Economist: Forget the Recession, This Is a Depression
With this morning’s news that employers laid off 524,000 workers in December, at least one prominent economist has some news of his own: The economy is the
Jul 31, 202067.2K Shares1.2M Views
With this morning’s newsthat employers laid off 524,000 workers in December, at least one prominent economist has some news of his own: “The economy is the jaws of a depression,” Peter Morici, a professor at the University of Maryland, wrote to reporters this morning.
What’s the criterion? Morici claims it’s this: Recessions correct themselves, while depressions do not.
“„Recessions are like stock market corrections—after a time, equity prices rebound without government intervention. Federal Reserve interest rate cuts and stimulus tax rebates and spending have shortened the lives and eased the impact of post-World War II recessions, but those policies did not end them. The economy self corrected.
By contrast, Morici writes, the troubles soon to be inherited by President-elect Barack Obama are more structural, stemming from “bad management practices at the large money center banks and the huge foreign trade deficit. These problems are not self-correcting.”
Trouble is, Morici adds, an enormous spending package alone won’t fix the problem.
“„The economy will not recover without fundamental changes in banking and trade policy. A large stimulus package, though necessary, will only give the economy a temporary lift but then unemployment will rise again and continue at unacceptable levels indefinitely without successively larger stimulus packages and huge federal budget deficits. The economy is a depression, not a recession.
The forecast lends truth to that great Onion headlinethat followed the election: “Black Man Given Nation’s Worst Job.”
Rhyley Carney
Reviewer
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