Great Depression II? Not Even Close

Real GDP contracted annually by about 8%, 6% and 13% in the first three years of the Great Depression, for a cumulative decrease of more than 27% (see chart above). According to the Philadelphia Federal Reserve Survey of Professional Forecasters (released February 13, to be updated this Friday), real GDP will contract this year by -2.0 before increasing by 2.2% next year. Even if real GDP contracts by much more than 2% this year before returning to positive growth next year, it will be nothing close to the contraction in real GDP of the early 1930s.

Related: See guest Freakonomics post “This is Not Another Great Depression,” which concludes: “We are experiencing pain now, but the problems of the Great Depression were several magnitudes greater.”

Related: The White House is projecting that the nation’s economy will shrink by 1.2% this year and increase by 3.2% next year. In addition, it projects that “by the end of this year,” the economy will be growing at a 3.5% annual rate.

About Mark J. Perry 262 Articles

Affiliation: University of Michigan

Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan.

He holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University in Washington, D.C. and an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota.

Since 1997, Professor Perry has been a member of the Board of Scholars for the Mackinac Center for Public Policy, a nonpartisan research and public policy institute in Michigan.

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