphaville — FT chief economic commentator Martin Wolf draws attention to the work of Barry Eichengreen of the University of California at Berkeley and Kevin O’Rourke of Trinity College, Dublin, in his Wednesday column . The work presents a “then and now” analysis by comparing the current global recession to April 2008 and that of the Great Depression to June 1929. In short, the charts provide sobering reading and are worth reprising in their own right (H/T Carlomagno for directing readers this way a few days ago). Here’s a taster, but do click through to the main paper to see all the charts with commentary. A tale of two ...

Financial Times Admits Recession Tracks Great Depression
Business Pundit — For some reason, the mainstream media has thus far avoided calling the current recession another Great Depression. Today, however, the Financial Times took a leap to the dark side with an article entitled “The recession tracks the Great Depression.” Here’s what they had to say: Two economic historians, Barry Eichengreen of the University of California at Berkeley and Kevin O’Rourke of Trinity College, Dublin, have provided pictures worth more than a thousand words (see charts). In their paper, Profs Eichengreen and O’Rourke date the beginning of the current global ...

The Wall Street Clown Show
Daily Markets — The Wall Street Clown Show By Michael Panzner on June 19, 2009 | More Posts By Michael Panzner | Author's Website It’s been a while since I laughed out loud while going through the news, but that’s just what happened when I read the following Reuters report, “JPMorgan’s Lee Sees S&P 500 Retest of ‘07 Record.” As a service to loyal Financial Armageddon visitors, I thought I’d do them the favor by highlighting all the ridiculous bits: The benchmark S&P 500 index should surge back to its October 2007 record above 1,500 by the end of 2012, provided the U.S. economy sees a V-shaped recovery, ...

European public opinion, migration, and welfare benefits
VoxEU.org: Recent Articles — Recessions are traditionally good times for left-wing parties, whose support for redistributive policies is perceived by voters as a sort of insurance scheme. If someone loses her job in the recession or gets poorer in the generalised downturn, there will be someone up there in the centre of things making sure that she receives some social support. Nobody will be left behind is the motto of Social Democrats. The golden age of Social Democrats in the European Parliament was in the mid-nineties when the EU was displaying a double-digit unemployment rate. The primacy of the Social Democrat group in Strasburg was lost while ...

A Tale of Two Depressions
The Big Picture — This week’s Outside the box looks at some very interesting research done by two economic historians, Barry Eichengreen of the University of California at Berkeley and Kevin O’Rourke of Trinity College, Dublin They give us comparisons between the Great Depression and today’s downturn. They continue to update their data from time to time, the link to their work is at http://www.voxeu.org/index.php?q=node/3421. I have not previously heard of www.voxeu.org, but it is a collection of the work of well regarded international economists that seems quite interesting for those who enjoy readings in the dismal ...

The Great Depression compared to the Great Recession
Millionaire Now! — This is gruesome. Two economics professors -- Barry Eichengreen and Kevin O'Rourke -- compared them. Here are their latest findings: * World industrial production continues to track closely the 1930s fall, with no clear signs of ‘green shoots’. * World stock markets have rebounded a bit since March, and world trade has stabilized, but these are still following paths far below the ones they followed in the Great Depression. * There are new charts for individual nations’ industrial output. The big-4 EU nations divide north-south; today’s German and British industrial ...

still a depression, but watching industrial production
Decline and Fall of Western Civilization — barry eichengreen and kevin o'rourke update their charts to note the nascent divergence of industrial production from the early 1930s trend. This is a sharp divergence from experience in the Great Depression, when the decline in industrial production continued fully for three years. The question now is whether final demand for this increased production will materialise or whether consumer spending, especially in the US, will remain weak, causing the increase in production to go into inventories, leading firms to cut back subsequently, and resulting in a double dip ...

Lots of Fun Stuff
MV=PQ: A Resource for Economic Educators — I've run across several links, each leading to something you might find useful for your students. First, Don Boudreaux at Cafe Hayek quotes Arthur Seldon on some foundations of economics. I like the basic ideas, but I like citing the appropriate economist just as much. Second, a case of gasoline arbitrage on the Columbian/Venezuelan border, as reported by the BBC. HT to Marginal Revolution. Third, A Tale of Two Depressions on voxeu.org has been updated by the authors, ...

Guest Post: How Bad Will Unemployment Get, And What Can We Do About It?
naked capitalism — By George Washington of Washington’s Blog. Unemployment is disastrous on both the individual and societal level. Individuals who look for work but can’t find it are miserable.  Indeed, most people who lose their job are unprepared for their circumstances.[1] On the national level, high unemployment is both cause and effect concerning other problems with the economy. As we’ll see below, high unemployment results from a weak economy and - in turn - weakens the economy. Until the causes of, and solutions to, high levels of unemployment are understood, we will not be able to ...

Jim Grant: Ringing the Bell at the Top?
The Big Picture — In the following Wall Street Journal commentary, “From Bear to Bull,” a long-time critic of the excesses and wayward policies that brought this country to its knees suggests the outlook for the economy is brighter than many people, especially the pessimists, believe: James Grant argues the latest gloomy forecasts ignore an important lesson of history: The deeper the slump, the zippier the recovery. “As if they really knew, leading economists predict that recovery from our Great Recession will be plodding, gray and jobless. But they don’t know, and ...

Is Jim Grant Ringing The Bell At The Top?
Daily Markets — Is Jim Grant Ringing The Bell At The Top? By Michael Panzner on September 21, 2009 | More Posts By Michael Panzner | Author's Website In the following Wall Street Journal commentary, “From Bear to Bull,” a long-time critic of the excesses and wayward policies that brought this country to its knees suggests the outlook for the economy is brighter than many people, especially the pessimists, believe: James Grant argues the latest gloomy forecasts ignore an important lesson of history: The deeper the slump, the zippier the recovery. As if they really knew, leading economists predict that recovery from ...

Trade Procyclicality in the Current Recession: The View from the US
Econbrowser — Paul Krugman recently characterized the current pace of trade activity as worse than that during the Great Depression. And indeed, graphs from Barry Eichengreen and Kevin O'Rourke have been diligent in illustrating how this is the case, most recently in this September VoxEU post. Caroline Freund ([pdf] here) as well as the IMF in its most recent World Economic Outlook (Box 1.1) atrribute the sharp drop-off in world trade to high income elasticities, in part associated with the high degree of vertical integration that characterizes the globalized world economy. Below, I want to examine that ...

The story so far, in one picture
Paul Krugman — World industrial production in the Great Depression and now: DESCRIPTION Data for the Depression courtesy of Eichengreen and O’Rourke . Data for the Great Recession (starting April 2008) from Netherlands Bureau for Cyclical Economic Analysis . Basically, we started out with a year that matched the Great Depression, but have since pulled back a bit from the edge of the abyss.

How French exporters were hit by the global crisis
VoxEU.org: Recent Articles — Trade in the last quarter of 2008 and the first quarter of 2009 contracted in an exceptionally sudden, severe, and globally synchronised fashion. According to Eichengreen and O Rourke (2009) the drop has been even fiercer than that during the Great Depression. Beyond a limited resurgence of protectionism ( Baldwin and Evenett 2009; Evenett 2009 and Bussiere et al. 2009), two broad explanations for the collapse of world trade have been put forward. First, the slump in trade has been associated with a sharp deterioration of demand and activity worldwide, deterioration which has been particularly severe ...

Depression multipliers
Paul Krugman — Barry Eichengreen and Kevin O’Rourke have lately been scoring a series of research coups, based on the combination of historical perspective and a global view. Most famously, they showed that on a global basis the first year of the current crisis was every bit as severe ...

How credit conditions will shape the economic recovery
VoxEU.org: Recent Articles — The prospects for recovery from the 2008 global financial crisis appear to be on the horizon. The focus in the blogosphere has likewise shifted from forecasting the recession s depth to predicting the letter characterising the recovery s output path U, V, W, or L ( Eichengreen and O ...