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The Economist: U.S. in Depression, Not Recession

Posted January. 02, 2009 03:00,   


The Economist in its latest edition says the U.S. economy is in depression rather than recession.

Based on an analysis of past depression, the weekly said the U.S. economy is in more of a depression given the causes of the economic crisis.

The difference between recession and depression lies in neither the decline in growth nor its duration, but in the causes of the economic slowdown. A depression is triggered by a bursting of the asset and credit bubble, a contraction in credit, and a decline in general price levels, it said.

U.S. GDP in the fourth quarter last year fell an estimated six percent, seemingly less severe than in the Great Depression of the 1930s, the Economist said, but the slump is closer to a depression since it was caused by the bursting of the largest asset and credit bubble in history.