FT.com / World - Data signal deep global downturn
But Ben Bernanke, US Federal Reserve chairman, sought to allay concerns that the US was entering a period of economic stress on par with the Great Depression. “Let’s put that out of our minds,” Mr Bernanke said in a speech in Austin, Texas. “There’s no comparison in terms of severity.”
At this point, this is quite true. The market is down 50%, not 90%, unemployment is 6.5%, not 25%, and only a handfull of banks (and none of their depositors’ money) have gone under, not 5000 total losses.
But this cycle is young yet.
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Reporters, like many people, get their history from the movies. For instance, one movie I like and recently saw again was The Legend of Bagger Vance. In one scene, the streets of Savannah are colorful, briight and bustling. Then the narrator says, “then the Great Depression hit”. Next scene is empty streets, drab buildings and aging rundown cars with broken wheels, parked empty and forlornly, crooked to the curb, with the soup kitchen lines snaking in the background.
The Great Depression didn’t just happen one morning. We didn’t wake up one day and suddenly over 20% of the workforce got laid off (it was Tues I think). The Dow didn’t drop 90% in a week. It unfolded over time starting mid 1929 until it’s first bottom in mid 1933. Then it stabilized (at a soul numbing 20+% unemployment rate) and around 1936 got a little better before starting a second, sickening slide in 1937 or so lasting thru 1939.
Now, Bernanke obvioulsy studied the history enough to know this. So he’s saying all this in the hopes that the public doesn’t know history from bunk. Is that a stretch?
But I still think the 1970’s are the correct history to be reviewing. Or else the twin bubbles created in the 1720’s by John Law in France and the South Sea Company in England.