Worse than the Depression

You hear it said that this is the worst US economy since the Great Depression.  I went back to the history books to look up the numbers.  It turns out that the current doldrums are actually worse in an important sense: sustainable 3.5% GDP growth is taking far longer to achieve than it did in the 1930s. By joining together yearly growth rates into rolling three-year periods of growth, to reflect the time businesses need to invest, and consumers need to feel confident about spending, the trend line is smoothed and the comparison of the New Normal with the Depression is easier to see. The graph below shows the trend line, but first some discussion.  The 3-year period ending with 1932 experienced -9.4% GDP growth rate per annum, far more devastating than the worse 3-year period of the past decade.  The next two periods, ending in 1933 and 1934, were better than 1932 but still terrible.  But starting in the 1933-35 period, the economy grew at very high, sustained...(Read Full Post)

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