The Very Great Depression

A year ago, I posted a quick observation about the economy based on an article from Canadian writer Bert Heilema, who predicted that the U.S. economy would tank in the third quarter of 2008. An apologist for the Bush administration (in the Czech Republic–go figure) slammed me for daring to call “no clothes” on the emperor.

Of course, Heilema was right. Very right.

Often cited comparisons – which look only at the US – find that today’s crisis is milder than the Great Depression. In this column, two leading economic historians show that the world economy is now plummeting in a Great-Depression-like manner. Indeed, world industrial production, trade, and stock markets are diving faster now than during 1929-30.

To illustrate, here’s a graph prepared by economists Barry Eichengreen and Kevin H. O’Rourke comparing world industrial output then and now:

And for those who believe that stock prices are the best indicator of economic health:

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