Depression Stories: Are We Worst Off?

With stock markets melting around the world, what would seem more timely than to compare today's conditions with that of the Great Depression.

Here are two articles showcasing sundry charts dealing with such comparisons.

First, comes from Barry Eichengreen and Kevin O'Rourke's A Tale of Two Depressions (Hat tip: safehaven.com/John Maudlin)

Volume of World Trade worst than the Great Depression

Falling world industrial output in line with the Great Depression

See the rest of the charts here

Mssrs. Eichengreen O'Rourke concludes (underscore mine): ``To summarise: the world is currently undergoing an economic shock every bit as big as the Great Depression shock of 1929-30. Looking just at the US leads one to overlook how alarming the current situation is even in comparison with 1929-30."

``The good news, of course, is that the policy response is very different. The question now is whether that policy response will work."

Council of Foreign Relations' Paul Swartz makes the same comparison but this time it's more US centric.

Industrial production hasn't fallen in the scale of the Depression

"Although the labor market has deteriorated more than at any time since World War II, it is much healthier than during the Great Depression."

"The federal budget has deteriorated far more rapidly than in any past recession, in part due to the first economic stimulus and bank bailouts.The current stimulus implies an even larger and more prolonged deficit in the future."

See the rest of the charts here

Concluding remarks from Paul Swartz, ``The collapse in the federal government’s finances is unprecedented, raising questions about how the government deficit will be brought under control.

``By most measures, the current recession is far milder than the Great Depression. But the appendix shows that house prices have recently fallen much more sharply than in the 1930s."

So essentially we have two opposing opinions.

Eichengreen-O'Rourke sees Depression like developments for the world and cheers on government policy actions while Mr. Swartz sees it otherwise and worries over government deficits.

That's the nature of economics, divergences in interpretations. What you see depends on where you stand-perhaps influenced politically or ideologically or from personal bias.