The Difference Between Recession and Depression

29 Sep 1932, Manhattan, New York, New York, USA --- Construction workers eat their lunches atop a steel beam 800 feet above ground, at the building site of the RCA Building in Rockefeller Center. --- Image by © Bettmann/CORBIS
by Reid Fitzsimons

There are those who don’t always accept the premise that the impoverished in America, as compared to the realm of the truly poor in non-developed countries, are hapless victims of extrinsic factors. Within this perspective is a belief that bad personal choices are made in the continuum of life that either keep people impoverished or disallow them to rise above it. In other words, individual poverty in America can’t always be traced back to Big Corporations and societal oppression in general, but that opportunities for education, to obtain marketable skills, and to establish a secure financial foundation are lost out to greed and pleasures of the here and now. People with this view are referred to as conservatives, often with pejorative adjectives attached. If we were actually honest we would admit that state lottery tickets aren’t routinely purchased by the economically self-actualized, but by people who can least afford them. One cannot smoke dope, shoot heroin or methamphetamine, or drink to excess with regularity as a means to success. Money used for tattoos and body piercings could probably be spent more wisely. Conservatives are more of the Morning in America mindset, whereas progressives tend to find themselves stuck in a narrative based in some cruddy New England textile mill from the early 20th century, allowing them to deflect blame for individual and societal failings.

I suspect I am one of those conservatives with essentially no formal education in economics who believe our economy is built on a gossamer bridge, located high above a deep gorge, that simply cannot support the weight of a 20 trillion dollar debt. However, what do I know? Perhaps we can continue adding debt indefinitely as long as everyone thinks and hopes we are able to do so. But if those of us unsophisticated and lacking confidence in the world of 0% interest rates and “quantitative easing” are actually correct and the bottom drops out, how will we know if we are in a recession or depression?

Pretty much every time an economic distress rolls around, noting that every one is always the worst since the Great Depression (kind of like every weather phenomenon these days is reported as the most extreme one in history), we have the great minds and mouths of the media offering us this witticism: a recession is when your neighbor loses his job, a depression is when you lose yours. Through how many economic cycles has Bob Schieffer and his brethren sagely made this statement followed by a pained chuckle? I would like to, however, offer the following as a replacement for this worn observation: a recession is when a greedy, selfish, and/or stupid person, one who has overspent, under saved, overextended their credit, bought things they didn’t need and couldn’t afford, etc experiences economic dislocation during a downturn in the economy; a depression is when a person who has worked hard, saved money, spent within their means, etc suffers dislocation as well. Personally I suspect we’ll be putting this to the test sooner than later.

Leave a Reply

Your email address will not be published. Required fields are marked *