It is very slowly becoming apparent to everyone but the mainstream economists that the USA has been in a depression since 2008:
The Great Depression that Federal Reserve Chairman Ben Bernanke claims to have averted has been part of the background radiation of our economy since at least 2008.
It’s just that like radiation — it’s invisible.
We’ve called it the recovery, the jobless recovery, the slogging recovery and more recently the fading recovery. We’ve measured modest growth in our nation’s gross domestic product to record that our so-called Great Recession ended in June 2009. And now we are saying that if this disappointing growth suddenly disappears, as currently feared, we will be in a new recession.
There is nothing more depressing than hearing about a new recession when you haven’t fully recovered from the last one. I take heart in suspecting that in a still-distant future, historians will look back with clarity and call this whole rotten period a depression.
Which, of course, is very close to what I have been repeatedly saying since early 2009, as The Return of the Great Depression was published on October 29, 2009, the 70th anniversary of the Black Tuesday crash on Wall Street. And some of you may recall the following failed economic prediction for 2011, which is looking at least partially correct for 2012.
One U.S. state and at least three major cities (100k population plus) will attempt to file for bankruptcy or federal bailout. (It’s unclear if states can file for bankruptcy and public employee unions will oppose the city filings.)
– December 31, 2010
“San Bernardino [pop. 210,000] on Wednesday became the third California city to declare insolvency, joining Stockton [pop. 291,707] and Mammoth Lakes [pop. 8,234] after officials say they filed an emergency petition for Chapter 9 bankruptcy.”
– August 1, 2012
Now, you are certainly welcome to dismiss my economic predictions due to my inability to pinpoint the precise timing with which these events will occur. But even in light of my temporal inaccuracy, I think it is worthwhile pointing out that these predictions are completely contrary to those made by the vast majority of economists and economic observers, many of whom are still talking about the ongoing recovery in the fourth year of the Great Depression 2.0. This failure to note the readily apparent is not unprecedented, as Megan McCardle noted in 2009.
I don’t want to push the Great Depression analogy too far, but what’s surprising when you go back to primary sources from 1930 is the optimism. I don’t mean to imply that everyone thinks things are just swell. But while you know that they are facing the worst economic decade of the twentieth century, they don’t. They’re expecting something more like the recession that followed World War I.
What was the big difference between the recovery from the 1920-21 recession and the non-recovery from the 1929-30 depression? Then, as now, the federal government decided to fight the economic contraction with economic stimulus. The reason that the Great Depression 2.0 will be much bigger and last much longer than its predecessor is because the debt overhang is larger and the stimulus attempts have not only been larger, but are global in their scope.