Postby Tim Elston » March 14th, 2009, 7:31 am
That's a worthwhile observation, Gerald. But the Great Depression lasted from 1929 to 1940, and if we apply last quarter's contraction rate of 6.2% over an eleven year period, the net contraction amounts to 50.5%.
That won't actually happen, though, because in the Great Depression the Fed did not manipulate interest rates downward and President Hoover fixed wages and imposed import tariffs during the first years, and increased taxes to make up for the deficit as the contraction was taking effect. This time the Fed has lowered interest rates to near zero, the government has thrown about $1.5 trillion into economic stimulus, and taxes have been cut, not increased.
Given the system, the actions that Obama and other G20 nations have taken are the causes of the expectation of only a 3% contraction. The actions are expected to arrest and reverse the recession. Had the Federal Reserve and the various governments, including Bush's and Obama's governments, not taken the actions they did, prognostications would, no doubt, be of a much greater overall contraction.
"And just when you think you've got me figured out, remember, No man ever steps in the same river twice, for it is not the same river and he is not the same man." --Heraclitus