The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

In A Flash

06/18/2020

Do you remember the year of 2010?  That was the year of the “Flash Crash”.  It happened on May 6th, when the stock market suddenly fell almost a thousand points, losing a trillion dollars, before recovering 36 minutes later.  It was a market event . . . of temporary significance.

Do you remember the year of 2020?  That was the year of the “Flash Depression.”  It happened during the first half of the year, when the economy was suddenly shut down.  The stock market lost many trillions of dollars, before rebounding nicely.  The overall economy will recover relatively soon, especially compared to the Great Depression.  This has been an economic event . . . of gigantic proportion, albeit temporary.

Current real unemployment (about 20%) is approaching that of the “Great Depression” (25%) during 1933.  The current drop in GDP (estimated at 34%) easily eclipses that of the Great Depression (26%).  Admit it, we are already in a Depression!  It doesn’t feel like a depression, only because it will NOT grind on for many L-O-N-G years.  We didn’t slip into this depression.  It happened in a flash.  Unfortunately, we will not exit this depression in a flash, but we will exit MUCH quicker than we exited the Great Depression.

When the Great Depression began, an ignorant Congress actually made it worse by starting a trade war, which was already behind us in 2020.  When the Flash Depression began, a normally-infantile Congress actually rose to the occasion by passing several multi-trillion dollar packages.  In econ-speak, these new deficit-spending programs support the aggregate demand for goods and services during weak economic conditions.

After the Great Depression, we installed a few automatic stabilizers into the American economy.  For example, when unemployment rises, spending for unemployment compensation, welfare, and food stamps also increase somewhat.  In econ-speak, these automatic stabilizers also help support the aggregate demand for goods and services during weak economic conditions.

Your kids may someday ask you . . . do you remember what you were doing on 9-11?  Do you remember where you were when the Berlin Wall fell?  Do you remember how you felt when Vietnam was surrendered?  Were you scared during the Flash Depression of 2020?

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