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Charts and Graphs That Will Finally Make It Clear

Economists Barry Eichengreen and Kevin H. O’Rourke have updated their series of charts making the case that "today's crisis is at least as bad as the Great Depression." For my money, this is the most persuasive chart:

eichengreen_update_fig3.gif

The one caveat here is that the Great Depression might not have been remembered as the Great Depression if it had lasted for only a year or so. The key was that the downturn was extremely long. Four years or more. And even Eichengreen and O'Rourke hold out hope that our policy response has been an improvement over Herbert Hoover's, and thus normalcy might return a bit more quickly.

Much more here.

By Ezra Klein  |  June 5, 2009; 5:06 PM ET
Categories:  Charts and Graphs , Financial Crisis  
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Comments

Ezra--

This is a great chart. It puts the whole thing in a global context, which is key.

As for the notion that this downturn won't be as long. . . There is a distinct limit to what any administation can do in a situation like this. Many people think that the economy is a ship and the president is the captain.

That just isn't true.

There are so many forces at work here-- some of them global--over which the administration has no control.

Most importantly, what has happened over the past 19-25 years has happened, and can't be undone. The waste, the corruption. Real wealth-- the "wealth of the nation"-- has been squandered, and that money is not coming back.

Hiiststory ory tells us that long periods of excess--too much money chasing too few assets-- are followed by very long downturns.

The 20s led to the 30s. The 60s (not nearly as excessive as the 20s) led to the 70s. It will take time to wring out the excesses of the 1990s and the first part of this century (the real estate bubble and stocks still overvalued).
And these excesses began in the 1980s . . By 1987, both stocks and real estate were overvalued. Stocks crashed, then bounced back. Real estate fell in a rolling real estate recession that spread, national wide, from the late 80s through the early 90s.

By the mid-nineites, real esate was bouncing back in most gold coast regions-- and spiralling to unreal heights, along with stocks.

If you look at the economic history of other countries, you find the same pattern: long booms lead to long busts.

We all need to hunker down and figure out how to protect those who are going to be hit hardest.

Posted by: mahar1 | June 5, 2009 6:53 PM | Report abuse

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