Kathianne
03-06-2009, 05:39 AM
Yeah, it's Friday. :( I suppose the only 'good news' is that many seem to be writing about the administrations meltdown regarding the economy, over reaching, appointments unconfirmable, czars that may undermine the legislative oversite...
Looks like the honeymoon is ending.
http://www.usnews.com/blogs/capital-commerce/2009/03/05/the-odds-of-a-depression.html
The Odds of a Depression? 40 Percent
March 05, 2009 08:40 AM ET | James Pethokoukis | Permanent Link | Print
The Intrade betting market assigns a 38 pecent chance the U.S. economy will shrink 10 pecent or more from peak to trough. Let's call that a depression. Moreover, the market assigns a 20 percent chance the economy will shrink 15 percent or more. Let's call that Great Depression 2.0. For context, GDP fell by just 3 percent during the terrible 1981-82 recession. Economist Robert Barro puts the odds for a "minor depression" at 20 percent in a new paper:
Long-term data for 25 countries up to 2006 reveal 195 stock-market crashes (multi-year real returns of -25% or less) and 84 depressions (multi-year macroeconomic declines of 10% or more), with 58 of the cases matched by timing. The United States has two of the matched events—the Great Depression 1929-33 and the post-WWI years 1917-21, likely driven by the Great Influenza Epidemic. 45% of the matched cases are associated with war, and the two world wars are prominent. Conditional on a stock-market crash, the probability of a minor depression (macroeconomic decline of at least 10%) is 30% and of a major depression (at least 25%) is 11%. In a non-war environment, these probabilities are lower but still substantial—20% for a minor depression and 3% for a major depression. Thus, the stock-market crashes of 2008-09 in the United States and other countries provide ample reason for concern about depression.
Looks like the honeymoon is ending.
http://www.usnews.com/blogs/capital-commerce/2009/03/05/the-odds-of-a-depression.html
The Odds of a Depression? 40 Percent
March 05, 2009 08:40 AM ET | James Pethokoukis | Permanent Link | Print
The Intrade betting market assigns a 38 pecent chance the U.S. economy will shrink 10 pecent or more from peak to trough. Let's call that a depression. Moreover, the market assigns a 20 percent chance the economy will shrink 15 percent or more. Let's call that Great Depression 2.0. For context, GDP fell by just 3 percent during the terrible 1981-82 recession. Economist Robert Barro puts the odds for a "minor depression" at 20 percent in a new paper:
Long-term data for 25 countries up to 2006 reveal 195 stock-market crashes (multi-year real returns of -25% or less) and 84 depressions (multi-year macroeconomic declines of 10% or more), with 58 of the cases matched by timing. The United States has two of the matched events—the Great Depression 1929-33 and the post-WWI years 1917-21, likely driven by the Great Influenza Epidemic. 45% of the matched cases are associated with war, and the two world wars are prominent. Conditional on a stock-market crash, the probability of a minor depression (macroeconomic decline of at least 10%) is 30% and of a major depression (at least 25%) is 11%. In a non-war environment, these probabilities are lower but still substantial—20% for a minor depression and 3% for a major depression. Thus, the stock-market crashes of 2008-09 in the United States and other countries provide ample reason for concern about depression.