What Is A Depression?
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What Is A Recession Depression?
First Published: ADawnJournal.com March 23, 2010
When we talk about depression, we are not talking about a psychological condition. Instead, we are talking about an economic condition and it is a very serious one that has done a lot of damage in the past to the world’s economies. Naturally, the most famous is The Great Depression, but there have actually been several depressions, which we will cover.
What Is It?
A depression is a long-term downturn in economic activity of a country, or several countries. In contrast to a recession, a depression is much more severe and has long-term effects that go for longer than a recession. Depressions will typically last for several years, there will be very high levels of unemployment and the availability of credit will be much smaller. As well, there is usually a reduction in trading between countries, bankruptcies increase, and the currency of the countries affected typically becomes more volatile.
What Makes A Depression?
The National Bureau of Economic Research has stated that a depression is a period of time where there is a substantial and sustained fall in the ability of people and governments to purchase goods. As well, the GDP of a country needs to fall at least 10 percent and have a recession that lasts longer than two or more years, to qualify as being in a depression.
Depressions in The Past
There are several examples of depressions in the past, both recent and over a century ago. The degree of severity ranges, but the effects are felt by millions all over the planet.
The Great Depression
The most famous of all depressions is The Great Depression. During this depression, economies around the planet were affected greatly during the 1930s, and it is generally accepted that the catalyst for this depression was the Wall Street Crash of 1929. In the United States, the unemployment rate rose to 25 percent and the GDP of the country fell by 33 percent.
The Long Depression
Not as severe as the Great Depression, the Long Depression lasted for 23 years, or over twice as long as The Great Depression. One interesting point is that before The Great Depression, The Long Depression was called The Great Depression.
Depression of 1837
One interesting depression was one that lasted for five years, and many historians see this as the first Depression in recent history. It was The Panic of 1837, which was caused by the bursting of the real estate bubble in the United States on May 10, 1837, when banks stopped making payments in gold and silver. The Panic was short, but the depression it caused lasted for five years and was marked by banks failing and very high unemployment levels.
Regional Depressions
While the United States is generally seen as the place where depressions start or stop, many countries have had depressions of their own, including in the past 30 years. Some examples of these include:
· In the 1980s, Argentina, Brazil, Chile and Mexico went through severe depressions in the 1980s when their GDPs fell by over 20 percent.
· Argentina suffered a second depression that lasted from 1998 to 2002.
· New Zealand suffered a long depression that lasted from 1974 to 1992.
· Switzerland is currently in a depression that has lasted since 1973, but the qualification of this time as a depression is not accepted by all economists.
· From 1980 to 2000, much of Sub-Sahara Africa suffered through a long and difficult depression.
· The Soviet Union went through a depression that was seen as twice as severe as The Great Depression during most of the 1990s.
· Finland went through a depression from 1989 to 1994 after the breakup of the Soviet Union. Norway and Sweden also had troubled economic times during this period.
Depressions are not something you want to go through. They are very difficult to deal with on a personal level, and for countries it can have disastrous results on a wide variety of industries. In a depression, there is less money to be spent on infrastructure and that means roads will decay at a faster rate. There is also less money to spend on police officers, which can cause crime to increase. In general, depressions are something every country wants to avoid, and thankfully, most are able to depending on how they react to poor economic times.
