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Are we in another Great Depression?

- April 7, 2009

If you look at the figures for the world, rather than just the US, the answer is yes – or at least the patterns we see resemble the start of the Great Depression. “Barry Eichengreen and Kevin O’Rourke”:http://www.voxeu.org/index.php?q=node/3421 have the graphs. The one below compares falls in world industrial output starting in June 1929 and April 2008. They have other graphs showing that global decreases in stock prices and trade are even starker than the Great Depression. However (and this is where the political economy comes in), they also show that the policy response to the crisis has been sharper – discount rates have been cut more rapidly, the money supply has expanded more, and governments seem much more willing to engage in deficit spending.