Wednesday, March 4, 2009

Possibility of a depression

Is 20%, according to economist Robert Darro. His 'approach uses long-term data for many countries and takes into account the historical linkages between depressions and stock-market crashes'
Many readers may be wondering about the difference between a recession and a depression.
Its simple: recession means a decline of 2-3 consecutive quarters of GDP plus and minus minor factors, and a depression means when GDP and consumption fall by greater than 10% (something last seen in the 1930s).
He concludes by saying that during periods when stock markets crash, depressions are more likely and when everything goes on smoothly, depressions are unlikely. The fact that the recent year has seen great stock market crashes, the likelihood of a depression has increased to 20%.
Don't worry because the bright side is that there is 80% probability of not facing a depression!

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