Difference between a Depression and
a Recession and which does Financial Crisis Qualify as?
Most people had believed that the chance of another Depression happening would be impossible because we can just take the information from the Great Depression and look for warning signs to prevent any in the future. Unfortunately that wasn’t really helpful as seen with the recession in 2007-09. There is a difference on what a depression and recession. Neither really seems to have a set definition. Recessions: “journalists often describe a recession as two consecutive quarters of declines in quarterly real gross domestic product (GDP)… Economists use monthly business cycle peaks and troughs designated by the National Bureau of Economic Research (NBER)” (Recession and a Depression?). A Depression, “…it’s a broad economic collapse that produces high unemployment from which there is no easy and obvious escape” (Samuelson). Another way that it’s defined is that it’s just “a more severe version of a recession” (Recession and a Depression). “The crucial difference between recession and depression is that recoveries from run of the mill recessions occur fairly rapidly in response to automatic market correctives and standard government policies” (Samuelson). Each one is similar in a way but as seen no one really has a set in stone definition. It’s just an interpretation of people’s thoughts on it. One thing that is common is that a Recession isn’t as bad as a Depression and lasts only for a short while. With a depression it lasts much long and is more damaging than a recession. The role of a financial crisis is what can cause economies to the downward spiral of a recession or worse a depression, but only if the crisis is left uncheck and is allowed to continue to a point where it can no longer be reversed (Financial Crisis). “Rising unemployment is a serious aspect of recessions, and falling unemployment with improving prospects for employment are an important part of recoveries” (Dwyer & Lothian). Along with a financial crisis, which is essentially the beginning of a recession, unemployment is another be warning sign. “With the economy shedding more than eight million jobs during the first two years of the recession, millions of workers faced the prospect of running out of unemployment insurance eligibility long before finding a new job” (Turck). A typical recession will last at least 10 months or more but the one in 2007 – 2009 it lasted a bit longer (Dwyer & Lothian). They go on to say that even the GDP hadn’t returned to the regular or peak levels. “The exhaust of economics is another parallel between our time and the Depression. Then, as now economists didn’t predict the crisis and weren’t able to engineer recovery” (Samuelson). In reality we might have the signs in theory but we really do not have any way to prevent it or a solution to get us out. The only thing that can be done is try to limit the damage and hope it doesn’t get worse.
Most people had believed that the chance of another Depression happening would be impossible because we can just take the information from the Great Depression and look for warning signs to prevent any in the future. Unfortunately that wasn’t really helpful as seen with the recession in 2007-09. There is a difference on what a depression and recession. Neither really seems to have a set definition. Recessions: “journalists often describe a recession as two consecutive quarters of declines in quarterly real gross domestic product (GDP)… Economists use monthly business cycle peaks and troughs designated by the National Bureau of Economic Research (NBER)” (Recession and a Depression?). A Depression, “…it’s a broad economic collapse that produces high unemployment from which there is no easy and obvious escape” (Samuelson). Another way that it’s defined is that it’s just “a more severe version of a recession” (Recession and a Depression). “The crucial difference between recession and depression is that recoveries from run of the mill recessions occur fairly rapidly in response to automatic market correctives and standard government policies” (Samuelson). Each one is similar in a way but as seen no one really has a set in stone definition. It’s just an interpretation of people’s thoughts on it. One thing that is common is that a Recession isn’t as bad as a Depression and lasts only for a short while. With a depression it lasts much long and is more damaging than a recession. The role of a financial crisis is what can cause economies to the downward spiral of a recession or worse a depression, but only if the crisis is left uncheck and is allowed to continue to a point where it can no longer be reversed (Financial Crisis). “Rising unemployment is a serious aspect of recessions, and falling unemployment with improving prospects for employment are an important part of recoveries” (Dwyer & Lothian). Along with a financial crisis, which is essentially the beginning of a recession, unemployment is another be warning sign. “With the economy shedding more than eight million jobs during the first two years of the recession, millions of workers faced the prospect of running out of unemployment insurance eligibility long before finding a new job” (Turck). A typical recession will last at least 10 months or more but the one in 2007 – 2009 it lasted a bit longer (Dwyer & Lothian). They go on to say that even the GDP hadn’t returned to the regular or peak levels. “The exhaust of economics is another parallel between our time and the Depression. Then, as now economists didn’t predict the crisis and weren’t able to engineer recovery” (Samuelson). In reality we might have the signs in theory but we really do not have any way to prevent it or a solution to get us out. The only thing that can be done is try to limit the damage and hope it doesn’t get worse.