"WASHINGTON (AP) — A Depression doesn't have to be Great — bread lines, rampant unemployment, a wipeout in the stock market. The economy can sink into a milder depression, the kind spelled with a lowercase 'd.'
"And it may be happening now.
"The trouble is, unlike recessions, which are easy to define, there are no firm rules for what makes a depression. Everyone at least seems to agree there hasn't been one since the epic hardship of the 1930s.
"But with each new hard-times headline, most recently an alarming economic contraction of 6.2 percent in the fourth quarter, it seems more likely that the next depression is on its way.
"'We're probably in a depression now. But it's not going to be acknowledged until years go by. Because you have to see it behind you,' said Peter Morici, a business professor at the University of Maryland.
"No one disputes that the current economic downturn qualifies as a recession. Recessions have two handy definitions, both in effect now — two straight quarters of economic contraction, or when the National Bureau of Economic Research makes the call.
"Declaring a depression is much trickier.
"By one definition, it's a downturn of three years or more with a 10 percent drop in economic output and unemployment above 10 percent. The current downturn doesn't qualify yet: 15 months old and 7.6 percent unemployment. But both unemployment and the 6.2 percent contraction for late last year could easily worsen.
"Another definition says a depression is a sustained recession during which the populace has to dispose of tangible assets to pay for everyday living. For some families, that's happening now." "It may not be another Depression, but it might be another depression"
"International Monetary Fund chief Dominique Strauss-Kahn said the world's advanced economies -- the U.S., Western Europe and Japan -- are 'already in depression,' and that the IMF could slash its global growth forecasts further. The "worst cannot be ruled out,' he said." IMF Chief Says Nations in 'Depression'
"What Does Contraction Mean?
"A phase of the business cycle in which the economy as a whole is in decline. More specifically, contraction occurs after the business cycle peaks, but before it becomes a trough. According to most economists, a contraction is said to occur when a country's real GDP has declined for two or more consecutive quarters.
"Investopedia explains Contraction
"For most people, a contraction in the economy can be source of economic hardship; as the economy plunges into a contraction, people start losing their jobs. While no economic contraction lasts forever, it is very difficult to assess just how long a downtrend will continue before it reverses because history has shown that a contraction can last for many years (such as during the Great Depression)." Investopedia: Contraction
"What Does Depression Mean?
"A severe and prolonged recession characterized by inefficient economic productivity, high unemployment and falling price levels.
"Investopedia explains Depression
"In times of depression, consumers' confidence and investments decrease, causing the economy to shut down. The classic example of this occurred in the 1930s, when the Great Depression shook the global economy." Investopedia: Depression
"There is an old joke among economists that states:
"A recession is when your neighbor loses his job.
"A depression is when you lose your job.
"The difference between the two terms is not very well understood for one simple reason: There is not a universally agreed upon definition. If you ask 100 different economists to define the terms recession and depression, you would get at least 100 different answers. I will try to summarize both terms and explain the differences between them in a way that almost all economists could agree with.
"Recession: The Newspaper Definition
"The standard newspaper definition of a recession is a decline in the Gross Domestic Product (GDP) for two or more consecutive quarters.
"This definition is unpopular with most economists for two main reasons. First, this definition does not take into consideration changes in other variables. For example this definition ignores any changes in the unemployment rate or consumer confidence. Second, by using quarterly data this definition makes it difficult to pinpoint when a recession begins or ends. This means that a recession that lasts ten months or less may go undetected.
"Recession: The BCDC Definition
"The Business Cycle Dating Committee at the National Bureau of Economic Research (NBER) provides a better way to find out if there is a recession is taking place. This committee determines the amount of business activity in the economy by looking at things like employment, industrial production, real income and wholesale-retail sales. They define a recession as the time when business activity has reached its peak and starts to fall until the time when business activity bottoms out. When the business activity starts to rise again it is called an expansionary period. By this definition, the average recession lasts about a year." "Recession? Depression? - What's the difference? - What's a recession? - How do we know if we're in one?"
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