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Freeze-Frame Radio -> Freeze-Frame Radio Lounge -> Recessions of the Past vs The Present
Post Info TOPIC: Recessions of the Past vs The Present
JD The Jazz Doctor


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Recessions of the Past vs The Present
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Theres little doubt left that were headed for or in the beginnings of and economic downturn. The housing recession that began in 2006 is one of the worst since the 1930s. Its likely that things will get worse before they get better. But its impossible to say at this moment in time how bad theyll get.


There are lots of economic data out there to chew on, but the broadest measure of the economys strength is the gross domestic product the total value of all the stuff we all make and services we sell each other. So a good yardstick of the damage done by a recession is the drop in GDP from start to finish.

By that measure, its too soon to say we're even in a recession: the last GDP data point (for the last quarter of 2007) showed very weak growth of 0.6 percent but growth nonetheless. Given the latest news on job losses in January and February, its likely well see a negative number for the quarter that wraps up at the end of this month it will take another month or more after that before the data is tabulated and analyzed. Depending on how long it takes for banks and other lenders to get through the ongoing turmoil in the credit markets, we may have more down quarters this year and possibly even next.

 

That could easily make this the worst downturn in recent memory. The last recession in 2001 was pretty short and shallow by historical standards. But things would have to get a whole lot worse to put the current downturn on the list of all-time worst.

The 1980-82 recession (technically two, quick back-to-back downturns) sent the unemployment rate to 10.8 percent more than double current levels. In the second quarter of 1980 alone, GDP fell 7.8 percent.

The worst recession since the Great Depression ran from Nov. 1973 to March 1975 and wiped out more than 5 percent of GDP. For all of 1974, inflation averaged 12.3 percent, which meant that unless you a fat raise that year, you had to figure out how to get by with a big drop in spending power. Inflation also destroyed savings and investment: from the start of 1973 to Sept. 1974, the stock market, as measured by the S&P 500 index, fell by 46 percent.

But as bad as the 1970s were, that downturn didnt come close to the economic contraction we now call the Great Depression. Theres good reason for using that superlative and for avoiding it when describing current conditions. From August of 1929 to March of 1933, the economy (as measured by GDP) shrank by more than a quarter. The stock market, as measured by the Dow Jones Industrial average, fell from 380.33 in Aug., 1929 to 42.84 in June of 1932. If that happened today, the stocks in your 401(k) retirement fund would be worth about 11 cents on the dollar. The Dow didn't fully recover from the '29 crash until November, 1954.

Its entirely possible were at the beginning of what may turn out to be a nasty recession, and we may see further drops in the stock market. There are plenty of ominous conditions, especially the recent rise in the inflation rate and the drop in the value of the dollar. Fed Chairman Ben Bernanke said recently he expects some banks will fail. On the other hand, the Feds aggressive interest rate cuts take time to work through the system. Many forecasters we respect maintain that the downturn will be relatively mild and over by the second half of this year.

So were not saying there wont be a severe downturn; the point is that no one knows. Its just too early to know how bad it will be. And it would have to get a whole lot worse to measure up to the biggest economic storms weve been through.



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"And like Web, I enjoy throwing JR under the bus.  Problem is, it's usually under the special bus that I ride every day". Ghostdancer 12-18-09
JD The Jazz Doctor


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"From August of 1929 to March of 1933, the economy (as measured by GDP) shrank by more than a quarter. The stock market, as measured by the Dow Jones Industrial average, fell from 380.33 in Aug., 1929 to 42.84 in June of 1932. If that happened today, the stocks in your 401(k) retirement fund would be worth about 11 cents on the dollar. The Dow didn't fully recover from the '29 crash until November, 1954."

That's just scary. Here we are told to save money in our 401ks and hope we get the 10% return.....

Where is Sparky?confused

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"And like Web, I enjoy throwing JR under the bus.  Problem is, it's usually under the special bus that I ride every day". Ghostdancer 12-18-09
JD The Jazz Doctor


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I remember the big long gas lines as a little kid in 1974 or 75. But I have very little memory of even knowing there was a recession in the early 80s. THe Brewers were doing so well in 1982, that was the only news that seemed to matter back then. I'll have to ask my dad if he remembers that time. I don't think he was laid off or anything, and I don't remember us cutting costs or anything back then...

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"And like Web, I enjoy throwing JR under the bus.  Problem is, it's usually under the special bus that I ride every day". Ghostdancer 12-18-09
ghostdancer


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We didn't have long gas lines here.....we had gas price wars going on and I can remember seeing signs for gas being 42 cents a gallon!.....it was readily available here all the time, and we (myself and my parents) wondered why there were lines all over the country but not here.  confused 

I remember the 80's recession big time.  That was when I worked at John Han**** Life Insurance and they were closing offices left & right throughout the country and also offices in other countries.  We were assured that our office would remain open, along with the office in Flint, Ann Arbor, and Detroit.  Less than 3 months later, they closed all of the offices except the one in Detroit.  At the same time, GM had major lay-offs going on.......I stood in the unemployment line every week for hours on end waiting for my check!!  Every week they asked if I had found other employment, and the answer was always "no, no one is hiring right now."  Those people at the unemployment office were always so nasty too.....they acted like my unemployment benefits were being paid directly out of their pocket. 

They got pay-back big time when the State of MI started laying off workers and the people that worked in the unemployment office lost their jobs and found themselves on the other side of the counter!!  They weren't so high and mighty then. 

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JD The Jazz Doctor


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wow! interesting story sandy. thanks for sharing!

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"And like Web, I enjoy throwing JR under the bus.  Problem is, it's usually under the special bus that I ride every day". Ghostdancer 12-18-09
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