Feeling Depressed

"I have to believe that when things are bad I can change them."
--Jim Braddock (Cinderella Man)

Recently Dave Rosenberg penned some thoughts about the nature of a depression in his daily commentary worthy of note here.

First, his definition of a depression: 'A depression, put simply, is a very long period of economic malaise. A series of recessions and modest recoveries over a multi-year period of general economic stagnation as the excesses from the prior asset and credit bubble are completely wrung out of the system.'

Dissecting this definition reveals a number of points that ring pretty true. One is that depressions extend over a long horizon. They are periods rather than events. Another is that there will be ups and downs during depressionary periods, although the general tone is one of weakness. Finally, depressions are the consequence of credit bubbles that pop, and the commensurate decline in asset prices that follow.

Based on that definition, Mr Rosenberg thinks we're in a depression now, suggesting that 'we are in the third inning of this current debt deleveraging ball game.'

He makes a number of other interesting points. For many people, the dominant image of many people is the soup line. Rosenberg suggests that today's soup lines can't be seen because they are in the mail in the form of unemployment checks. Nice observation.

I believe he's correct. Many fret about avoiding a depression that's already here.

Reference

Rosenberg, D.A. "Breakfast with Dave." Gluskin Sheff Economic Commentary. September 2, 2010.