Will This Be The Worst Recession Ever?
It doesn’t seem like that long ago that it was hard to get politicians and economists to call today’s financial environment a “recession.” It became official just a few months ago, and now that we’re facing some of the worst conditions in anyone’s memory, the conversation has shifted away from, “Is this a recession,” to “how bad will this recession get?” And the answer is that it could easily go down as the worst recession in the post World War II era. There are even concerns that it could lead to a depression-like environment.
There are several ways that you can measure a recession, and by just about any measure, this one is looking pretty bad. The longest postwar recession lasted for 16 months, and we are currently in month 15 of this recession and it is showing no signs of improving. It’s hard to imagine that we will snap out of this recession without several more months of economic pain.
The recession of 1981-82 is largely regarded as the worst recession since World War II. After 10 years of massive inflation in the US economy, the Fed pushed interest rates higher at a rapid pace, breaking the back of inflation but dragging the economy to a standstill in the process. At the end of the recession, unemployment was at 10.8%, almost 3% higher than today’s unemployment rate. Almost every time new bad news is brought to light, we find that the last time it was this bad was in 1982.
Maybe the most basic measure that we can use is our own experience, and the experiences of people close to us. An economy like this affects everyone differently. Some people are prepared for these downturns and are able to weather the storm without much on an interruption to their lifestyle. But way too many people today were stretched too thin heading into this recession, and for those people the next several months could be extremely difficult to navigate.
An economist from Wachovia said of this recession, “This recession is broader, deeper, and more complicated than virtually anything we have ever seen.” All recessions hurt at the time, but most people would agree that this one feels different compared to recessions of the past. And if you’re wondering if this recession could get worse before it gets better, the answer is yes.
Years from now we will be able to look back and judge just how serious the economic problems were relative to other times during this recession, but there is plenty of reason to believe that this recession will turn out to be historically very bad, and likely the worst since the Great Depression.
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Tags: great depression, recession, Wachovia
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