Are we headed for an Economic Depression?

I think there is universal agreement the globe is headed for an economic recession. But this week I was hearing the “D” word being discussed… Economic Depression.

I think the lines outside Centrelink brought back memories of the black and white photos in our old school history books of the dole queues during the Great Depression of the 1930’s.

It’s a very scary thought.

But I was chatting about it with Dr Keith Suter on Sunrise this morning and he made a fascinating point. “The Depression didn’t have John Maynard Keynes back then and his blueprint for economies”.

As Keith was explaining, during the Great Depression the political leaders saw it as, basically, An Act Of God and just let it work itself out. Did nothing to help anyone.

But in 1936, Keynes published an economic paper called “The General Theory of Employment, Interest and Money”. In it he concluded Government’s need to increase demand to boost economic growth.

In other words, Governments need to intervene in economic downturns to ensure consumers can spend their way out of trouble. That means making sure the banks keep lending, that businesses can keep employing and consumers keep spending.

Sound familiar.

That’s why Keith is confident we aren’t headed for a Depression… yes recession but thankfully not depression. Makes sense.

Thanks John Maynard Keynes… I’ve started to re-read my old economics textbooks.