By Mark Riepe
Schwab Center for Financial Research

Buffeted by weeks of withering financial news, nearly six out of 10 Americans now believe the U.S. economy is somewhat or very likely to fall into a depression, according to an October 4–5 CNN/Opinion Research Corp. poll. But while the U.S. economy is not as strong and our financial system isn’t as healthy as it needs to be, we’re nowhere near the types of economic difficulties seen in the depths of the Great Depression—nor does Schwab believe we’re headed there.

For context, consider these two realities. First, the U.S. economy is much stronger today than during the Great Depression. In the 1930s, America was primarily an industrial powerhouse, and industrial production shrank 52% from peak to trough, while gross domestic product (GDP) shrank 27%. As an example, if we assume December 1, 2007, is ultimately declared the start of a recession, you can see below that GDP and industrial production are nowhere near depression levels. Industrial production declines suggest a garden-variety recession, and GDP is still positive (although we don’t expect it to stay that way).

Source: Charles Schwab & Co. Inc

About this entry