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http://www.safehaven.com/article-13712.htm
A Tale of Two Depressions
By Barry Eichengreen and Kevin O'Rourke
New findings:
* World industrial production continues to track closely the 1930s
fall, with no clear signs of 'green shoots'.
* World stock markets have rebounded a bit since March, and world
trade has stabilized, but these are still following paths far below
the ones they followed in the Great Depression.
* There are new charts for individual nations' industrial output.
The big-4 EU nations divide north-south; today's German and British
industrial output are closely tracking their rate of fall in the
1930s, while Italy and France are doing much worse.
* The North Americans (US & Canada) continue to see their
industrial output fall approximately in line with what happened in the
1929 crisis, with no clear signs of a turn around.
* Japan's industrial output in February was 25 percentage points
lower than at the equivalent stage in the Great Depression. There was
however a sharp rebound in March.
The parallels between the Great Depression of the 1930s and our
current Great Recession have been widely remarked upon. Paul Krugman
has compared the fall in US industrial production from its mid-1929
and late-2007 peaks, showing that it has been milder this time. On
this basis he refers to the current situation, with characteristic
black humour, as only "half a Great Depression." The "Four Bad Bears"
graph comparing the Dow in 1929-30 and S&P 500 in 2008-9 has similarly
had wide circulation (Short 2009). It shows the US stock market since
late 2007 falling just about as fast as in 1929-30.
Comparing the Great Depression to now for the world, not just the US
This and most other commentary contrasting the two episodes compares
America then and now. This, however, is a misleading picture. The
Great Depression was a global phenomenon. Even if it originated, in
some sense, in the US, it was transmitted internationally by trade
flows, capital flows and commodity prices. That said, different
countries were affected differently. The US is not representative of
their experiences.
Our Great Recession is every bit as global, earlier hopes for
decoupling in Asia and Europe notwithstanding. Increasingly there is
awareness that events have taken an even uglier turn outside the US,
with even larger falls in manufacturing production, exports and equity
prices.
In fact, when we look globally, as in Figure 1, the decline in
industrial production in the last nine months has been at least as
severe as in the nine months following the 1929 peak. (All graphs in
this column track behaviour after the peaks in world industrial
production, which occurred in June 1929 and April 2008.) Here, then,
is a first illustration of how the global picture provides a very
different and, indeed, more disturbing perspective than the US case
considered by Krugman, which as noted earlier shows a smaller decline
in manufacturing production now than then.
Updated Figure 1. World Industrial Output, Now vs Then (updated)
Source: Eichengreen and O'Rourke (2009) and IMF.
Similarly, while the fall in US stock market has tracked 1929, global
stock markets are falling even faster now than in the Great Depression
(Figure 2). Again this is contrary to the impression left by those
who, basing their comparison on the US market alone, suggest that the
current crash is no more serious than that of 1929-30.
Updated Figure 2. World Stock Markets, Now vs Then (updated)
Another area where we are "surpassing" our forbearers is in destroying
trade. World trade is falling much faster now than in 1929-30 (Figure
3). This is highly alarming given the prominence attached in the
historical literature to trade destruction as a factor compounding the
Great Depression.
Updated Figure 3. The Volume of World Trade, Now vs Then (updated)
Sources: League of Nations Monthly Bulletin of Statistics,
http://www.cpb.nl/eng/research/sector2/data/trademon
itor.html
It's a Depression alright
To sum up, globally we are tracking or doing even worse than the Great
Depression, whether the metric is industrial production, exports or
equity valuations. Focusing on the US causes one to minimise this
alarming fact. The "Great Recession" label may turn out to be too
optimistic. This is a Depression-sized event.
That said, we are only one year into the current crisis, whereas after
1929 the world economy continued to shrink for three successive years.
What matters now is that policy makers arrest the decline. We
therefore turn to the policy response.
Also remember they told the truth back in the last great depression unlike
today where everything is all lies spewed mostly by tarbaby boy.
Don Tiberone wrote:
> http://www.safehaven.com/article-13712.htm
>
> A Tale of Two Depressions
> By Barry Eichengreen and Kevin O'Rourke
>
> New findings:
>
> * World industrial production continues to track closely the 1930s
> fall, with no clear signs of 'green shoots'.
> * World stock markets have rebounded a bit since March, and world
> trade has stabilized, but these are still following paths far below
> the ones they followed in the Great Depression.
> * There are new charts for individual nations' industrial output.
> The big-4 EU nations divide north-south; today's German and British
> industrial output are closely tracking their rate of fall in the
> 1930s, while Italy and France are doing much worse.
> * The North Americans (US & Canada) continue to see their
> industrial output fall approximately in line with what happened in the
> 1929 crisis, with no clear signs of a turn around.
> * Japan's industrial output in February was 25 percentage points
> lower than at the equivalent stage in the Great Depression. There was
> however a sharp rebound in March.
>
> The parallels between the Great Depression of the 1930s and our
> current Great Recession have been widely remarked upon. Paul Krugman
> has compared the fall in US industrial production from its mid-1929
> and late-2007 peaks, showing that it has been milder this time. On
> this basis he refers to the current situation, with characteristic
> black humour, as only "half a Great Depression." The "Four Bad Bears"
> graph comparing the Dow in 1929-30 and S&P 500 in 2008-9 has similarly
> had wide circulation (Short 2009). It shows the US stock market since
> late 2007 falling just about as fast as in 1929-30.
>
> Comparing the Great Depression to now for the world, not just the US
>
> This and most other commentary contrasting the two episodes compares
> America then and now. This, however, is a misleading picture. The
> Great Depression was a global phenomenon. Even if it originated, in
> some sense, in the US, it was transmitted internationally by trade
> flows, capital flows and commodity prices. That said, different
> countries were affected differently. The US is not representative of
> their experiences.
>
> Our Great Recession is every bit as global, earlier hopes for
> decoupling in Asia and Europe notwithstanding. Increasingly there is
> awareness that events have taken an even uglier turn outside the US,
> with even larger falls in manufacturing production, exports and equity
> prices.
>
> In fact, when we look globally, as in Figure 1, the decline in
> industrial production in the last nine months has been at least as
> severe as in the nine months following the 1929 peak. (All graphs in
> this column track behaviour after the peaks in world industrial
> production, which occurred in June 1929 and April 2008.) Here, then,
> is a first illustration of how the global picture provides a very
> different and, indeed, more disturbing perspective than the US case
> considered by Krugman, which as noted earlier shows a smaller decline
> in manufacturing production now than then.
>
> Updated Figure 1. World Industrial Output, Now vs Then (updated)
>
> Source: Eichengreen and O'Rourke (2009) and IMF.
>
> Similarly, while the fall in US stock market has tracked 1929, global
> stock markets are falling even faster now than in the Great Depression
> (Figure 2). Again this is contrary to the impression left by those
> who, basing their comparison on the US market alone, suggest that the
> current crash is no more serious than that of 1929-30.
>
> Updated Figure 2. World Stock Markets, Now vs Then (updated)
>
> Another area where we are "surpassing" our forbearers is in destroying
> trade. World trade is falling much faster now than in 1929-30 (Figure
> 3). This is highly alarming given the prominence attached in the
> historical literature to trade destruction as a factor compounding the
> Great Depression.
>
> Updated Figure 3. The Volume of World Trade, Now vs Then (updated)
>
> Sources: League of Nations Monthly Bulletin of Statistics,
> http://www.cpb.nl/eng/research/sector2/data/trademon
itor.html
>
> It's a Depression alright
>
> To sum up, globally we are tracking or doing even worse than the Great
> Depression, whether the metric is industrial production, exports or
> equity valuations. Focusing on the US causes one to minimise this
> alarming fact. The "Great Recession" label may turn out to be too
> optimistic. This is a Depression-sized event.
>
> That said, we are only one year into the current crisis, whereas after
> 1929 the world economy continued to shrink for three successive years.
> What matters now is that policy makers arrest the decline. We
> therefore turn to the policy response.
--
The Grandmaster of the CyberFROG
Come get your ticket to CyberFROG city
Nay, Art thou decideth playeth ye simpleton games. *Some* of us know
proper manners
Very few. I used to take calls from *rank* noobs,
Hamster isn't a newsreader it's a mistake!
El-Gonzo Jackson FROGS both me and Chuckcar
Master Juba was a black man imitating a white man imitating a black man
Using my technical prowess and computer abilities to answer questions
beyond the realm of understandability
Regards Tony... Making usenet better for everyone everyday
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