Economic depression: Difference between revisions
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==Notable depressions== |
==Notable depressions== |
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===Depression of 2009=== |
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Some commentators have speculated the economic conditions during the recession in 2009 may be deemed a depression or lead to a depression. |
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===Great Depression=== |
===Great Depression=== |
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Revision as of 02:53, 17 August 2009
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In economics, a depression is a sustained, long downturn in one or more economies. It is more severe than a recession, which is seen as a normal downturn in the business cycle.
Considered a rare and extreme form of recession, a depression is characterized by abnormal increases in unemployment, restriction of credit, shrinking output and investment, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile relative currency value fluctuations, mostly devaluations. Price deflation or hyperinflation are also common elements of a depression.
Definition
There is no widely-agreed-upon definition for a depression, though some have been proposed. In the United States the National Bureau of Economic Research determines contractions and expansions in the business cycle, but does not declare depressions.[1] Generally, periods labeled depressions are marked by a substantial and sustained shortfall of the ability to purchase goods relative to the amount that could be produced using current resources and technology (potential output).[2] The economic theory most concerned with periods of inflation, deflation and depressions is known as the Kondratieff wave. Another proposed definition of depression includes two general rules: 1) a decline in real GDP exceeding 10%, and 2) a recession lasting 3 or more years.[3][4].
Notable depressions
Great Depression
The most well-known depression is the Great Depression that affected most of the economies in the world throughout the 1930s. The depression began during the Wall Street Crash of 1929, and the crisis quickly spread to most national economies.[5] Between the years of 1929 and 1933, GDP decreased by 33% and unemployment rates increased to 25%. The probable causes of the Great Depression include the loose money policies of the Federal Reserve and the misallocation of capital based on easy and inexpensive credit.
A long-term effect of the Great Depression has been the departure of every major currency from the Gold Standard. See: Bretton Woods Accord
Long Depression
The Long Depression, known at the time as the "Great Depression", lasted from about 1873 to 1896.[6] It affected much of the world and was contemporaneous with the Second Industrial Revolution.
Panic of 1837
The Panic of 1837 was an American financial crisis, built on a speculative real estate market [7]. The bubble burst on May 10, 1837 in New York City, when every bank stopped payment in gold and silver coinage. The Panic was followed by a five-year depression[7], with the failure of banks and record high unemployment levels[citation needed].
See also
- Recession
- List of recessions
- List of recessions in the United States
- Stagflation
- Late 2000s recession
References
- ^ http://www.nber.org/cycles/recessions_faq.html
- ^ http://www.infoplease.com/ce6/history/A0821657.html
- ^ http://www.economist.com/finance/displaystory.cfm?story_id=12852043
- ^ http://businesscycles.info/recession-definition/
- ^ http://www.english.uiuc.edu/maps/depression/about.htm
- ^ Outliving a long depression, money.cnn.com
- ^ a b http://www.politonomist.com/history-of-economic-recessions-00273/3/