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Tough times, yes — but dreaded D-word?
BY TOM RAUM AND DANIEL WAGNER
The Associated Press

    WASHINGTON — A Depression doesn’t have to be Great — bread lines, rampant unemployment, a wipeout in the stock market. The economy can sink into a milder depression, the kind spelled with a lowercase “d.”
    And it may be happening now.
    The trouble is, unlike recessions, which are easy to define, there are no firm rules for what makes a depression. Everyone at least seems to agree there hasn’t been one since the epic hardship of the 1930s.
    But with each new hard-times headline, most recently an alarming economic contraction of 6.2 percent in the fourth quarter, it seems more likely that the next depression is on its way.
    “We’re probably in a depression now. But it’s not going to be acknowledged until years go by. Because you have to see it behind you,” said Peter Morici, a business professor at the University of Maryland.
    No one disputes that the current economic downturn qualifies as a recession. Recessions have two handy definitions, both in effect now — two straight quarters of economic contraction, or when the National Bureau of Economic Research makes the call.
    Declaring a depression is much trickier.
    By one definition, it’s a downturn of three years or more with a 10 percent drop in economic output and unemployment above 10 percent. The current downturn doesn’t qualify yet: 15 months old and 7.6 percent unemployment. But both unemployment and the 6.2 percent contraction for late last year could easily worsen.
    Another definition says a depression is a sustained recession during which the populace has to dispose of tangible assets to pay for everyday living. For some families, that’s happening now.
    Morici says a depression is a recession that “does not self-correct” because of fundamental structural problems in the economy, such as broken banks or a huge trade defi - cit.
    Or maybe a depression is whatever corporate America says it is. Tony James, president of private equity firm Blackstone, called this downturn a depression during an earnings conference call last week.
    The Great Depression retains the heavyweight crown. Unemployment peaked at more than 25 percent. From 1929 to 1933, the economy shrank 27 percent. The stock market lost 90 percent of its value from boom to bust.
    And while last year in the stock market was the worst since 1931, the Dow Jones industrials would have to fall about 5,000 more points to approach what happened in the Depression.
    Few economists expect this downturn will be the sequel. But nobody knows for sure, and nobody can say when or whether the downturn may deepen from a recession to a depression.
    In his prime-time address to Congress last week, President Barack Obama acknowledged “difficult and trying times” but sought to rally the nation with an upbeat vow that “we will rebuild, we will recover.”
    The next day, Federal Reserve Chairman Ben Bernanke told the House Financial Services Committee that the “recession is serious, financial conditions remain difficult.” He held out a best-case hope that it might end later this year, with “full recovery” in two to three years.
    Despite the tempered optimism, the economic outlook remains grim. Consumer confidence has fallen off the table, stocks are at 12-year lows, layoffs come by the tens of thousands, and credit remains tight.
    The current downturn has many of the 1930s characteristics, including being primed by big stock market and real estate booms that turned to busts, said Allen Sinai, founder of Boston-area consulting firm Decision Economics.
    Policymakers and economists note there are safeguards in place that weren’t there in the 1930s: deposit insurance, unemployment insurance and an ability by the government to hurl trillions of dollars at the problem, even if it means printing money.
    Before the 1930s, any serious economic downturn was called a depression. The term “recession” didn’t come into common use until “depression” became burdened by memories of the 1930s, said Robert McElvaine, a history professor at Millsaps College in Jackson, Miss.
    “When the economy collapsed again in 1937, they didn’t want to call that a new depression, and that’s when recession was first used,” he said. “People also use ’downward blip.’ Alan Greenspan once called it a ’sideways waffle.’”
    Most postwar U.S. recessions have come after the Fed has increased interest rates to cool down rapid economic growth and infl ation. Later, the Fed lowers rates and helps restart the economy, with the housing and auto sectors — both sensitive to interest rates — leading the way.
    This time is different: As Senate Banking Committee Chairman Chris Dodd, D-Conn., said, “Our housing and auto sectors are leading us not out of recession, but into it.”
    What’s more, the Fed no longer has the ability to kick-start recovery by lowering interest rates. The central bank has already effectively lowered the short-term rates it controls to zero.
    And there are no guarantees the massive economic stimulus package and series of bank bailouts will stave off a nightmare recession, or worse.
    “It is certainly plausible that ......................http://www.dailygazette.net/De.....amp;EntityId=Ar00103

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Depression will give way to rage Richard Cohen
Richard Cohen is a nationally syndicated columnist.

    Last weekend’s book section of the Financial Times contained a capsule review of Stefan Zweig’s “The Post Office Girl,” a novel written in the aftermath of the First World War and just recently translated into English. This is an immensely good thing, but really why I mention Zweig comes at the end of the review, when the critic says that the book “is a fascinating depiction of the effects of history on individual lives” — in other words, what is happening to most of us today. History, like an animal escaped from the zoo, is again out of its cage.
    Zweig’s own life was illustrative of history’s immense force. He was a rich Viennese, born in the 19th century, and a famous writer at a young age. He was conversant in all the usual European languages and traveled throughout that continent, as one could at the time, without so much as a passport. It was his world and he enjoyed it enormously.
    Then Zweig experienced a stark loss of control over his life. He went from being at home anywhere in Europe to being on the lam, a Jew fleeing the Nazis. He wound up in Brazil where, in the depth of both despair and hideous reality, he killed himself. His world — “The World of Yesterday,” is what he called his memoir — had vanished.
    Zweig’s story is extreme, yet it contains elements of the current economic calamity. The term economic “depression” has now been uttered. This means not that things are suddenly worse, but that we have recognized them for what they are. We give power to words or terms — which is why it was news in itself when the media chose to label what was happening in Iraq a “civil war.”
    So now, at least in Saturday’s New York Times, we are in a depression — maybe not a “great” one, but one that will do for now. This means that unemployment could go over 10 percent and the housing catastrophe will deepen and some major banks will become wards of the government. Europe is scared and Japan is sullen and Russia, which needs $70 oil to break even, is hurting at near $40. This is a very bad time.
    A depression, if it amounts to that, is not just an economic crisis. It’s a historical mugging. Those of us who have been accustomed to exercising control of our lives are about to undergo an awfully frightening experience. This will hit the young particularly hard. If you asked almost any of them over the last 20 years or so why they did not read a newspaper or, really, care about the news at all, the answer was that news was irrelevant to their lives. It did not matter to them that what was happening in Washington or London or even Baghdad.
    An older generation still had a residual appreciation for the linkage of things — how an event there could affect an event here and a job would disappear or a war would erupt. It mattered because history mattered. One had the feeling that what with wars and famines, disease and ruthless economic cycles, one could never really control one’s own life.
    But generations that followed came to feel that they had mastered history and it was, like polio, no longer a threat. The great exception in my lifetime was the Vietnam War and its suffocating draft. Rage was the result. The campuses exploded.
    The rage that is coming will change the politics of our time. Barack Obama will either figure out how to channel it, as Franklin D. Roosevelt did, or he will be flattened by it, as Lyndon Johnson was. Obama’s challenge might even be greater than FDR’s. The people of the 1920 and ’30s were tough, hard. They did not expect all that much from life and they had learned to expect next to nothing from government.
    In contrast, we are soft, coddled. We actually thought we could have a house we could not afford and a mortgage we could not pay and it would all somehow work out. This keeps being called the American Dream. It was actually the American Delusion.
    Zweig fled Austria in..............http://www.dailygazette.net/De.....amp;EntityId=Ar00702