500 Newport Center Drive, Suite 500
Newport Beach, CA 92660
Phone: (949) 721-2330
Fax: (949) 721-0734
February 2009 
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Great Recession, Not Great Depression
by Mark Wilson, APA, CFP®
Virtually every article I’ve read about the economy for the last several months has noted “the current economic downturn is the worst since the Great Depression.” Every single time I read this, I want to pull out my hair in frustration. The implication is that we are nearing even more severe stock market declines, 25% unemployment rates and soup lines! We are clearly in the midst of a severe recession, but nowhere close to the Great Depression.
Dr. John Hussman (one of the active managers we use in many client accounts) says this another way: “… to say that this is ‘the worst economy since the Great Depression’ is like blowing up a crate of dynamite on the Nevada Proving Grounds and saying it is the worst explosion since the detonation of the atomic bomb there. Even if the statement is accurate, the comparison is absurd.”
Here are some comparisons:
Why does the poor comparison bother me so much? Because it unnecessarily leads to sleepless nights, irrational financial decisions, and the pricing of stocks as if we are in the middle of the Great Depression 2.0. While there are certainly some parallels between today’s environment and the environment of 80 years ago, we are much closer to the “Great Recessions” of 1954, 1958, 1975 and 1982. To be sure, recessions are painful times for the consumer and the equity markets. The good news is that all severe recessions (and Great Depressions) end. In addition, they have all been fantastic buying opportunities for equities.