…but it could be the next. Nobody really knows how deep “it” will go or how long it will last.

In the wake of a 50% drop in the stock market, comparisons to the great depression are apt to occur. Learning from history may reduce our chances of repeating it and all that.Is it possible, theoretically, that we could experience another great depression? If you believe that there is, there hasn’t been a more precipitous collection of events conspiring to repeat that chapter than we have right now.

Are we really so much smarter or better equipped than we were “back then?”

There are a lot of very smart analysts and economists debating both sides of this argument but one fact remains. There has only been one such event in America, and only a handful of major recessions. A dearth of data upon which to formulate analysis of current events.Every time we have a market crash, pessimists exhort “This time is different,” but it never is and the market has always recovered.

Recessions however are caused and measured by multiple elements, the stock market representing only one of them. To say that we aren’t witnessing the beginnings of another great depression simply because conditions are dissimilar to those the led up to the last one is sheer folly.

All this historically inaccurate nostalgia can occasionally make you want to clock somebody with one of the three volumes of Arthur M. Schlesinger Jr.’s history of the New Deal. The credit debacle of 2008 and the Great Depression may have similar origins: Both got going when financial crisis led to a reduction in consumer demand. But the two phenomena differ substantially. Instead of workers with 5 o’clock shadows asking, “Brother, can you spare a dime?” we have clean-shaven financial-services executives asking congressmen if they can spare $100 billion. More substantively, the economic trauma the nation suffered in the 1930s makes today’s woes look like a flesh wound.

That’s easy to say in retrospect but we’re not done yet. Unemployment hasn’t peaked. Real estate values haven’t stopped falling. Credit hasn’t started flowing. Banks haven’t stopped failing. The market hasn’t stopped falling.

A forensic analysis determines the conditions of an event but does not rule out other conditions that could have the same result.

I’m not saying that in fact we are going to experience anything like the Great Depression nor do I know anyone that does. Policymakers however can not continue to penalize the productive, facilitate bail outs, effect government takeovers of entire segments of our economy and drive deeper our national debt without fear of paying a much higher price in the future.

A price that we may not have the resources to pay. Then what?

It isn’t clear what Barack Obama intends to do to correct the course of the economy. It isn’t clear there is anything he can or should do. What is becoming clear however is that a liberal administration and a liberal congress have no intention of sidelining additional bailouts and government largess. The policies that got us into this mess will be perpetuated for at least the next four years. Like oil turning to sludge in a V8 engine, the productive and corrective forces of our free enterprise system are becoming ever more encumbered by liberal lawmakers that have no business messing with economic policy or worse, feel that they know better.

The next great depression may have been caused by a whole new set of circumstances. The last one was caused by a lack of government intervention. The next one could be caused by exactly the opposite.

This entry was posted by by Johnny Roosh on Monday, November 24th, 2008 at 6:00 am and is filed under Business, The Economy and The Markets. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.