Recession or Depression?

As at the time of writing this article, neither the UK or US economies are officially in recession according to the precise definition, but already people are asking if this will be like the Great Depression of the nineteen-thirties.
The difficulty in answering this question is that there is not apparently a precise definition of an economic depression, and it is one of those terms that can only be applied in retrospect. In other words we won't really know if we are in a depression until it's over and then it will be up to historians to decide if the crisis can be compared with the Great Depression.
Paradoxically, the 'Credit Crunch' tag was already established even before recession had struck, the only definition we have for 'A Depression' is a prolonged recession, therefore we can compare the period of the thirties recession when this recession is over, but that is going to be the only tangible measure.

Employment figures are certainly a feature that will be common to both recessions, but the abject poverty, sickness and hunger that characterised the Great Depression can hopefully be avoided, and of course one must bear in mind that this came at a time of World War which thankfully is not the present situation. However the similarities that will be evident are bound to be unwelcome and could well include a near-collapse of the stock exchange, huge job losses and real economic uncertainty. What is apparent is that the current safety nets are breaking and hence the moves by Governments to try and establish new safety nets - judging the level at which to fix these nets is a gamble and we will only know the consequences when it is all over.
In conclusion then, terming a recession a 'depression' is a job for historians, we must continue as individuals to operate good budgeting and housekeeping to ensure that we stand the best chance of surviving financially intact. The fact that we are entering recession is quite bad enough without having to consider how deep a recession it will eventually become. Rest assured it will be quite bad enough!

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