Are We In A Depression Right Now?

The CEO of Microsoft, Steve Ballmer, recently said that our current economy bears many similarities to those seen during the depressions of 1837, 1873 and 1929.

Dominique Strauss-Kahn, managing director of the International Monetary Fund, recently went on record as saying that the world's "advanced economies" are already in a depression.

Jeff Immelt, the CEO of General Electric, recently warned that the United States could "descend into a depression".

David Rosenberg, who is Merrill Lynch's chief economist in North America, recently stated that he believes that we are in a depression right now.

These are just some of the recent comments from prominent figures that have mentioned the dreaded "D" word. Forget a recession. Forget a deep recession. More and more people are coming out and warning of a potential depression. Some are even saying that we are currently in a depression.

What exactly is a "depression"?

To be honest, there is no exact definition of the term.

A "recession" is usually defined as at least two straight quarters of negative GDP growth. A typical recession usually lasts between 14-18 months.

A "depression" is harder to define. Most will tell you that in a depression, you have:

-a much bigger spike in unemployment
-a much greater contraction of the GDP
-a much longer time frame in which the economy is contracting

Think of a depression as a super-recession. There is no real cut-and-dried definition of the term - you have people arguing as to whether or not we are currently in a depression, and you will have people arguing, after the fact, as to whether or not we were ever in a depression at all.

The current situation that we are dealing with has all the signs of a depression. You have a government that is frantically scrambling to stimulate a wilting economy. You have spiking unemployment numbers. You have a collapsed housing market. You have a frozen credit market. You have a precipitous decline in major stock indexes. You have a shattered banking system. You have numerous countries around the world teetering on the brink of collapse. The auto industry has been completely destroyed. There is absolutely no consumer confidence right now.

If that isn't a depression, then I don't know what is.

What do you think?

Filed under: The Economic Meltdown