U.S. News & World Report Editor Compares Credit Crisis to the Great Depression

Photo of Jeff Poor.
By Jeff Poor (Bio | Archive)
January 21, 2008 - 18:06 ET

It's no longer enough to say the economy is heading into or already is in a recession. Invoking the memory of the Great Depression has become the latest way to dramatize the economic turmoil caused by the credit markets.

"[I] think we are facing the worst financial crunch and crisis since the Great Depression," Mort Zuckerman, editor-in-chief of U.S. News & World Report, said on the January 20 "McLaughlin Group."

Zuckerman told viewers we're heading into uncharted territory with this current credit freeze-up.

"You have the entire banking system now that is virtually frozen. And there are, not just this subprime mortgage thing, there are other things called credit default swaps where they will lose as much money, $250 billion on. The banks are frozen. They are not making loans because they have such huge debts that they have to take on to their balance sheets and nobody knows how to deal with that," he continued.

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While the financial sector is seeing problems with tightened credit, Zuckerman's reference to the Great Depression could lead viewers to think that the economy is heading toward a depression.

The U.S. economy overall does not appear to be headed for another Great Depression. For the last two quarters, gross domestic produce (GDP) has grown at a rate of 3.8 percent in the second quarter of 2007 and 4.9 percent in the third quarter. Fourth-quarter GDP numbers for 2007 will not be released until March. Unemployment in the U.S. is also relatively low at 5 percent.

Even the somewhat gloomy forecast from Goldman Sachs Group, Inc. (NYSE:GS), a Wall Street investment bank that has avoided the worst of the subprime mortgage losses, said on January 9 the recession they are predicting would be brief - certainly a far cry from a depression.

"One silver lining is that the recession is likely to be relatively mild by historical standards, with a cumulative contraction in real gross domestic product of only about 0.5%," said a Dow Jones report about Goldman Sach's prediction. "And the economy will eventually walk out of the recession and gradually recover in the course of 2009."

Despite that, strong bearish opinions on the economy as well as parallels to the Great Depression have been cropping up recently in media reports including a January 16 "CBS Evening News" story. That night CBS correspondent Anthony Mason compared problems in the financial sector to banking problems around the Great Depression.


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"Nothing succeeds like excess!"

January 21, 2008 - 18:15 ET by Crash

There reaches a point when we all have to pay our debts. Who'd these credit providers think they were ... congress?

As discussed here before,

January 21, 2008 - 18:26 ET by Chris Norman

As discussed here before, Glenn Beck has been pushing the same notion of a credit and banking catastrophe. Global, even.

Zuckerman

January 21, 2008 - 18:33 ET by d1carter

The sky is falling, the sky is falling.

The only real "great

January 21, 2008 - 18:58 ET by Schnikeys

The only real "great depression" that will emerge from this is the depression I experience from knowing people are making wild comparsions such as these.

(signature):
You know, people ask me what I like to watch on TV, and I always tell
them that I simply don't watch TV. And I really don't, because TV is a
easy way for others to manipulate how you think. And I would rather not
put up wi

In just a few short weeks,

January 21, 2008 - 19:56 ET by jdhawk

In just a few short weeks, the Fed will have eased at least another 50 basis points and before the end of February the Congress will have legislated an incentive package to further ease this slow down.

Does that mean that the stock market will not continue to go down. No, it will settle out and start to climb back up when moneyed interests see that 6-9 months out the ecnomony is picking back up.

Meanwhile, this editor, not economist, can not even show that we are in a recession (recession = two back to back quarters of negative growth as measured by GDP). Let alone a depression.

Nevertheless, it has been a great short opportunity in the markets since the end of October 2007.

Thank you for needlessly spreading hysteria, dipstick, er . . . Zuckerman.

Irresponsible

January 21, 2008 - 20:27 ET by iveseenitall

More irresponsible, negative "journalism". When will they finally go out of business for good? Sickening, self-centered, anti-American  s.o.b.'s. For years I've found that Zuckerman says whatever he thinks is advantageous for him at the moment. He has no principles at all, IMHO.

NEVER,NEVER trust a "liberal"

"Meanwhile, this editor,

January 21, 2008 - 20:25 ET by forest

"Meanwhile, this editor, not economist, can not even show that we are in a recession (recession = two back to back quarters of negative growth as measured by GDP). Let alone a depression." - jdhawk

Enough with the facts already!  It'll interfere with the hysteria. /sarc

Seriously though, how many of these media people actually know the definition of a recession?  Over the past month I've heard a bunch of them mention "slowed growth", "mortgage crisis" and "recession" in the same breath.  Do they actually think a slowing in the rate of growth is the same thing as "negative growth"?

 

 

Exactly

January 21, 2008 - 20:39 ET by iveseenitall

Exactly! Ignorant and Irresponsible ---these words fit modern "journalists" perfectly. And they are a dangerous combination.

NEVER,NEVER trust a "liberal"

→ Night of the Living Debt

January 22, 2008 - 02:12 ET by Cool Arrow

Have I just tuned in to the FEELGOOD channel?

Let's ignore that the Card Lenders are carrying enormously misleading receivables.  It's growing exponentially and we're busy covering our ears singing "la la la la" at the top of our lungs.

Somebody is going to bail these lenders out.  Currently they are selling at a discount to Chinese and Arabs.  Eventually this propped up paper is nothing more than buttwipe.

Those rate cuts are really being implemented to make the buttwipe smell better to foreigners.

Weeks from now we'll be turning our heads and scoffing at all the losers who welshed on 30% credit debt because they missed one payment on a 6.9% card and found that all 10 of their card rates rose in unison.

You're whistling past the graveyard.  I hear Vincent Price.

BTW, while we were taking a day off for MLK day, the rest of the world's markets are dipping badly.

I ♣ My Seal

Mort Zuckerman

January 22, 2008 - 09:59 ET by geno8808

I would dearly love to pile on, but Mort Zuckerman is one of the shewdest businessmen in the world. Unlike most of his colleagues, Zuckerman is actually out in the trenches every day trying to make his businesses a success under sometimes daunting odds.

He built an office tower on Times Square. In the midst of construction his lead tenant, Arthur Andersen blew up. Luckily, he found another tenant before the building was completed but it was a high wire act of epic proportions.  

Sure, he's a liberal but he's a liberal in the great tradition of liberalism.   

 

 

Hit the books.

January 22, 2008 - 10:17 ET by Crash

Definition: A recession is defined to be a period of two quarters of negative GDP growth.

I too think Zuckermann is right to worry. We've had recessions and depressions in localized areas for as long as I can remember. Whether or not the nation as a whole will be slammed is up to so many factors that NO PERSON could ever predict it. They could only utter two phrases after the fact, "I was right" or "I was wrong, but..."

Will the next president Carter please step down. 

$250 billion vs. $8 Trillion

January 22, 2008 - 20:36 ET by Gary Hall

 

Suddenly $250- billion seems so insignificant: 

Zuckerman told viewers we're heading into uncharted territory with this current credit freeze-up.

"You have the entire banking system now that is virtually frozen. And there are, not just this subprime mortgage thing, there are other things called credit default swaps where they will lose as much money, $250 billion on. The banks are frozen.

A little refresher course -- remember what was going on when President Bush was first trying out the chair in the Oval Office? Lifted from the pages of IBD (but I contributed to it):

The stock market, as measured by the popular Nasdaq, had already plunged 46% from its peak in 2000 — the biggest drop since 1929, slicing nearly $8 trillion from Americans' wealth.

• Not until Jan. 3, 2001, a mere three weeks before Bush took office, did the Federal Reserve cut interest rates —

Yes, the country was headed into recession, as Pres. Bush took his seat, and by the fall 0f 2001, just as the economy was coming out of recession, it was blindsided with the events of 9/11.

 Naturally,  the MSM in it's wall to wall coverage of the long desired market correction, and due course the eagerly wanted recession, will compare the fate of any potential Democrat winner in this race to that of Bill Clinton in 1992. The events of 2000 does not exist (and never did) in the minds of the MSM, and as well, they continue to forget that in '92 Bill Clinton inherited a recovery - not a recession.