Is This a Depression or a Recession?





world heading into a depressionAre we currently struggling through a REALLY bad recession, or is this something worse?

I think more and more people are starting to come to the conclusion that we are currently in a depression.

We've gone from downturn to recession to deep recession to depression. There are now some people in the media saying that we are going through a "mild" depression, or a depression with a "small D".

As we've mentioned before, many notable people have already proclaimed that we are currently in a recession. This includes the managing director of the International Monetary Fund and the chief economist of Merrill Lynch.

Now, there is no exact definition of a depression - it's completely subjective. Many people prefer to say that a "depression is worse than a recession, and lasts about twice as long".

Based on that simple definition, can anyone actually argue that we aren't in a depression right now?

This downturn has now lasted 15 months, and there is absolutely no indication that things are on the verge of stabilizing. When all is said and done, this downturn will likely last 24-30 months, perhaps even longer. Whether you want to call it a depression or "super" recession, it is still much worse than a standard recession.

The American economy was absolutely crushed in the fourth quarter of 2008. The American consumer, who is the grease in the engine of the global economy, closed their pocketbooks and started saving wherever and whenever they could. This sent a shock-wave through the global economy, and is one of the leading reasons as to why there is a global recession/depression.

Those who felt as though a significant downturn in the U.S. economy would result in a "re-balancing" of global economic power have been proven dead wrong. The United States is going down, but most countries throughout the world are going down faster. Countries such as Russia and China are suffering tremendously through this global recession.

Wall Street, as we know it, will never be the same. The global banking system is on life support, with many governments being forced to prop up their biggest banks.

Real estate values throughout the world have been decimated. Most major market indexes are now down 60%+ from their peaks.

Major industries are crumbling before our very eyes. The auto, banking and newspaper industries are just a few of the casualties of this unprecedented downturn.

Many major countries are taking on massive amounts of debt in order to throw money at the problems that currently plague us. Trillions upon trillions of dollars have been thrown at the problem already, with no end in site.

Companies such as AIG, C and GM are in constant need of billions upon billions of dollars in bail-out money. Where will it end? And how will we afford it?

Some of the (previously) largest and most revered companies in the world are now worth just a fraction of what they once were. BAC. C. GM. GE. The carnage just goes on and on, and this doesn't include the companies that went bankrupt.

The entire banking system is being re-made before our very eyes. Wall Street will never be the same. Many of the most prestigious newspapers and periodicals are on the brink of going under, if they haven't already. Unemployment numbers are spiraling higher. Banks aren't lending. Oil is plummeting due to a sharp fall-off in demand. Car sales are non-existent, as people are too terrified to make any new purchases with so much uncertainty.

How is this not a depression?

If it sounds like a depression and looks like a depression, then it is probably a depression.

To those who email me and say "stop saying there is a depression, because there isn't" - what's your evidence? I would love to hear your argument as to why this isn't a depression. Feel free to comment below if you feel that I am wrong, and that this isn't a depression. I would love to hear from you.




Filed under: The Economic Meltdown

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