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Great Depression

Is this the next Great Depression?

Economists disagree — vehemently, at times — about whether our current economic malaise will ultimately rival the dark days of the 1930s.

Pessimists worry that the global economy is headed into a round of “debt deflation” like the one many economists believe caused the Great Depression. That happens when businesses with too much debt sell off assets to pay their creditors. But the large-scale selling can push down asset values faster than companies can get rid of debt, leaving their balance sheets worse than ever. The result: the economy grinds to a halt.

More sanguine economists say that any resemblance to the 1930s is only superficial. They argue that unemployment isn’t likely to approach the Great Depression’s peak of 25 percent, government responses to the Depression (such as federal deposit insurance) should help prevent a recurrence, and today’s policy makers know much more about how to avert a crisis than they did then. View the links below for some of these perspectives.

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  • Eugene Fama: Why You Can't Time the Market

    For decades, the notion that markets are efficient has been a broadly held belief. So how could so many markets crash simultaneously? Eugene Fama, the father of the efficient market theory, answers the skeptics. His bottom line: If markets are efficiently priced, why did they crash?...

    Articles | Mar 9, 2009

  • How Depressing Is a Depression?

    Financially, it’s a disaster. Psychically, it might not be nearly as bad as you expect.It’s becoming increasingly clear that the recession is going to be nasty, brutish, and long. Many economists project years of pain, and there’s little on the horizon — even the stimulus bill — that...

    Articles | Mar 9, 2009

  • Living Through a Recession

    Given the state of the economy and the job and real estate market, you might think we’d all be in for an extended bout of depression. But the economic crisis might not make you as miserable as you think because of the way most people adapt to their circumstances, both good and bad…Skim the...

    Articles | Mar 9, 2009

  • The Fruits of Frugality

    Despite our recent history, Americans haven’t always been spendthrifts: from 1950 to 1992, the saving rate averaged 8.6 percent. What a return to a savings rate that high might look like in terms of social habits, the country’s mood, and our position in the world…In the wake of the worst...

    Articles | Mar 17, 2009

  • The Debate over the Stimulus Plan

    Our optimist, Professor Menzie Chinn of the University of Wisconsin, sees a bold investment that came not a moment too soon. Our skeptic, Garett Jones of George Mason University, smells a boondoggle. Follow their debate and decide for yourself who’s right…When the president signed the...

    Articles | Mar 17, 2009

  • Are You Saving Too Much?

    The economic crisis has driven families to rediscover a long-forgotten American virtue: thrift. Ironically, that’s exactly what the economy doesn’t need right now.The message from the Administration and the U.S. Treasury couldn’t be clearer: Please start spending again, America. Your...

    Articles | Mar 24, 2009

  • A Case Study: Why 'Buy American' Will Make You Poorer

    Trade barriers didn’t exactly cause the Great Depression, but they probably helped prolong it. Here’s a lesson from history on why you want free trade, even if you think you don’t. Hoovernomics During his 1928 presidential campaign, Herbert Hoover promised...

    Articles | Apr 15, 2009

  • How to Make the Financial Crisis Worse

    Trade barriers. “Buy American” rules. Anti-immigrant hysteria. The protectionist fever that helped make the Depression Great shows sign of reemerging here and now. Do bad times bring out countries’ inner protectionists? Yes, and there are alarming signs that it could be happening again....

    Articles | Apr 15, 2009

  • The Link Between Money and Happiness

    MoneyWatch Editorial Director Eric Schurenberg shares the effects of the economy on our mood and tips on how to keep your chin up in a downturn.

    Videos | Apr 2, 2009

  • The Great Depression Ahead? Don't Be So Sure

    Harry Dent's The Great Depression Ahead makes a lot of sense -- so long as you ignore every prediction Dent ever made before writing it. by Allan Roth

    Blog posts | Apr 8, 2009

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