30.9.08

THE ONLY THING WE HAVE TO FEAR? The Chicago Tribune interviews a number of macroeconomic experts, from a wide variety of research and political perspectives.

Hearing some of the dire predictions for an economy struggling to avert a financial collapse, it's easy to recall 1930s photos of people huddled in soup lines or traveling the country for work and wonder what a depression would look like in the modern world.

Experts say that won't happen. Yes, banks are failing and the stock market plunged Monday. And yes, there is genuine concern that regardless of the government's $700 billion bailout proposal the United States still could land in a severe recession, with more business failures, higher unemployment, an even weaker housing market and depleted retirement savings.

But despite the alarms, including dire warnings from President Bush, economists insist there is no risk of a second Great Depression because, for some time now, the U.S. economy has been in the midst of a very different, less threatening phenomenon: "the Great Moderation."

I have memories of people traveling the country for work. There were some bitter jokes in Texas about broken down Michigan-registered cars causing traffic jams. Here's the capsule version of that era.
In 1982, at least one member in 8 million families was unemployed, accounting for 13 percent of all families. The housing, automobile, aircraft and steel industries all were hit. High oil prices reduced the demand for oil and gas, putting 150,000 miners out of work in a single year. Residential construction slowed because of high mortgage rates. Meanwhile, jobs in the services sector grew but at a slower pace than previously.
Since then, assorted sectors of the economy have been subject to recession at different times, something the commentariat used to call "rolling recessions." A repeat of the pattern of 1982, even if on a smaller scale, will be unlike any of the more recent recessions.

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