Written by Dave Young for Paragon’s 2008 3rd quarter newsletter.

No, and it is ludicrous to even make the comparison.

We are not even officially in a recession yet, let alone a depression. The word depression is used perpetually in the media to describe our economy. These comparisons are irresponsible and only do more to unnecessarily destroy confidence.

Confidence is what makes the economy work.

By way of comparison between today and the Great Depression:

· Unemployment was 25% during the depression, today it is about 6%.

· Our economic output (GDP) shrank by 25% during the depression, over the past year it grew at 3% .

· Consumer prices fell by 30% during the depression, today they are still rising.

· 40% of all mortgages were late by 1934; today only 4% are late.

· In the 1930’s more than 9,000 banks failed, in the past two years there have been about 30 failures.

*statistics taken from MarketWatch.

 

Extraordinary Circumstances

Extraordinary circumstances are driving this bear market. One year ago, according to actual statistical measures, our economy was extremely strong and hitting on all cylinders. Eighteen months ago, the presidential candidates began telling us how bad things were. At that time their mantra of economic weakness was completely untrue.

Since political gain is much more important to most politicians than speaking the truth, they continued their drumbeat of doom.

They told us that we were in recession when we weren’t. They told us unemployment was bad when it wasn’t. They remind me of the annoying salesman whose strategy is to scare you to death in order to make the sale. Their goal is to convince us that in order to be saved (from whatever) we must elect them.

As I mentioned above our economy is based on confidence. It is plain and simple. When its participants are confident, they spend, they expand and they maximize growth. When they lose confidence and are scared they stop spending, stop borrowing, stop growing and effectively huddle in the corner. That lack of confidence causes the economy to slow or stop growing.

About six months into the campaign the political scare tactics began to work.

They were killing consumer confidence. One year ago in October the stock market started its decent and then six months later we began to see the first signs of economic weakness.

 

To be continued. Click here to read more.