Following The Depression Path
June 10, 2009
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In April, Barry Eichengreen and Kevin H. O’Rourke, two well-known economists, published a study which compared economic trends today with those during the Great Depression. They found that world industrial production, trade, and stock markets were collapsing faster during this global crisis then during the Great Depression.
They have now updated their work. Their major findings include the following:
* World industrial production continues to track 1930s trends, with no clear signs of ‘green shoots’.
* World stock markets have rebounded a bit since March, and world trade has stabilized, but they are still following paths far below the ones followed in the Great Depression.
* German and British industrial output are closely tracking their rate of fall in the 1930s, while Italy and France are doing much worse.
* US and Canadian industrial output continues to fall approximately in line with what happened in the Great Depression, with no clear signs of a turn around.
* Japan’s industrial output in February was 25 percentage points lower than at the equivalent stage in the Great Depression. There was however a sharp rebound in March.
In short–a quick look at their easy to follow graphs makes it clear that we are dealing with a serious structural crisis.
One would be hard pressed to know all of this from reading the mainstream media. As Dean Baker notes: “The media have obviously abandoned economic reporting and instead have adopted the role of cheerleader, touting whatever good news it can find and inventing good news when none can be found. This leaves the responsibility of reporting on the economy to others.”