How Long Will the Great Recession Last?

A depression is a long period of high unemployment characterized by GDP that stays at or below pre-depression levels. The following graph shows Real GDP during the Great Depression which began at the end of 1929 and ended in 1939:

The Great Recession began in the first quarter of 2008. So far there have been two upturns. The first upturn only lasted one quarter, the second quarter of 2008, in response to President Bush's stimulus plan. The second blip just started last quarter, in response to Obama's recovery plan:

Don't expect this blip to last much longer than the first. The reason is simple: China. When President Bush wanted to borrow money from China to pay for the first stimulus plan, China started pegging their currency to the dollar. As a result, the United States trade deficit with China stopped improving. During Obama's most recent quarter, our trade deficits got worse:

There is a positive statistic in these data, the stabilization of residential investment, which had been falling ever since the house price bubble popped in 2006, as shown in the graph below:

The depressing statistic in these data is non-residential fixed investment, which includes building new energy production, building new factories, and retooling old factories. That sort of investment has not yet stopped declining since the current recession began, as shown in the graph below:

There is nothing that wouldn't get better if business fixed investment would increase. New and improved factories would mean more demand for products now, and higher productivity and exports later.

The United States got out of the Great Depression as a result of increased net exports to the warring countries in Europe. Those exports, in turn, resulted in increased fixed investment. If we were to require that China buy our goods in return for us buying Chinese goods, net exports and fixed investment would get the United States out of this current depression.

Disclosure: No Positions

Comments

[bbro:]

the relationship between disposable personal income,personal
consumption expenditures and business fixed investment is way out of whack. The longer this stays this way the greater the snap back.
That is something a lot of doom and gloomers have missed. Businesses have way overeacted to the scare last fall.

Oct 30 06:03 AM

[Michael Clark:]

A Great Depression is a series of great recessions and insignificant recoveries: see 1929 - 1947. See 1965 - 1983. See 1893-1911. See 1857-1875. See 1821-1839. See 1785-1803.

How long will the Great Depression last? From 2001-2019.

More information available at

hoalantrangallery.com/...

Oct 30 06:27 AM

[User 353732:]

1. It depends does it not on whether you are one of bosses or a member of the middle class?
For the Bosses, there was no recession, great or small. Its actually the Great Expansion in power, privilege, wealth concentration, control over national resource allocation and when it comes to issuing fake dollars it is the Greatest Expansion. It is boom in the rule of self anointed men and women over the Constitution ,in statistical fraud, in wealth transfer. It is the best of times for those who make the financial shackles, chains and fetters that bind ordinary people and in the policy jackboots that keep their faces in the jobs and income dirt.

2. The Govt says that the economy is growing. If they say so it must be so and while your neighbor may be unemployed, poor, fearful and about to lose her job, that's just a trivial and irrelevant fact that has no "statistical" validity at all.
Govt statistics trump middle class truths.
The statistical pigs are on parade in Wash Dc this week . They strut impressively, with their shining painted faces and lipstick of deceit and their pretty tutus to hide unseemly"facts".
The carefully selected and highly privileged friends and family from Big Media and Wall St invited to the Festival of Lies roar their approval and lower their snouts yet again in the public trough.

3. If you are a member of the besieged middle class its not a great recession: its a depression and it will last just as long as the great expansion for the Bosses lasts.
And if you are a member of the lower class, you hardly care about recessions, depressions, expansions and booms just as long as the entitlements proliferate, the transfer payments keep coming and the drug and digital addictions are available on demand.

Oct 30 07:05 AM

[Donald Ingram:]

User 353732 - Okay, I think I'll cut my throat now!
Agreed. Events have a habit of moving from the impossible to the inevitable without ever stopping at the probable. For those thinking the course will probably be a short one, will be surprise when the bus does not even stop at their stop. What may seem impossible to them at the beginning of the trip, will become gruesomely clear as the final destination heaves into view. Welcome to the new reality.

Oct 30 11:49 AM

[Russ Wetherill:]

How long will the recession last? Short answer is that it depends. It depends on how long it takes us to get our personal and public financial houses in order.

It takes time to pay off debts, it takes time to divest non-performing assets, and it takes time for politicians to realize that more spending and more taxes do not lead to economic prosperity - they lead to financial ruin.

When will the recession end? The only answer to this question, given the spendthrift ways of the current administration is not soon, may not ever. The CBO projects a decade of deficits, perhaps $10T in total.

How will these deficits be reduced? More taxes. How will the health care, and carbon tax programs be funded? Even more taxes. How will Social Security payments be sustained in an era of aging population? Not even by taxes.

More taxes equals less discretionary spending for investment and consumption. This means fewer jobs, economic stagnation, and lower standards of living for all. Historically, the only effective way to expand the economy has been reducing government spending, decreasing taxes, and maintaining positive cash flow.

All levels of government, most financial organizations, and many individuals have, and remain, headed down the wrong road. Taking on more debt does not make you richer, it makes you poorer. Being broke is far better than being in debt because every dollar you earn is your own, no one else has a claim to it.

Oct 30 01:47 PM

[Howard Richman:]

Russ,

You were exactly correct when you wrote: "How long will the recession last? Short answer is that it depends. It depends on how long it takes us to get our personal and public financial houses in order."

But don't miss the fact that our debt problems are increasing so long as we continue to run trade deficits. In order to buy more imports than we receive from exports, we have to borrow money from foreigners.

Howard

On Oct 30 01:47 PM Russ Wetherill wrote:

> How long will the recession last? Short answer is that it depends.
> It depends on how long it takes us to get our personal and public
> financial houses in order.
>
> It takes time to pay off debts, it takes time to divest non-performing
> assets, and it takes time for politicians to realize that more spending
> and more taxes do not lead to economic prosperity - they lead to
> financial ruin.
>
> When will the recession end? The only answer to this question, given
> the spendthrift ways of the current administration is not soon, may
> not ever. The CBO projects a decade of deficits, perhaps $10T in
> total.
>
> How will these deficits be reduced? More taxes. How will the health
> care, and carbon tax programs be funded? Even more taxes. How will
> Social Security payments be sustained in an era of aging population?
> Not even by taxes.
>
> More taxes equals less discretionary spending for investment and
> consumption. This means fewer jobs, economic stagnation, and lower
> standards of living for all. Historically, the only effective way
> to expand the economy has been reducing government spending, decreasing
> taxes, and maintaining positive cash flow.
>
> All levels of government, most financial organizations, and many
> individuals have, and remain, headed down the wrong road. Taking
> on more debt does not make you richer, it makes you poorer. Being
> broke is far better than being in debt because every dollar you earn
> is your own, no one else has a claim to it.

Oct 30 03:03 PM

[Ron Derven:]

As a business writing of many years, I have never seen conditions worse for small business.Money and credit have dried up. It has been dried up and continues to be dried up. I do not know how the remaining companies are keeping going. The Masters of the Universe can look at tables and stats and declare recession

Oct 30 11:46 PM

[chris coonan:]

Things will get a lot worse, before they get better. The US is quickly moving into second world status, and will be a third world nation before long. Greed killed the golden goose, and Wall Street and the folks at Goldman should be proud of the devastation they have unleashed.

The good news for them is they can afford to buy an island, and start a new country.

Nov 07 08:18 AM