Could We Ever See the Great Depression Again

Unemployed people expect outside the land Labor Bureau in New York City in 1933. The current economic crisis has drawn comparisons to the Not bad Depression, but experts say this downturn should be shorter. AP hibernate explanation

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Unemployed people wait outside the state Labor Bureau in New York City in 1933. The current economical crisis has drawn comparisons to the Peachy Depression, but experts say this downturn should be shorter.

AP

With the U.South. economy in costless-fall, a lot of forecasters have been digging deep into the history books, looking for a guideposts of what to wait. Often, they've turned to the affiliate on the 1930s.

"Conspicuously people have fabricated comparisons to the Great Depression," said former Federal Reserve Chairman Ben Bernanke.

"It'south non a very good comparison," he cautioned.

Bernanke, who is a student of the Cracking Depression, says that crisis was triggered by a financial meltdown and fabricated worse by bad policy choices, including the decision past his Fed predecessors to raise interest rates.

Perhaps most chiefly, the Low dragged on for a dozen years. While Bernanke doesn't expect to rebound from the current crisis in the adjacent half dozen months or so, he doesn't see it stretching out indefinitely, either.

"If all goes well, in a year or 2 we should be in a substantially amend position," Bernanke told an audition at the Brookings Institution last month.

That optimistic view is supported past a different historical example from more than a decade before the Smashing Depression: the 1918 flu pandemic, after which the U.Southward. economic system bounced back relatively apace.

"I recollect there is quite a lot to exist hopeful for," said Carola Frydman, an economic historian at the Kellogg School of Management.

The so-called Castilian influenza pandemic killed an estimated l million people worldwide, including hundreds of thousands in the U.South. It also prompted some of the aforementioned "social distancing" measures we've adopted against the coronavirus, with shuttered bars, schools and churches.

Still, the economic fallout was "more often than not modest and temporary," Frydman wrote. And the U.S. enjoyed strong growth in the decade that followed.

She believes that could happen this time as well.

"As soon as people feel confident again interacting and being able to go near their business, I would not await the economic fallout to concluding a lot longer than that," Frydman told NPR.

Of course, no one's certain how long it will have for people to feel comfortable shopping or traveling once again — or how many businesses and families might go under in the meantime.

In 1918, government spending on World War I helped make up for some of the lost private demand, Frydman said. No one is advocating another world war. Merely Fed Chairman Jerome Powell said the federal regime might take to spend more than than the trillions it's already shelled out to continue businesses and families afloat.

"Additional fiscal support could be plush only worth it if it helps avoid long-term impairment and leaves united states of america with a stronger recovery," Powell said during an online forum sponsored by the Peterson Institute for International Economic science.

Other government policies — including protectionism — could hamper the recovery. President Trump has long advocated higher trade barriers. He'south getting less resistance thank you to the pandemic.

"These stupid supply chains that are all over the earth — we accept a supply concatenation where they're made in all different parts of the world and i little slice of the world goes bad and the whole affair is messed up," Trump said during an interview with Fox Business this past week. "I said nosotros shouldn't accept supply chains. Nosotros should have them all in the Usa."

Here the Bully Depression does offer a useful lesson. In the 1930s, the U.S. and other countries turned their backs on trade, adopting steep tariffs in an effort to prop upwards their Depression-scarred economies. It backfired.

"And that, economists have come up to believe, contributed to how long the Keen Low actually lasted," said Chad Bown of the Peterson Institute for International Economics. "It made information technology very, very hard for countries to grow their economies again and utilize merchandise to assistance them become at that place."

Bown acknowledges that protectionism is a natural reflex at a time like this, just he warns it's counterproductive. The coronavirus does not take to touch off another Great Depression, but with misguided policy, it could.

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Source: https://www.npr.org/2020/05/17/857149873/a-lot-to-be-hopeful-for-crisis-seen-as-historic-not-another-great-depression

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