Looking Back

One difficulty in raising awareness of the 2008 Depression is the lack of a strict definition of an economic depression. There are some rules of thumb, but they allow for 'wiggle-room' in their application. This, coupled with denial about the situation, allows commentators to avoid directly saying the United States is in a depression. Although such hesitation is understandable, it is not helpful to those making decisions in this Depression. It is therefore extremely important that you, Reader, arm yourself with the tools to analyse the situation for yourself.

In identifying a depression, it is best to not look at arbitrary measures, but rather history. The most familiar example in the United States is, of course, the Great Depression of 1929-1939. To show the severity of this Depression we will use the Dow Jones Industrial Average as a primary example. The Dow, then as today, represented the largest and strongest corporations. The Dow reached its peak on September 3rd, 1929 and proceeded to lose 89% of its value, finally reaching its bottom on July 8th, 1932. Other, smaller markets fared even worse than this.

Unemployment in 1930 reached 25% and remained there more or less throughout that Depression, and was still at 15% at 1940. By 1932, the average income of the American household had fallen 40%. The depth of that Depression was finally reached in 1933, after American industrial output dropped by over 50%. Over 9,000 banks failed during the 1930's. Recovery was slow and arduous, and the catastrophe left its mark on the economy and citizens of the United States along with most of the rest of the world for decades following. For example, the Dow Jones Industrial Average did not sustainably reach its 1929 high until the 1950's, even with an exploding population.

What you, Reader, should take away from reading about the 1929 Depression is not the numbers. It is the scale of the collapse that you should remember: a near-total wipe-out of value on the stock market; vast numbers of people unemployed; and many businesses of all sizes failed. Most importantly was the pervasiveness of the Depression. It lasted ten years and its effects lasted for decades following, fundamentally changing the nature of the United States. So, too, will the 2008 Depression change the way Americans live.