Aug 14, 2012 10:57 PM GMT
But, we have not had "the worst recession since the Great Depression"! This is not the "Great Recession",1980- 82 was.
A recession is defined as two consecutive quarters in the gross domestic product (GDP). The US went into a recession in the fourth quarter of 2008 as the GDP fell by 1.1%. In the fourth quarter it fell to 6.6% and in the first quarter of 2009 the GDP was negative 6.5. The figures may be revised and even challenged, but the general direction and depth are pretty clear by now. Since then the GDP turned positive and has been so ever since.
Now consider the recession of 1980. In the second quarter the GDP fell 8.23%, much greater than the present recession. It was negative through the first quarter of 1981 in which it was negative 6.5%. 1980 was an election year and the prime rate soared to over 20%. President Carter pressured Paul Volker to imposed credit controls and cut interest rates, which he did and brought the rate down to 11%, almost half
its former level.
After the election when Ronald Reagan won in a landslide, Volker allowed rates to return to market levels and they hit 21.5% During the 80-81 period GDP went positive briefly due to the fed's artificial stimulation. It is looked back as a double dip recession as we fell back into negative growth in 1982, but in fact it was one recession briefly interrupted by a failed government attempt to prevent it. (I expect somewhat the same results this time.)
During those years we had a thing called the "misery index". It measured the pain that the average person was experiencing. It was made up of a combination of inflation and unemployment. At the worse of the recession, the inflation rate hit 14%. Today it is running 1%. Unemployment back then at its worse point ran 10.8%. The worse point today has been 10.1%. The misery index at worse back then hit 21%. During our recent recession it was more like 12%. Almost half as painful. Clearly, the facts do not support the perception that this is a worse recession than the 1980-82 recession.