On Oct. 14, the Dow Jones Industrial Average barely passed the 10,000 mark for the first time in over a year.
That gave the “green shoots” crowd spasms of joy at the possibility of a recovery from the worst recession to hit America in seven decades. Of course, the last one eventually morphed into the Great Depression lasted at least a full decade, rewired our currency, led to world war, ruined countless lives and set a universal standard for societal implosions.
The fire this time? It’s almost out, say a series of decorated financial experts within and without the mainstream.
But most of them blew the call on the implosion, and are still blowing it today. We are not in Paul Krugman’s Great Recession, or the “deep and long recession” coined by the optimistic National Association for Business Economics. We’re not even mired in Wikipedia’s comparatively boring Financial Crisis of 2007-2009.
No, we’re neck-deep in another Great Depression, which is unfurling into a devaluation nightmare of everything from our lives and currency to, given curve balls like catastrophic climate change and peak oil and water, our very existence.
“There are always unexpected disasters out there waiting to happen,” Jeffrey Frankel, a Harvard economist and member of the National Bureau of Economic Research’s Business Cycle Dating Committee, explained to AlterNet.
Frankel took pains to clarify that he’s speaking for himself, not the nonprofit NBER, which is the largest economics research organization in the U.S. and usually gives the last word on when recessions begin and end — or turn into depressions.
Frankel’s public stance on such loaded terms can be costly. But another clarification Frankel offered added firepower to theory that the differences between recessions and depressions are as ideological as they are statistical.
“There is no standard definition of depression,” Frankel said.
Like “socialism” and “democracy,” an economic depression is terminology fueled by ideology. It can be colored in using whatever palette the powers that be decide to wield.
The last few economic depressions were concretized in hindsight, with the benefit of much analysis and more controversy.
The Long Depression of 1873-1896, depending on whom you ask, arguably lasted over two decades and set the table for the 20th century’s Great Depression. Centuries later, it is still a matter of contention. Most notably, from neoconservative guru Milton Friedman and Anna Schwartz, who argued in their influential, The Monetary History of the United States, that the Long Depression was “severe” but “shorter in length and far less severe than it has been generally judged.”
In other words, even the so-called experts can’t agree on what an economic depression really is, much less a deep and long Great Recession, even while they’re trapped within one.
Logically, one can call the chaos we’re now stuck in a depression, and there’s not a damn thing anyone can do about it. Score one for the linguistic and financial relativists.
But if you’re on the lookout for more statistically convincing evidence, then chew on the raw data.
“The rule of thumb for a depression is unemployment over 10 percent,” Thomas Palley, explained by phone to AlterNet. Palley is a Bernard L. Schwartz economic growth fellow at the New America Foundation, as well as the author of a recent Financial Times column, “A Second Great Depression is Still Possible.” “If you look at the U.S. Bureau of Labor Statistics’ official U3 number, then we’re darn near close to it. If you count the discouraged who aren’t looking for work, or part-timers, then we’re already there.”
The BLS’ official unemployment rate is another clever example of economic and terminological manipulation. Its favored U3 does not count the U4, U5 or U6 contingent, which ranges from “discouraged workers” and “marginally attached workers” to part-timers, which is a very large hedge.
If they were all mashed into a more faithful rendering of the employment landscape, the resultant percentage would be closer to 20 percent than 10 percent. The economic recovery would be summarily stripped of its clothes.
“There’s a very strong case for saying that we’re already in a depression,” Palley concluded. “Lawrence Summers, [Treasury Secretary] Timothy Geithner and the Federal Reserve have been much more subdued and even gloomy. I think something is registering.”
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