“The Prevailing Debate Among Economists and Historians is Whether the World Economy Faces the ‘Great’ Depression of the 1930s or the ‘Long’ Depression of the 1870s”

Economists Agree: We’re In a Depression

Reuters notes:

You know it’s grim when the prevailing debate among economists and historians is whether the world economy faces the “Great” depression of the 1930s or the “Long” depression of the 1870s.


Harvard professor and economic historian Niall Ferguson, a fan of the British government’s austerity drive and skeptic of further stimulus, reckons the world is facing a “slight depression” and favors comparison with the late 19th century rather than 1930s.


Long-term market bear Albert Edwards at Societe Generale has talked more apocalyptically for years of an economic “Ice Age” dominated by household deleveraging, low growth and deflation.

But now “depression” is very much back in the mainstream lexicon as the small economic bounce from the deep global recession of 2008/09 fades rapidly after little more than two years and Europe’s bank and sovereign debt crisis intensifies.

Economist and doomsayer Nouriel Roubini now says there’s a “huge” risk of 1930s-style depression ….

HSBC chief economist Stephen King, who wrote earlier this year of a “new economic permafrost”, warned last week that the systemic financial threat of a euro zone collapse and breakup risked another “Great Depression”.

As I’ve noted for 3 years, we are in a depression, and – because the government has done all of the wrong things – we’re stuck in it.

It Could Be WORSE Than the Great Depression

Indeed, contrary to Reuters’ saying that economists are split on whether it’s a repeat of the Great Depression or a lesser depression, many economists say it could be worse than the Great Depression, including:

Bad Government Policy Has Us Stuck

We are stuck in a depression because the government has done all of the wrong things, and has failed to address the core problems.

For example:

  • The government is doing everything else wrong. See this and this

This isn’t an issue of left versus right … it’s corruption and bad policies which help the top .1% but are causing a depression for the vast majority of the American people.

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  • Tom

    I would have said it’s 100% certain that we’ve been in a deflationary depression for the last three years, offset by unprecedented “double-up” stimulus and QE packages.

    But, then again, if the likes of Greenspan, Bernanke and Krugman are thinking along the same lines, perhaps I’m mistaken.

    • jacob reed

      This author doesn’t give enough credit to the stimulus. If it wasn’t for that, things would be much much worse. The author quotes a historian who is a fan of austerity, but that is a recipe for disaster. Bernanke just warned of the damage that could come with too short term budget cuts and nearly every economist on the list feels the same way. Especially Krugman.

      • Sevens

        You meant Keynesian “economists”, didn’t you?

        The only way some people may open their mind for the real economics as taught by the Austrian school and foremost by von Mises is to have a total collapse of the current fiat-money based global financial system similar to the economic and political fall of the soviet Block. Even then there would be many left to whisper about the “glorious past” as today do the communist retirees in Eastern Europe and Russia.

        All the stimulus went to support the largest contributors of the status quo in DC. When this new money reaches you its value will be a lot less than today.

  • It’s a 1870s type of depression, i.e. deeply structural with only political (revolutionary) solutions. But it’s also different in that things go necessarily faster today because both communications and the economy itself do.

  • Ops, I’m sorry I though you were thinking of the late 18th century crisis, which led to the US and French revolutions.

    I’m not sure which kind of depression was that of the 1870s, a period I know best for the German and Italian unifications and the Paris Commune and for what I can find in Wikipedia in the USA corresponds to a period of economic growth. So I do not understand what depression are you referring to, sorry.

    • Jack Black

      Maju, if you don’t know anything about the Great Depression that started in 1873,
      why waste anyone’s time blogging that you don’t know ? There’s a great deal of
      info on it, if you can get off your lazy butt and google it.

    • Jack Black

      Economic growth in the US during the 1873-1898 economic crisis:
      If you look at a chart of US economic growth 1800-1900, you will
      see two relatively straight lines, both trending upwards. However,
      1873-1898 growth was much slower. If you extend the 1800-1873
      growth rate out to 1900, you will find that by 1900, the economy
      was about 1/3 less than it would have been. This is similar to the
      actual 1/3 contraction that occurred in the US in the early 1930’s.
      The fact of growth 1873-1900 is not impressive, given the huge
      inputs of immigration, large capital fows from Britain, and a huge
      fertile continent that could be exploited.

      Finance lay at the heart of both Great Depressions, as they were
      called in their respective eras.

      In the second half of the 1800’s, the Bank Of England played a trick
      on other nations. The BOE overpaid for gold relative to silver.
      After the BOE had amassed gold, it announced it would no longer
      accept silver, which had never before happened on the planet. That
      credit crunch damaged European economies and led to the 1873
      crisis. Here in the US, under pressure from a British delegation, in
      1872, the US first removed silver as legal currency, but this started
      a fight that raged for the next 26 years. The other cause of that
      depression was that the Civil War era greenbacks were withdrawn
      from circulation, simply burned when they were used to pay taxes.
      In 1865, there was $48.50 in currency for everyone in the US. By
      1886, there was only about $6.50 per person.

      • It’s a little complicated as it seems that the Gilded Age (1870s-1880s) and the Long Depression overlap and that the late 1870s were a period of sharp economic expansion, at least in the USA (according to this graph). The rest of the “depression” is actually stagnation or a very thin haircut in all the 1880s-1890s. Instead in the Great Depression there was a loss of some 25% of the GDP in very few years.

        Whatever the case, I was unaware of this “long depression” (stagnation) period of the late 19th century and is instructive to learn about it.

        But in that case I must say that my stand is that it’s not like the “long depression” because this is and will be a collapse. The lack of credibility or any sort of statesmanship of the people at the decision making positions and the structural problem of lack of demand (dependent on salaries and/or welfare, which are being destroyed, or on credit, which has duly collapsed), make this recession unsurmountable in Capitalist terms. In this sense it is more similar to that of 1929 (sharper and needed of massive “socialist” interventions to counter or at least alleviate it) but because of the difference in the dominant ideologies (in the 1930s “socialism” was not a dirty word but a catchphrase used by nearly everyone everywhere) the system is unwilling to do what must be done and will allow the crisis to continue without providing any effective solution (other than accumulating more nominal private wealth for a few in the Cayman Islands and such).

        In that sense it’s comparable to how aristocracy resisted change in the late 18th century in France (and elsewhere) and it resembles more that crisis in that (1) is sharp dip, (2) it has a long forecast and (3) requires of very radical, revolutionary, creative solutions (which the system is unable and unwilling to provide).

        • It’s difficult to even read your missive because it causes so much mental pain. I didn’t know that there was actually anyone left in the world who believed that socialistic governmental policies would actually positively affect a free market society…ever, under any circumstances.

          The term “socialism” was hardly a household word in the U.S. during the 1930’s. “Laissez Faire”, on the other hand, was a well-understood concept and quite accepted by the general population. Do you not know the history of the political war between the FDR administration vs. the conservative congressional minority and early-30’s US Supreme Court regarding promulgating socialist legislation during that period?

          Finally, you ascribe a different ideology in effect now, as opposed to that of a “clean” socialism in the 1930’s; such that we find ourselves ill-equipped to deal with the present situation. What are you talking about!?! We have nearly tripled our money supply, nearly 40% of the U.S. population receives a measurably significant government-sponsored entitlement, and unemployment benefits have been extended to nearly 3 years. I could go on, ad nauseum. There isn’t much more that can be done from a socialist point of view, other than to nationalize all remaining enterprise, and create a communist regime.

          Distortionists such as you are evil, and typically lazy people. You look with an envious eye toward someone resting in the success of his own labor, and assume he has somehow wronged you in the acquiring of it. You create nothing and wish to take and distribute everything.

    • robertsgt40

      “It Could Be WORSE Than the Great Depression”—It’s already worse than the great depression. It should be clear even to the most myopic that we are not just in a prolonged dip in the “business cycle”. We are broke past any ability to pay back interest on the debt much less the principle. Consider this. We have NO manufacturing base with which to recover. All by design. Wait til they can’t prop up the markets anymore with taxpayer money. Talk about a hard landing.

  • Compound F

    I’m sure you’re aware of these fine folks:


  • It would seem that any plutonomy by definition would look like both types of depressions you mention, to the 98% who are being plundered, but likely would look and feel the same to the 2% plunder barons who are drinking champagne and eating caviar all the way “down”.

  • Harry Hill

    “History has a habit of repeating itself. The global financial collapse of AD 1345 had many similarities to what is happening now.” – http://www.doeda.com/collapse.html

    That collapse took 200 years for the western world to recover from.

  • JR


  • William Wyatt-Lowe

    You should remove or change your last entry in the list, Ed Balls is not a minister, he was one until May 2010 – IMO the ‘senior’ is not justified. Or you could go with ‘Shadow Minister’ where as shadow (i.e. opposition party) he does have a senior role. However he is really known as a politician rather than an economist – so why is he there at all?

  • F*ckin? amazing things here. I am very happy to see your post. Thank you a lot and i am taking a look forward to contact you. Will you kindly drop me a e-mail?

  • Easy: GREAT AND LONG …