Friday, June 19, 2009

Comparing Depressions

All of us who stay informed on the current economic situation know that the crisis is far from over. 5 days ago I saw a discussion of the book "The Crash of 2010" on Spanish TV. The author argues that the worst is yet to come. We have a lot more of downhill to go before we can speak of true "green shoots". I am repeating just the obvious, but this blog has very good charts on how we compare our ongoing 2009 depression to the depression that started in 1929. It is appropriately entitled "A Tale of 2 Depressions". The first two charts show clearly that it went downhill for 36 months. Even 51 months after June 1929 the stock market was down by about 35%. In the Great Depression it took some 4 years to reach the turning point, i.e. the lowest point, and some 8 years to get back to the original level. In the depression that started in 2008 we should expect worse. We will not recover in 8 years because during these 8 years we will be hit with another crisis: peak oil, environmental crisis, a possible water resource limitation, etc. Furthermore, it will be more difficult to get out of this depression because our living standard (at a materialistic level) is a lot higher. Everyone already has a car, a TV, etc. The markets are saturated and the primary fuel for the economy, i.e. oil, is diminishing. In respect to GNP we might possibly not get back to 2008 levels for the rest of our lives. But we can get back to levels of happiness and quality of life higher than 2008 in short time if we set our mind to it, by focusing less on materialistic issues, striving for a sustainable life and enjoy the simple things.

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