Will the Next Recession Be Worse Than the Great Depression?

This Quora question sounds like a GOP-troll-question given the current economic context. As of now, with a Democratic President, the unemployment rate in the U.S. is at a mere 3.6%, whereas during the Great Depression, unemployment peaked at 25%, during a Republican presidency. These historical contexts make the question quite challenging to address.

The Current Recession: A Matter of Public Health

The current recession is partly a result of a global pandemic caused by the coronavirus, which has led to widespread lockdowns and economic shutdowns. While the virus certainly poses a significant health risk, it is not the only threat. People must balance the risk of severe illness from the virus with the risk of economic collapse and inability to support themselves. This situation highlights a vital risk factor: the threat of hunger and economic instability is more powerful than the risk from the virus. Thankfully, the coronavirus is not as deadly as SARS-1.

Viral Behavior and Human Adaptation

Viruses tend to weaken over time as they spread from person to person. Historically, viruses like the common cold and flu are a part of human life, and the coronavirus may eventually become another one of these recurring health challenges. It is premature to assert that a vaccine will be available or effective against COVID-19 immediately. Each flu season sees the development of new vaccine strains, and the same may happen for the coronavirus. The unpredictability of viral behavior and the emergence of new variants make a quick fix unlikely.

Despite the severity of the current pandemic, it is worth noting that it has indirectly led to more cautious behavior, such as wearing masks and practicing hygiene. This behavior is expected to decrease the incidence of the common cold and flu. Historically, about 40,000 to 60,000 people die each year from the regular flu, which means that the measures taken to prevent the coronavirus may ultimately contribute to a reduction in these deaths.

Economic Predictions and Future Scenarios

Currently, the share markets are anticipating a vaccine, which could be the key factor preventing further economic decline. However, as time passes and government debt continues to rise, ultimately leading to economic panic, a series of negative outcomes are likely. Another market crash or gradual decline is a realistic scenario. Additionally, deflation may persist for a year or longer as people and businesses adapt to the new economic reality.

Eventually, governments may take extreme measures, printing large amounts of money in a last-ditch effort to stimulate the economy and prevent collapse. This could lead to high inflation rates, potentially reaching 20% or more. Such economic conditions could signal the start of a new 90-year economic cycle.

It is clear that the current situation is complex and multifaceted. While there is no clear answer to whether the next recession will be “worse than the Great Depression,” understanding the historical context and current challenges can help provide insights into what might lie ahead.