Comments on: Why it ain’t your grandfather’s depression (at least, not yet)

By: john cramer

john cramer — Sun, 28 Dec 2008 21:23:56 +0000

well I never. I was an automatic stabiliser and didn’t know it.

Tim adds: The argument being that if you have unemployment benefits then if you get lots of unemployed then the govt has to borrow money to pay the benefits (for taxes also fall in a recession) and this “automatically” provides a fiscal boost….

By: john cramer

john cramer — Sat, 27 Dec 2008 22:43:46 +0000

Is not there a lot more current welfare to support than back in the 30s. And when the recession really bits there will be a lot more still.
Not many handouts in 1930+.
I remember (just) when I broke my arm about 1939 the things you had to do to get it x rayed and put in plaster.

Tim adds: There is indeed a lot more welfare now. Which will mitigate the effects….they’re known as “automatic stabilisers”.

By: Craig

Craig — Sat, 27 Dec 2008 22:34:18 +0000

Edward Hugh has touched on it but it bears repeating. Most of the so-called “service sector” jobs are completely dependent on manufacturing. They are the engineering, software-making and accounting functions that manufacturing requires to, um, manufacture.

That government statistics have been rejiggered to count these as a separate “service” category does not change the underlying facts.

By: Henry North London

Henry North London — Sat, 27 Dec 2008 19:42:02 +0000

Not yet

Watch how the price of stocks falls in 2009 when the people realise what is going on

By: Edward Hugh

Edward Hugh — Sat, 27 Dec 2008 11:12:46 +0000

Hello Tim,

“However, however, I think there’s one thing that’s being missed here. The structure of the economy.”

I think this is a perfectly fair point. But then I am focusing to some extent on economies were industrial output is a very important structural driver – Japan, Germany, China, and Central Europe. Arguably in these economies manufacturing output is still a very important key to everything else that happens.

Europe’s Southern and Western perifery (Spain, Greece, the UK and Ireland) is rather different since countries there were operating a different model of being driven by construction and financial services. But I think we will find cold comfort here.

But to be explicit, I am still not saying we are back to the hard times as our grandma knew them (actually in my case it was my dad), but simply that the risk of getting stuck in a major depression exists, and needs to be taken seriously.

Anyway, the seasons greetings to you,

Edward