In A Gallup Poll, published today 33% of Americans think the US is in a depression.
It is a reflection of the turmoil gripping the financial markets and housing markets that people have such a pessimistic outlook. Amidst tumbling share prices, falling house prices, collapsing banks and growing unemployment. It almost seems churlish to point out that, unbelievably, the US economy is still actually expanding.
The US is not in a depression. A depression would have to involve significant periods of negative growth and a much higher unemployment figure. But, whilst economists may argue over semantics and what actually constitutes a recession / depression, the salient point is that the US and global economy faces a real crisis. One of the worrying things about the current crisis is that it is all unchartered territory. We have had recessions before, but, they have been relatively predictable changes in the business cycle. The current crisis is unprecedented because the financial system is collapsing in a way never seen before. No one is exactly certain how it will develop. There is a lot of panic in financial markets and this panic is contagious. The outcome could be ugly.
In a way I am pleased the $700bn bailout got rejected by the house of representatives. The plan was ill thought out, based on tenuous economics. Wall Street deserves a bloody nose, but, whilst it is easy to knock a plan it is more difficult to suggest a solution.