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Last post 02-17-2009 2:00 PM by cartoon. 0 replies.
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  • 02-17-2009 2:00 PM


    More than 500,000 people are losing their jobs every month. Companies are failing left and right. Thousands of homeowners are facing foreclosure every day. A reasonable person might ask: Are we in a Depression?

    Government officials say no. Aides to Prime Minister Gordon Brown of Britain quickly backpedaled after he suggested that fiscal stimulus was needed to pull the world out of a “depression.” The aides called it an unfortunate slip of the tongue. When the International Monetary Fund’s boss, Dominique Strauss-Kahn, suggested that the rich world was already in the Big D, Lawrence Summers, president Obama’s chief economic adviser, retorted: “We’re really in a very different situation than that.”

    Janet Yellen, president of the Federal Reserve Bank of San Francisco, made the round trip to the edge of the precipice and back: “We have the same type of dynamics taking place that do happen in a depression,” she said. “But this is not a depression.”

    Officials are frightened, of course. A deep economic slump is one of those places where, in F.D.R.’s parlance, fear itself can be fairly scary. Telling people that they already have tipped into depression would probably scare them a lot, making it much more difficult to dig us out of the mess.

    Fortunately, the D-word itself provides an easy way out. Unlike recessions, which are precisely determined as a function of unemployment, growth and other such things by the National Bureau of Economic Research, depressions have no clear-cut contemporary definition. Depression is a historical rather than an economic term.

    Regular recessions used to be known as depressions. Among the most famous was the so-called long depression between 1873 and 1896, which was known as the Great Depression until the meltdown of the 1930s snatched the moniker. To avoid reminding people of economic collapse, 25 percent unemployment and soup kitchens, the D-word was retired from everyday use and replaced with recession.

    Some economists have set personal rules of thumb since then. Alan Greenspan said a depression required 15 percent unemployment for three to nine months or 12 percent unemployment for nine months or more. Alfred Kahn, the Cornell economist who was President Jimmy Carter’s inflation czar in the 1970s, set the bar at more than 10 percent unemployment plus two consecutive quarters of economic contraction. In 1980, President Ronald Reagan said: “A recession is when your neighbor loses his job. A depression is when you lose yours. And recovery is when Jimmy Carter loses his.”

    When we eventually emerge from our economic morass, historically minded linguists may go back to the drawing board. We might want to number the Great Depressions, as we do our World Wars. We might need some new scary words.

    Ultimately, it won’t matter. In 1978, President Carter chided Mr. Kahn for warning in speeches that the country risked “deep, deep depression” if inflation continued to soar. So Mr. Kahn replaced the term with “banana.” Everybody knew what he was talking about.

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