Here’s my take on what “caused” the Great Depression (over simplification, obviously):
Widespread deflation as countries returned to the gold standard after WW1
Reduced spending due to 1 (holding cash was better than investing)
Tariffs further reduce demand by hiking prices
This time around, spending is pretty healthy, we’re not in a deflationary environment (just coming off an inflationary environment), etc. Tariffs will likely cause a demand shock due to higher prices though, so I think recession is likely as spending falls off (assuming the tariffs stick). I doubt we’ll see a depression unless Trump increases tariffs again in response like Hoover did.
Everything depends on how the US gov handles the reaction to tariffs and how other countries react as well.
I doubt we’ll see a depression unless Trump increases tariffs again in response like Hoover did.
Hoover wasn’t ripping through the federal government, slashsing employee headcounts, and slashing outgoing funds.
These two alone, are likely enough to seal the “Depression” deal… Like, in 1 month, we have 30,000+ new people seeking unemployment; states, counties, and cities are going to start cutting jobs too, because of the slashed federal funds which fund programs at those levels. I know one non-profit that has basically let all 90 employees go, because lack of federal funds coming in on grants means they can’t keep the rent paid.
30k people looking for jobs isn’t going to trigger anything. A typical jobs report shows adding something like 100-150k jobs in one month, so a one time bump in workers seeking employment is merely a blip. Here’s the January report, which shows 143k jobs added.
Yes, a lot of companies and individuals will be impacted, but I highly doubt it’s widespread enough to be more than a blip on the market. The bigger impact will be a longer term impact from what these employees used to do, and what will fill their place, but I doubt it’s recessionary.
I’m much more worried about tariffs chilling consumer sentiment and reducing demand, since that’s what actually triggers recessions.
30k is a low end estimate. And 30k+ people in a single month WILL be more than a dent. So, take the 100-150, and revise back to 70-120K new jobs, which is below typical new job creation.
And this is JUST the first wave of effects… Those jobs created other jobs, down the line, which also are going away. Case in point: The 90 people in a single NPO that let everyone go. That is not unique, and not counted in the federal layoff count.
Just looked it up, the current count is 77,000 employees have been terminated, so far. So, that 100-150k gets revised downward to 30-70K new jobs… Almost cut it in half there! Its expected to increase, upwards of 200K. And, those all, once again, have downward effects on local govs and NPOS.
It’s unlikely to increase monthly, and it’ll likely plateau after a couple months after Trump has his fun. Since the economy is reasonably healthy (lowish unemployment, inflation under control, etc), the jobs report isn’t going be all that pivotal unless inflation picks back up again or consumer spending drops, and then it’s only interesting as a trend.
It turns out, when you flood the market with competent workers and your economy is otherwise healthy, they tend to get snapped up. The same is true for any resource, if something useful all of a sudden gets more plentiful, it will be used.
I’m not saying this won’t have an impact, I’m saying the jobs report isn’t where to look for problems since it’s usually a lagging indicator of larger problems. Recessions aren’t caused by governments cutting jobs, unless it’s a socialist country or something where the government is the main employer or something.
I’m far more worried about tariffs in the short term than I am about government jobs getting slashed. That’s concerning over the long term as research doesn’t get done and whatnot, but that’s a future us problem.
Since the economy is reasonably healthy (lowish unemployment, inflation under control, etc)
OMG… The economy ISN’T reasonably healthy…
Inflation is headed back up.
Houselessness in the US hit records highs, and still climbing.
Real income is still flat from 1980.
It turns out, when you flood the market with competent workers and your economy is otherwise healthy, they tend to get snapped up.
That… Not at all how it works. It ignores all sorts of things, like labor mobility. Remember the Great Depression? Loads of people, and loads of jobs out there… Labor was frozen, and immobile.
Right now, we have low unemployment, because people are holding 2 and 3 jobs just to meet basic needs… And are still falling behind.
Source? Jan inflation was 3.0% annualized, slightly up from 2.9% in December. We hit a low of 2.4% back in Sep, but it’s been pretty steady around 2.5-3% over the past year. The fed started cutting rates late last year, and now they’re pausing. There’s always some uncertainty around election season, and this one was especially spicy, so that’s honestly a good call.
Houselessness in the US hit records highs, and still climbing.
Yes, that’s certainly concerning. But that doesn’t really indicate issues in the broader economy, it indicates issues in the low-end of housing affordability. That’s certainly a problem and should be addressed, but it’s not indicative IMO of a recession looming, unless we get a round of defaults or something like we had in 2007/2008.
Prices are high because new construction was severely limited during COVID, and it does seem to be getting better, just slower than most would like.
people hoarding dollars due to #1, dramatically reducing money circulation (i.e. demand falls off)
tariffs, which caused things to get even more expensive, fueling #2
If Hoover just didn’t create tariffs to try to address the recession, the Great Depression likely never would’ve happened. But no, we chased reduced demand with higher prices, further pushing demand down. Instead, we should have increased the money supply, encouraging businesses to expand instead of consumption to contract.
I am concerned about Trump’s tariffs for much the same reason that tariffs were problematic in the 1920s, but we’re not in a deflationary environment, on the flipside, inflation seems to be largely under control. Ideally, if we do tariffs, we should wait until inflation is too low and the fed wants to drop rates, because that means the market is a bit overheated and tariffs could help cool it a bit.
Additionally, slashing federal spending does… Reduce the GDP. Every federal dollar spent usually leads to 3-7 USD once it gets to the streets.
If we go back to the Great Depression, just creating jobs didn’t fix the economy, my understanding is that gold inflows (we were still on the gold standard) largely did, because it increased money supply, encouraging more investment. The rampant deflation started ending in 1933 (same link as above), which is when the economy started showing signs of recovery.
That’s the same general idea for the recovery in the 2008 recession, we slashed fed rates, which increased the money supply and encouraged investment.
Every federal dollar spent usually leads to 3-7 USD once it gets to the streets.
If we go back to the Great Depression, just creating jobs didn’t fix the economy, my understanding is that gold inflows (we were still on the gold standard) largely did, because it increased money supply, encouraging more investment
That’s… not really true, though it is a popular take. After WW2, there were concerns that we’d go right back into recession/depression, because the fundamentals of the economy didn’t really change. The main thing that seemed to fix that was slashing taxes to encourage more private sector investment, which helped take advantage of dominating trade while the rest of the world was rebuilding.
It’s not going to be from cutting federal workers, at least not in the short term, those impacts are more long-term. I’m much more worried about tariffs destroying consumer spending, and that might end up with a wave of unemployment.
No, we shouldn’t be trying to avoid recessions, that’s how we got the Great Depression of the 1930s and the stagflation of the 1970s (different causes and responses, similar govt meddling). Recessions are normal and usually short lived, so the best response IMO is to let bad businesses fail and maybe reduce lending rates to encourage good businesses to fill the expand.
What we need is for government to stay out of it. Don’t touch tariffs, and definitely don’t try to fix things. The economy is fine, though I think we’ll likely see a correction or recession regardless sometime in the next few years (AI bubble, high borrowing rates, climate change, etc). I also believe tariffs will accelerate that.
So we don’t necessarily need competent government, we just need to avoid incompetent, reactionary government when the pullback happens.
Thats my point. Far right governments are taking power all over the world. They don’t usually lead to stability. Add in some well-timed crisis (or at least the perception of a crisis, and the media loves to make us perceive things as crises), and things could go south very fuckin fast. Look at Milei, Trump, the far right in Britain, the AfD. These aren’t the most competent people. They’re reactionaries at best. But what they are good at is scapegoating groups and whipping up peoples fears and biases. A few more elections going the wrong way and we are looking at a nearing uniform far right takeover of power.
Look at Milei, Trump, the far right in Britain, the AfD.
One of these is not like the other.
I think Milei is doing a fantastic job at what he set out to do: tackle inflation. He’s an economist, and when he took office, inflation was 250% and rising, peaked at 300%, and now it’s <100% and falling rapidly. He had to take drastic measures to fix it, similar to (and more extreme than) what we did in the late 70s and early 80s to fix stagflation, and it took years to take effect. The larger the problem, the more painful the fix, and he’s taking the right approach IMO of trying to get it done ASAP so things can return back to normal more quickly.
I agree with the overall sentiment though. I’m very concerned about Trump and many of the elections over the last couple of years, as well as upcoming elections. We’ll see where it all ends up though.
That depends on a bunch of factors.
Here’s my take on what “caused” the Great Depression (over simplification, obviously):
This time around, spending is pretty healthy, we’re not in a deflationary environment (just coming off an inflationary environment), etc. Tariffs will likely cause a demand shock due to higher prices though, so I think recession is likely as spending falls off (assuming the tariffs stick). I doubt we’ll see a depression unless Trump increases tariffs again in response like Hoover did.
Everything depends on how the US gov handles the reaction to tariffs and how other countries react as well.
Hoover wasn’t ripping through the federal government, slashsing employee headcounts, and slashing outgoing funds.
These two alone, are likely enough to seal the “Depression” deal… Like, in 1 month, we have 30,000+ new people seeking unemployment; states, counties, and cities are going to start cutting jobs too, because of the slashed federal funds which fund programs at those levels. I know one non-profit that has basically let all 90 employees go, because lack of federal funds coming in on grants means they can’t keep the rent paid.
30k people looking for jobs isn’t going to trigger anything. A typical jobs report shows adding something like 100-150k jobs in one month, so a one time bump in workers seeking employment is merely a blip. Here’s the January report, which shows 143k jobs added.
Yes, a lot of companies and individuals will be impacted, but I highly doubt it’s widespread enough to be more than a blip on the market. The bigger impact will be a longer term impact from what these employees used to do, and what will fill their place, but I doubt it’s recessionary.
I’m much more worried about tariffs chilling consumer sentiment and reducing demand, since that’s what actually triggers recessions.
30k is a low end estimate. And 30k+ people in a single month WILL be more than a dent. So, take the 100-150, and revise back to 70-120K new jobs, which is below typical new job creation.
And this is JUST the first wave of effects… Those jobs created other jobs, down the line, which also are going away. Case in point: The 90 people in a single NPO that let everyone go. That is not unique, and not counted in the federal layoff count.
Just looked it up, the current count is 77,000 employees have been terminated, so far. So, that 100-150k gets revised downward to 30-70K new jobs… Almost cut it in half there! Its expected to increase, upwards of 200K. And, those all, once again, have downward effects on local govs and NPOS.
It’s unlikely to increase monthly, and it’ll likely plateau after a couple months after Trump has his fun. Since the economy is reasonably healthy (lowish unemployment, inflation under control, etc), the jobs report isn’t going be all that pivotal unless inflation picks back up again or consumer spending drops, and then it’s only interesting as a trend.
It turns out, when you flood the market with competent workers and your economy is otherwise healthy, they tend to get snapped up. The same is true for any resource, if something useful all of a sudden gets more plentiful, it will be used.
I’m not saying this won’t have an impact, I’m saying the jobs report isn’t where to look for problems since it’s usually a lagging indicator of larger problems. Recessions aren’t caused by governments cutting jobs, unless it’s a socialist country or something where the government is the main employer or something.
I’m far more worried about tariffs in the short term than I am about government jobs getting slashed. That’s concerning over the long term as research doesn’t get done and whatnot, but that’s a future us problem.
OMG… The economy ISN’T reasonably healthy…
Inflation is headed back up.
Houselessness in the US hit records highs, and still climbing.
Real income is still flat from 1980.
That… Not at all how it works. It ignores all sorts of things, like labor mobility. Remember the Great Depression? Loads of people, and loads of jobs out there… Labor was frozen, and immobile.
Right now, we have low unemployment, because people are holding 2 and 3 jobs just to meet basic needs… And are still falling behind.
https://www.politico.com/news/magazine/2025/02/11/democrats-tricked-strong-economy-00203464
The economy is only doing “reasonably well” for oligarchs.
Additionally, slashing federal spending does… Reduce the GDP. Every federal dollar spent usually leads to 3-7 USD once it gets to the streets.
Source? Jan inflation was 3.0% annualized, slightly up from 2.9% in December. We hit a low of 2.4% back in Sep, but it’s been pretty steady around 2.5-3% over the past year. The fed started cutting rates late last year, and now they’re pausing. There’s always some uncertainty around election season, and this one was especially spicy, so that’s honestly a good call.
Yes, that’s certainly concerning. But that doesn’t really indicate issues in the broader economy, it indicates issues in the low-end of housing affordability. That’s certainly a problem and should be addressed, but it’s not indicative IMO of a recession looming, unless we get a round of defaults or something like we had in 2007/2008.
Prices are high because new construction was severely limited during COVID, and it does seem to be getting better, just slower than most would like.
That’s just not true.
Those were very different times. The Great Depression seems to have been caused by:
If Hoover just didn’t create tariffs to try to address the recession, the Great Depression likely never would’ve happened. But no, we chased reduced demand with higher prices, further pushing demand down. Instead, we should have increased the money supply, encouraging businesses to expand instead of consumption to contract.
I am concerned about Trump’s tariffs for much the same reason that tariffs were problematic in the 1920s, but we’re not in a deflationary environment, on the flipside, inflation seems to be largely under control. Ideally, if we do tariffs, we should wait until inflation is too low and the fed wants to drop rates, because that means the market is a bit overheated and tariffs could help cool it a bit.
If we go back to the Great Depression, just creating jobs didn’t fix the economy, my understanding is that gold inflows (we were still on the gold standard) largely did, because it increased money supply, encouraging more investment. The rampant deflation started ending in 1933 (same link as above), which is when the economy started showing signs of recovery.
That’s the same general idea for the recovery in the 2008 recession, we slashed fed rates, which increased the money supply and encouraged investment.
That really depends on what it’s spent on.
WW2 fixed the Great Depression…
That’s… not really true, though it is a popular take. After WW2, there were concerns that we’d go right back into recession/depression, because the fundamentals of the economy didn’t really change. The main thing that seemed to fix that was slashing taxes to encourage more private sector investment, which helped take advantage of dominating trade while the rest of the world was rebuilding.
Also the wave of unemployment that is about to cone might push us into a recession
It’s not going to be from cutting federal workers, at least not in the short term, those impacts are more long-term. I’m much more worried about tariffs destroying consumer spending, and that might end up with a wave of unemployment.
So basically a competent and thoughtful government is sort of required to avoid one?
gulp
No, we shouldn’t be trying to avoid recessions, that’s how we got the Great Depression of the 1930s and the stagflation of the 1970s (different causes and responses, similar govt meddling). Recessions are normal and usually short lived, so the best response IMO is to let bad businesses fail and maybe reduce lending rates to encourage good businesses to fill the expand.
What we need is for government to stay out of it. Don’t touch tariffs, and definitely don’t try to fix things. The economy is fine, though I think we’ll likely see a correction or recession regardless sometime in the next few years (AI bubble, high borrowing rates, climate change, etc). I also believe tariffs will accelerate that.
So we don’t necessarily need competent government, we just need to avoid incompetent, reactionary government when the pullback happens.
Thats my point. Far right governments are taking power all over the world. They don’t usually lead to stability. Add in some well-timed crisis (or at least the perception of a crisis, and the media loves to make us perceive things as crises), and things could go south very fuckin fast. Look at Milei, Trump, the far right in Britain, the AfD. These aren’t the most competent people. They’re reactionaries at best. But what they are good at is scapegoating groups and whipping up peoples fears and biases. A few more elections going the wrong way and we are looking at a nearing uniform far right takeover of power.
One of these is not like the other.
I think Milei is doing a fantastic job at what he set out to do: tackle inflation. He’s an economist, and when he took office, inflation was 250% and rising, peaked at 300%, and now it’s <100% and falling rapidly. He had to take drastic measures to fix it, similar to (and more extreme than) what we did in the late 70s and early 80s to fix stagflation, and it took years to take effect. The larger the problem, the more painful the fix, and he’s taking the right approach IMO of trying to get it done ASAP so things can return back to normal more quickly.
I agree with the overall sentiment though. I’m very concerned about Trump and many of the elections over the last couple of years, as well as upcoming elections. We’ll see where it all ends up though.