Official: The Great Depression is history

Bank runs and soup lines that once stretched around the neighborhood during the Great Depression of the 1930s remain atypical today, even during the worst economic crisis of the last 70 years. “The current economic recession is unquestionably severe, it pales in comparison with what our parents and grandparents experienced in the 1930s,” said Christina D. Romer, the Chair of the President’s Council of Economic Advisors. Even at the worst point in the current recession, unemployment has only reached 8.1 percent, which stands in stark contrast to the nearly 25 percent seen during the 1930s. Therefore, Romer believes, that no matter how severe the economic recession is presently, America is no where close to entering another depression.


Romer attributed the cause of the current recession to modern innovations such as derivatives, which led to a direct relationship between asset prices and severe stress in financial institutions. “A reliance on such insecure and volatile assets caused the failure of financial institutions, which led a drying up of credit, which America so desperately needs,” said Romer.


Additionally, Romer complimented the Obama administration for passing the American Recovery and Reinvestment Act, and called it the “biggest and boldest countercyclical fiscal action in history.” Also, Romer noted the lack of bank runs and attributed this to the Federal Deposit Insurance Company, which was created as part of the New Deal.


Remaining optimistic, Romer stated that due to the quick and well-conceived response of the Obama Administration, “there is every reason to believe that we will weather this trial and come through stronger than before.” Senator Sherrod Brown (D-Ohio) echoed such beliefs, when he exclaimed that “the United States recovered from the Great Depression and we will recover from today’s recession.”