What Does A Depression Look Like?
Practically speaking, at our current rate we’d need the GDP to drop 6.6% in 4 straight quarters for it to hit the purple line below.
While that’s not very easy to do, it’s much more likely if the banking problem doesn’t get solved and credit freezes up again.
Calculated Risk offers this handy graph…
And, as you can see, we’re already very close to this being the worst recession in post-war history, and with some mortgage time bombs about to go off, I’m almost certain that this one will eventually lay claim to that dubious distinction.
Still, will we get to an actual “capital D” Depression?
To be painfully honest, with every passing day I think it’s possible. I hate to say that, but we’re talking about another $2+ trillion in toxic mortgage backed securities being dropped on top of our heads in the next couple years. And that could easily work to undermine any fixes that the administration puts in place for the banks, the economy, healthcare, etc.
Yes folks, consider me truly Worried.