AppyLover2
Well-Known Member
I've found myself wondering how far we are from going from recession to depression and what the difference is between the two. I'm not old quite enough to remember the "great depression" but I definitely remember my parents talking about it. I remember my mom talking about being hungry, about going for a walk at lunch time at school because she didn't want the other kids to know she had nothing to eat, about cutting down hand-me-down clothes to have something to wear, about having "one" dress. I remember my father talking about selling news papers on the street corner to feed his family.
The internet, being the wonderful source of information it is, lists several different references to the difference between the two. Of the few I scanned this one seemed to be the easiest for me to understand.
"Recession? Depression? What's the difference?
Before the Great Depression of the 1930s any downturn in economic activity was referred to as a depression. The term recession was developed in this period to differentiate periods like the 1930s from smaller economic declines that occurred in 1910 and 1913. This leads to the simple definition of a depression as a recession that lasts longer and has a larger decline in business activity.
The Difference
So how can we tell the difference between a recession and a depression? A good rule of thumb for determining the difference between a recession and a depression is to look at the changes in GNP. A depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn that is less severe.
By this yardstick, the last depression in the United States was from May 1937 to June 1938, where real GDP declined by 18.2 percent. If we use this method then the Great Depression of the 1930s can be seen as two separate events: an incredibly severe depression lasting from August 1929 to March 1933 where real GDP declined by almost 33 percent, a period of recovery, then another less severe depression of 1937-38. The United States hasn’t had anything even close to a depression in the post-war period. The worst recession in the last 60 years was from November 1973 to March 1975, where real GDP fell by 4.9 percent. Countries such as Finland and Indonesia have suffered depressions in recent memory using this definition.
Now you should be able to determine the difference between a recession and a depression...."
But I suppose the news will let us know if we get there.
The internet, being the wonderful source of information it is, lists several different references to the difference between the two. Of the few I scanned this one seemed to be the easiest for me to understand.
"Recession? Depression? What's the difference?
Before the Great Depression of the 1930s any downturn in economic activity was referred to as a depression. The term recession was developed in this period to differentiate periods like the 1930s from smaller economic declines that occurred in 1910 and 1913. This leads to the simple definition of a depression as a recession that lasts longer and has a larger decline in business activity.
The Difference
So how can we tell the difference between a recession and a depression? A good rule of thumb for determining the difference between a recession and a depression is to look at the changes in GNP. A depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn that is less severe.
By this yardstick, the last depression in the United States was from May 1937 to June 1938, where real GDP declined by 18.2 percent. If we use this method then the Great Depression of the 1930s can be seen as two separate events: an incredibly severe depression lasting from August 1929 to March 1933 where real GDP declined by almost 33 percent, a period of recovery, then another less severe depression of 1937-38. The United States hasn’t had anything even close to a depression in the post-war period. The worst recession in the last 60 years was from November 1973 to March 1975, where real GDP fell by 4.9 percent. Countries such as Finland and Indonesia have suffered depressions in recent memory using this definition.
Now you should be able to determine the difference between a recession and a depression...."
But I suppose the news will let us know if we get there.
