The Current Recession

How Does The Current Global Economic Recession Compare To The Great Depression?

The Global Economic Recession and the Great Depression are the fallout of the exact same economic phenomenon and are only different in a few respects. Each period is marked by a massive run up in asset prices followed by a tremendous deflationary pressure that has sent both debt and equity markets into turmoil .
The Great Depression saw the Federal Reserve do little to ‘save’ the economy because their policy actions were limited by a currency backed by precious metal. In the face of deflation, the 1930s Fed knew it needed to expand the money supply by lowering reserve requirements at banks. In fact, the board of governors did actually reduce the reserve requirement, but not enough to have a sizable impact. And so, the country was stricken to a decade of deflation, high unemployment, and slow growth.
The Economic Recession is very similar in origin, but the policy response was different. Most modern day central banks have fiat currencies as opposed to currencies backed by precious metals (Gold, silver, animal pelt, etc.). And so, in times of crisis they can ‘create’ money by artificially increasing member banks’ deposits at the Federal Reserve, funds from which those banks can lend to the public.
I believe the difference in monetary regime is the cause for the difference in ‘perceived’ outcome of the two crises. I still think the two crises are very similar. Here’s why:
Lots of folks compare unemployment rates. They say, unemployment was 25% in the Depression and only 10% in the GR. First of all, the definition of employment has changed in the survey literature over time with the 1930s definition being far broader. Second, It is more prudent to look at underemployment to really grasp the scale of the GR. This underemployment figure counts folks who are not satisfied with the level of work they have been able to achieve given their skill sets. We are approaching 20% underemployment. Moreover, the labor force participation rate, which is a measure of the percentage of people working in the entire population, is falling precipitously. Note that each percentage point decrease in labor force participation rate is equivalent to 3 million people leaving the labor force. And so, given the declining participation rate, the 20% underemployment figures may actually understate the true level of unemployment in the economy.
“People had to resort to waiting in bread lines, living day to day.” Again, if the underemployment situation isn’t sad enough, 1 in 6 Americans is living off of government assistance. More than 50 Million are on Medicaid. And another 10 million are in unemployment assistance. The median duration moved from just 5 weeks in the 1960s to over 25 weeks today. 25 weeks is half of a year. Tell me people are not living day to day.
“There was a debt deflation death spiral that halted credit liquidity.” There is definitely still a deflationary spiral. It is massive. See my answer here What arethe sources of deflationary pressuresoon after the Great Recession?.
I think it is pretty clear that we are in a very precarious economic situation that is highly similar to the Great Depression. Getting out of this economic situation is going to be very hard. It will take a lot of national pain as our economy transitions from a consumption based, high-debt, low-growth debtor nation into a manufacturing and exporting nation once again. We will see how that all plays out in the next 10-20 years.

What is a Great Depression?
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in 1930 and lasted until the late 1930s or middle 1940s. It was the longest, most widespread, and deepest depression of the 20th century.
In the 21st century, the Great Depression is commonly used as an example of how far the world's economy can decline. The Great Depression had devastating effects in countries rich and poor. Personal income, tax revenue, profits and prices dropped, while international trade plunged by more than 50%. Unemployment in the U.S. rose to 25%, and in some countries rose as high as 33%.
Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming and rural areas suffered as crop prices fell by approximately 60%.Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries such as cash cropping, mining and logging suffered the most.
Some economies started to recover by the mid-1930s. In many countries, the negative effects of the Great Depression lasted until the end of World War II.

The Causes and Cures of the Great Global Economic Recession
Congress created the Federal Reserve System in 1913 to tame the business cycle once and for all. Optimists believed central banking would moderate booms, soften busts, and place the economy on a steady trajectory of economic growth. A century later, in the wake of the worst recession in fifty years, Editor David Beckworth and his line-up of noted economists chronicle the critical role the Federal Reserve played in creating a vast speculative bubble in housing during the 2000s and plunging the world economy into a Great Recession.
As commentators weigh the culpability of Wall Street’s banks against Washington’s regulators, the authors return our attention to the unique position of the Federal Reserve in recent economic history. Expansionary monetary policy formed the basis of the soaring housing prices, excessive leverage, and mispricing of risk that characterized the Great Boom and the conditions for recession.
Yet as Boom and Bust Banking also explains, the Great Recession was not an inevitable result of the Great Boom. Contrary to the conventional wisdom, the Federal Reserve in fact tightened rather than loosened the money supply in the early days of the recession. Addressing a lack of critical studies of recent Federal Reserve policy, Boom and Bust Banking reveals the Federal Reserve’s hand in the economy’s deterioration from slowdown to global recession.
At the close of the most destructive economic episode in a half-century, Boom and Bust Banking reconsiders the justifications for central banking and reflects on possibilities for reform. With the future ripe for new thinking, this volume is essential for policy makers and concerned citizens who wish to learn from recent history.

Global Economic Recession Causing More Poverty, Deaths For Females Than Males
The global economic recession, talk abounds of austerity measures, food shortages and a shrinking middle class. But there are few specifics about those who withstand the brunt of the downturn: women and girls.
This demographic has been hit hardest by the global recession -- more likely to be poor, die sooner and drop out of school, according to a new report from Plan and the Overseas Development Institute, an NGO that fights poverty in developing countries.
The report "Off The Balance Sheet: The Impact Of The Economic Crisis On Girls And Young Women" noted that entrenched gender inequality, austerity and economic trends typically take a toll on the most vulnerable, but the data on life expectancy is especially alarming:
“It is little surprise that the most vulnerable suffer more in times of austerity but to see the impact in higher mortality rates, reduced life expectancy, less opportunities and greater risks for girls and boys is stark," Nigel Chapman, Plan Chief Executive Officer, said in the report.
He pointed out that females need more targeted social protection, job creation and education and added that right now, “The world is failing girls and women."
Chapman told the Huffington Post that he feels the recession's impact on women and girls might be lost amid the gravity of the crisis.
"This is a conjectural point, but I feel in some ways the lack of equality and the gap in the rights was a very hot story three or four years ago," he said. "But theres a slight sense that the world moves on. The crisis has become macro. If you're in country where the economy is shrinking, that's really serious, and the government is focused on the big picture."
The study points out specific global examples of the toll on females, including Nicaraguan women who reduce their food intake; Cambodian girls who are forced to drop out of school and become domestic workers; and an unemployment rate of 67 percent for young Greek women, compared with 44 percent for men in 2011.
"While cooking, I try to use less rice…I always try to make sure that the male members have enough to eat. They are working hard and they need food to perform their laborious jobs. Then I try to feed the children. We [the female members of the family] eat the remaining food. Well, this is not enough. But what can I do?" the Plan study quoted a Cambodian woman as saying.
This could mean setbacks in the gains made toward reaching the UN Millennium Development Goals in improving maternal health, education and more, Chapman told HuffPost.

"It doesn't take much to set us back in this cocktail of an issues. The progress is fragile, and that's why we are drawing attention to it," he said.
The researchers also saw increases in child labor and and young girls taking risky jobs that make them vulnerable to abuse.
"In some cases, they're sent out to work to earn money through sex work, through prostitution, which is of course is very, very worrying," Chapman told ABC News. "They're very, very vulnerable children and it just exacerbates a pattern or a trend that happens in some countries already, but it makes it worse."
The report calls on countries to tackle gender equality and proposes specific solutions such as promoting local sustainable food production and programs that meet the needs of girls, and incentivizing families to keep kids in school and subsidize child care.
Chapman emphasized global education as the primary way to empower girls. He said NGOs and governments are have done much to highlight the need, but more needs to be done.
"We are simply driving girls out of school too young," he told HuffPost. "Education is a catalyst because it gives you earning power you wouldn't otherwise have."
Though the study highlights the need for greater strides, there are many organizations already working to empower women and girls amid the global recession.
In terms of tackling child labor and sexual violence against women and girls, nonprofits asked the Obama administration earlier this month to renew the Trafficking Victims Protection Act (TVPA), which would help protect the 27 million people who are considered modern-day slaves. This comes in the wake of The White House declaring January National Slavery and Human Trafficking Prevention Month and outlining ways the government, businesses and everyday people can fight trafficking and work to empower women.
NGOs such as Concern Worldwide are working to break the cycle of hunger by providing solutions for women farmers on issues such as land acquisitions, investment deals and more. The organization and others are calling for a continuation of hunger-fighting initiatives from 2012 into 2013, such as those outlined at the G8 Summit and by David Cameron at the Olympics.
And programs such as UNICEF's Education First was established late last year as a way to galvanize governments, nonprofits and foundations to make sure children worldwide have equal access to education. The organization also supports programs that promote gender equality and empowerment in education, and tackles health issues that impede children's development.

Global Economic Financial Recession and Its Effects in the Philippines
How the Global Economic Recession Is Affecting the Philippines
Technically speaking, the Philippines is not yet in recession, like other countries in the rest of the world. The Philippine economy certainly did not have a negative growth in 2008 and in the first quarter of 2009 (jury is still out for the second quarter of this year), but there has been hardly any growth at all. The first quarter 2009 GDP growth was less than .5% while the World Bank predicted an over-all decrese of .5% for the whole of 2009.
But with or without these dire predictions, it cannot be denied that my country, along with all the other countries, had been affected by this crisis. Here are some of the effects of the global economic recession in the Philippines.
All About Davao
A Sprawling Metropolis Davao City is the biggest city in the Philippines, and one of the biggest in the world. It is located in the Southern part of the Philippines, or more specifically in Southern Mindanao....
Unique Foods From the Philippines
Each nation in this world has something unique to offer to foreigners visiting the country. One of these unique things is food. This hub is all about the unique foods from the Philippines. I won't exactly...
Butuan City, Home Sweet Home
Courtesy of: http://www.piepenbrock.nl/map.htm Butuan City is located in the northern part of the Mindanao (the second-largest island in the Philippines). It is the regional center of the Caraga Region of the...
On the Negative Side
Intel Shuts Down Philippine Operations

On Jan. 21, 2009, Intel Philippines announced that it is shutting down its test-and-assembly facilities in the country, ending two decades of operations in the country. As early as November 2008, Intel already announced the first batch of lay-offs. As of the day of the January announcement, the company still employed about 1,800 employees.

Goodyear Shuts Down Philippine Plant
In a more recent development (see news feed below), Goodyear Tire & Rubber Co. has announced the shutting down of its Philippine plant, causing about 500 Filipinos to lose their jobs. Goodyear opened same plant in 59 years ago and it produces around 2 million tires annually. Reason for the shutdown: transfer to less costly locations in other parts of Asia (no specific place yet).
Lost Overseas Jobs
The Philippines is the home of around 11 million overseas Filipino workers or OFWs. With there more than $14.4 billion (about 700 billion pesos) annual remittances, the OFWs are the major contributors to the country's economy. The largest number of OFWs can be found in the U. S., U. K. and the Middle East. With the recession, countless OFWs have been forced to leave these countries and return to the Philippines without jobs, making their reintegration a major problem for the country and its government.
Stock Market Plunged
Since the Philippines' stock market follow closely stock markets around the world, particular the NYSE, the Philippine stock index fell during the second half of 2008. Investors lost as much as 50% of their investments in the local stock market. Economic Slowdown
The first quarter of 2009 posted the lowest growth in GDP (.4%). For the rest of the year, some entities have predicted zero growth for the country while others have predicted negative growth. As of the moment, the country has not yet met the technical description of a recession. But some people believe that it is just a matter of time before the country itself will hit this phase.
On the Positive Side
Country Not Yet in Recession
On the other hand, the country has not yet reached the negative growth required for it to be classified as "in recession". This has been attributed to the strengthening of its banking system (due to the 1997 Asian financial crisis), the continuing flow of OFW remittances from other countries, the pump-priming by the current government through construction works and the increasing number of outsourcing jobs obtained by Filipinos from foreign countries. With the gradual reversal (?) of the financial crisis around the world, it is to be hoped that the recession will not actually reach our shores.

Stock Market Recovering
The stock market may have been badly battered during the last half of 2008 and the first quarter of 2009 but it is now slowly but surely recovering. From a stock index of below 2,000 last year, the index is around 2,500 now, and has been steadily rising during the past two months.
More Savings
Historically speaking, the Filipinos are some of the lowest savers in the world. However, a recent survey conducted by Nielsen Media showed that Filipinos want to save more, and spend less. This is a welcome development.
To encourage Filipinos to save, the government has approved the increase of the maximum deposit insurance coverage to 500,000 pesos or about $10,000. This may not be much in a developed country, but here, it is a very significant amount (you can build a house with this amount or buy a 300-square meter lot in some areas of the country).
Caveat
Although this is a published hub, this is nevertheless a work in progress as the recession is still ongoing, the Philippines is still largely affected and the economic growth is still in the low end.

What were the causes and consequences of the Great Depression?
Causes:
Unregulated banking practices
Maldistribution of income and purchasing power
Overexpansion of agricultural production
Overproduction of industry
Automation
American tariff policy
Monopolistic pricing
Overexpansion of credit
(The Stock Market Crash wasn't really a cause, it was really the way that people found out that all the above was happening)

Consequences:
25% unemployment
Losing houses to pay off bank debts, lived in 'Hoovervilles'
Basically everyone became poor, and had no way to overcome problems
The New Deals (these were good things from the President)