Graphically, this IS as bad as 1929

amcluesent

The Depression in one picture

The numbers along the x axis represent the numbers of months we are out from the peak for GDP, while the vertical axis represents where the economy is at that point in relation to the peak. In other words, as things currently stand we’re just about 6pc lower than the peak for the economy (in 2008), which is more or less where the UK was in 1931.

Generali

It is worth noting that while the Great Depression was pretty bad for the UK (especially the poor), it was the US-ian Great Depression that was amazingly bad (GDP down 25%, unemployment over 30% IIRC).

That was mostly because while the US was basking in in 'wealth' created by a series of bubbles (Floridian land and shares spring to mind most readily) the UK had inflicted deflation onto it's economy deliberately as part of the policy of returning to the Gold Standard in 1925.

amcluesent

>the US was basking in in 'wealth' created by a series of bubbles<

So this UK depression has the same causes, so could be just as bad...

Generali

amcluesent wrote: »

>the US was basking in in 'wealth' created by a series of bubbles<

So this UK depression has the same causes, so could be just as bad...

Yeah, in theory. There are some features of the modern economy that could make things far worse IMO (high levels of Government debt for example could prove very nasty, especially given the large size of undeclared liabilities like pensions).

My guess is that things won't be as bad as we're starting from a much higher point and I'm a born optimist. Time will tell however.

Degenerate

Generali wrote: »

That was mostly because while the US was basking in in 'wealth' created by a series of bubbles (Floridian land and shares spring to mind most readily) the UK had inflicted deflation onto it's economy deliberately as part of the policy of returning to the Gold Standard in 1925.

That's a contentious conclusion. Another school of thought says it was because we were forced off the gold standard and the pound plummeted - just like it did again this time.

Graham_Devon

On a personal note, I think the problems of a recession come after the recession, when you can take stock of what actually happened. You can't do this in the middle of one, though I do have to say, this is the first recession I have lived through that I understood.

At the moment, the only people really feeling this seem to be those who have unforunately lost their jobs. For everyone else, it seems to be a case of "what recession" and life as normal, thanks to artificial stimulus.

There are a few who have noticed their house go down in price, though most seem to be in complete denial thinking it's simply a blip and a new coat of magnolia throughout and some scatter cushions still at 10k to the value of the house.

I reckon once we are out, the other side of the recession, we can start making comparisons to others. Until that point we don't know what's round the corner in terms of more bad news, repayment of the stimulus being used, or just how long a return to "normality" may take, if our sense of "normality" can indeed ever be returned to.

We may be as bad, or worse than any other known recession, it's just that at the moment, we do not really feel it. But the clean up operation of anything is always much harder than the "operation".

andykn

DUMB QUESTION ALERT!

How does inflation affect GDP figures?

1990 and 1979 had much higher inflation numbers, if this were stripped out might they look worse?

nearlynew

andykn wrote: »

DUMB QUESTION ALERT!

How does inflation affect GDP figures?

1990 and 1979 had much higher inflation numbers, if this were stripped out might they look worse?

Have a look at this.......

http://www.chrismartenson.com/crashcourse/chapter-16-fuzzy-numbers

If you have time check out the rest of "the crash course". It is very good.

Generali

andykn wrote: »

DUMB QUESTION ALERT!

How does inflation affect GDP figures?

1990 and 1979 had much higher inflation numbers, if this were stripped out might they look worse?

GDP change is usually quoted in 'real terms', ie adjusted for inflation so that shouldn't make a difference unless inflation is being under-reported right now and so flattering the growth figures (unlikely IMO).

nearlynew

Generali wrote: »

GDP change is usually quoted in 'real terms', ie adjusted for inflation so that shouldn't make a difference unless inflation is being under-reported right now and so flattering the growth figures (unlikely IMO).

But using hedonics (which I know you are familiar with Gen) the inflation in price of an item can be reduced while at the same time its contribution to GDP can be increased.

It is this cynical manipulation of figures which allows the government to paint a rosier picture than actually exists.

It is blatantly dishonest and steals people's money without them noticing.

Generali

nearlynew wrote: »

But using hedonics (which I know you are familiar with Gen) the inflation in price of an item can be reduced while at the same time its contribution to GDP can be increased.

It is this cynical manipulation of figures which allows the government to paint a rosier picture than actually exists.

It is blatantly dishonest and steals people's money without them noticing.

There is a very close correlation between the GDP deflator and RPI. Furthermore, changes in GDP and unemployment are closely linked and consistent.

As a result I don't believe that UK RPI figures are being distorted.

Hedonics is an interesting topic but doesn't have that great an impact on the 'bottom line' figure for GDP I believe. Most things in the RPI figure (food, drink, utilities, transport, mortgage payments, furniture & holidays for example) are subject to little or no hedonic adjustment. Also, if you systematically under-reported inflation for decades even by 0.1%/month then over a long period it would be massively obvious.